Why is the EU trying to kill microbusinesses? Here’s a few current headlines from around the world:
How the EU is throttling online business with idiotic VAT reform
EU VAT law could kill THOUSANDS of online businesses
“VAT a Mess” – New EU Tax Rules Set to Close Small Businesses
According to Clare Josa, on behalf of the EU VAT Action Team, the 2015 EU VAT will devastate digital microbusinesses. Results from a recent study show:
- Only 4% of microbusinesses believe they will comply in time
- 10% are closing their business completely
- 50% don’t believe they will ever be able to comply
- 45% are damaging their business by stopping digital sales or excluding EU customers
These statistics are horrifying and shows how stressed out and frustrated these business owners truly are. The intention of the law wasn’t to close these businesses, but the implementation is a nightmare.
And not just the ones in the EU.
The 2015 EU VAT Nightmare
It all starts with Value Added Tax (VAT). If you sell any digital products, to anyone in the EU, YOU must collect a VAT charge based on the customer’s location – not the seller’s location.
Your shopping cart technology or process must be able to accurately pinpoint the seller’s location, and figure out how to charge the correct VAT rate. Because each EU country charges a different VAT rate.
And to make life a little more interesting, no one cares if you don’t own a business in the EU. If you sell digital products to ANY CUSTOMER in the EU, you have to register and pay VAT fees.
This puts unfair stress on microbusinesses. It’s overwhelming, ridiculous and scary.
What eCommerce Services are Doing
The beauty of digital sales is that you can sell a product to anyone, anywhere in the world. If you’ve got an internet connection, you can buy a digital product. Time and location should be irrelevant.
The new law changes that. Location is now completely relevant and essential. Not all eCommerce platforms are jumping on the compliance bandwagon. But here’s a few that are stepping up to help their customers stay in business.
Selz allows sellers to sell digital products, either from a customized Selz store or directly from the seller’s website. To handle the new VAT law, Selz has designed a free VAT reporting system that identifies the customer’s location, and applies the correct VAT rate. Plus it collects and stores the evidence of the customer’s location, which is a requirement of the new law.
Selz also offers a feature that blocks specific countries or regions, like the entire EU. Microbusinesses are afraid they won’t be able to afford a solution that works for their business. But Selz isn’t charging extra for these solutions, but is offering them for free as a service to their customers.
Recurly offers subscription based services, including billing automation. They have one of the best supported EU VAT compliance systems available. They have an entire resource section on the upcoming changes. Recurly is partnering with Avalara AvaTax™, a cloud-based tax solution, to handle EU VAT compliance.
#3. Easy Digital Download for WordPress
Easy Digital Downloads (EDD)’s VAT extension is a full-fledged compliance solution. They are also offer a Quaderno integration, and will soon release integrations with TaxCloud and Taxomo. EDD is also working on a solution to block any EU customers.
Taxamo is a real-time Software as a Service (SaaS) solution for compliance with 2015 EU VAT rules on the sale of e-services. Taxamo works with shopping cart systems, like Stripe and PayPal. Their Pay As You Go program is €0.20 per transaction, up to 2000 transactions per month. PayPal’s solution for compliance is unknown, that’s why it’s crucial to implement a VAT compliance solution if you use Paypal as a checkout system.
Don’t Let 2015 End Your Business!
This is an extremely complex issue. Many are trying to change EU VAT rules now, before it affects microbusinesses. If you’re a digital business, regardless of where you’re located, check to see what your eCommerce platform is doing to help you comply. Ask them questions, and if they don’t offer a solution that you can afford, find someone who does.
This nonsensical law is creating a lot of hostility and fear among microbusinesses. If 10% are closing their business completely, that could have devastating effects on the economy.
But this isn’t the end of digital microbusinesses.
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