Changes to EU VAT rules from January 2015

[PokeMon]

I don't know what the VAT position is in Germany - but I have been trading as a business and reporting my profits etc for tax since 1987. I just do not currently need to report VAT on anything, as my total sales per year is below the UK VAT registration threshold (£82,000).

Rich,

thanks for your notes. I am not sure what the threshold means, don't you have to declare VAT in general (even not to the UK tax administration) or just not to separate VAT by countries ? If you don't have to declare in general below this threshold than you may feel lucky and this would explain why it could be maybe a UK based problem only at the end - at least with this high threshold.

On the other hand we have something similar in Germany as well, called "Kleinunternehmer" where you may be free of VAT charges at all if you don't have a turnaround of more than EUR 17.500 per year. This advantage has many disadvantages as well, so you can not substract any VAT you payed to anyone and if you do business with a company they can not subtract VAT from your invoices. This regulation is for very small, let's say homebusiness or sparetime-workers but if you can guess this low threshold you can imagine that you never have the chance to support yourself properly with EUR 17.500 turnover which gives a maybe much less profit. So I would never choose this regulation and at the end you have to change to normally VAT processing after few years. Not the paper worth written on and you have to pay income tax anyway regardless of VAT. Normal companies avoid making business with these companies as the pay much higher prices than any end customer.

So - if you don't have to report any VAT now you maybe now handled as a so called "private business" which is not affected from the SME rules. As long as you are not a real business or as long as you have an in-between exception (same like we have in germany with "Kleinunternehmer") - why do you think this will change for your "business" ? So now you are maybe not classified as small enterprise business - if so you would have to report VAT, don't you think so ? For selling private or used items (where you don't have official invoices) this maybe actual the best solution.

In fact you have the right to fight for any new regulation but I am absolutely sure that other much bigger companies will fight for, too. So I would relax because your problem with VAT calculation and so on (I think you don't do it now - why do you think you have to do it in future ?) as at least eBay with many many private sellers has exactly the same problem with VAT processing. So with my experience I do not think that these thresholds would be touched (maybe adjusted or harmonised in height, don't know) as long as I don't believe that cash money will be forbidden in year 2018 (another conspiracy theory started in 2015). And I wouldn't interchange the general threshold of private selling vs. business with the threshold of individual VAT processing for any country (which the regulation talks about).

At the end I think my business would be much more affected than yours or others "private businesses" - but I don't worry anyway.
Life is too short to worry.

[RWAP]

Yes, the UK VAT registration threshold works in the same way as your "Kleinunternehmer" - but I am shocked that the German threshold is so low - I assume that is based on your turnover (sales) which is how the UK threshold works, or is it based on profits?

Why a fear that the changes will mean I need to register and report / charge VAT - because of how the EU brought in the VAT rules for digital e-services - ie. NO THRESHOLD, although they now seem to have realised their mistake, as small traders are having to spend lots of money to report just £40-£50 VAT at most every 3 months and of course, it costs the governments a lot of money to adminster the collection and distribution of these tiny sums, so it is just not worth it. I am certain that is one of the reasons why the HMRC told me that they would happily accept that the sellers on sellmyretro.com were businesses making and selling products - as it is just not worth their while trying to get me to account for VAT on maybe £100 worth of fees a year !!

The fact that small businesses had no contact about these changes until it hit the press and new HMRC guidelines only 2 weeks (and that was over Christmas!) before the regulations came into force just gives no confidence that the EU will actually consider the effect of their measures. Apparently, the various governments did a lot to publicise the changes, but forgot that they needed to identify and find some way of letting the 1000s of small businesses who had no dealings with VAT know about the forthcoming changes and the need to register!! Even the large players in the field, ebay and google, only appear to have found out and changed their systems during December!

Further, in order to bring in a europe wide Single Digital Market, with a threshold below which VAT will not be charged (which is what they appear to be talking about), they will need to placate all of the countries in the EU some of whom have a niil threshold at the moment, or very low thresholds for VAT. They also need to give more than 2 weeks notice of changes.

In effect, unless they do have a reasonable threshold (such as the existing threshold where you do not have to charge VAT on items sold to another country where those sales do not exceed €35,000 each year), then small businesses in the EU are put at a huge disadvantage as they end up trying to compete with small businesses based outside the EU who either do not know about, or just ignore the rules - as I say it is highly unlikely that (for example) the German Government would find out that you as a consumer, had purchased a €100 interface from a small online trader based in the USA - even more unlikely that the German Government would then consider it worth their while to take court action to find out about all of the sales made by that trader to German consumers in the previous 12 months, and then further action to recover the VAT which should have been collected and handed over by that trader.

From a consumers point of view, because all of the products made and sold for retro computers come from these small micro businesses, the impact of having to charge VAT on every single item sold would be an unfair burden on this particular market.

[XorA]

Rich part of the issue may be as a vat registered business I already had to report European sales and vat on software services was already paid at destination not source so these new rules were really just a clarification.

It's a pity they did not check the impact on smaller businesses. But for the sort of guys they are used to dealing with it makes little change.

G

[PokeMon]

Yes, the UK VAT registration threshold works in the same way as your "Kleinunternehmer" - but I am shocked that the German threshold is so low - I assume that is based on your turnover (sales) which is how the UK threshold works, or is it based on profits?

Yes - 17.500 EUR is meant as turnover, not profit. In fact the regulation talks about that you don't exceed the 17.500 EUR limit for last year turnover and you don't will exceed the limit for 50.000 EUR of the current year (which can be guessed only). Anyway if you exceed the limit you have to register and report VAT for the following year. And yes, as I wrote, it is much less than you need to support your life and so it is useful only for home business or sparetime businness.

So VAT reporting is a general issue for me but (!) till now I only have to calculate the german VAT and pay to the german tax admin as long as I not exceed a yearly threshold per country which height is country depended but in fact 30.000 EUR up per country. If you exceed that limit you have to register in the individual countries only (not all) where you exceed the limit you will need a VAT registration number in that country and have to pay the VAT to the tax admin of that country with the height of VAT in that country. So now an issue which is raised for companies with big bordercross sellings only.

Maybe we will have some special rule for the UK as Merkel announced to hold the UK in the EU.