I work with a lot of small businesses and microbusinesses. The EU VAT laws that say an online firm must know the location of its customers, produce two pieces of evidence, store the data for ten years, and charge and remit VAT to that customer’s country and location at time of purchase by that countries laws with no threshold (a 1 euro donation would be subject to VAT) have been a nightmare. Many of the smaller nonprofits I work with have removed websites or Paypal because they can’t afford to comply.
The EU discussed it last week, and …their solution is not to change VAT to allow smaller firms to trade across the EU by introducing a threshold. It was to suggest that smaller firms should geoblock (See Here), and simply block trade with EU customers to avoid the extra costs.1
It is now official: the EU discourages small firms fro m trading cross-border.
To give you an idea of one site’s situation:
New Zealand has a 60,000 threshold, which is higher than one site’s entire turnover (by a factor of around one hundred). The site can accept customers and donations from New Zealand, and sell ads to them, without any problems.
The USA hasn’t got the customer location rule in, so they can freely trade with them, which is as well because many of their sponsors are from there.
Canada? Like the USA, no problem.
France? The site can’t accept a single customer or donation without falling under VAT-Moss and having to do a UK Vat return to the VAT Moss office every three months.
Germany? They’d need to get a German tax number, register with a German tax office (Germany opposes the VATMoss system – details here) and do full VAT accounting four times a year when they might receive a total of $5 every couple of years from German citizens.
This is the situation while we are in the EU. For micro-businesses, whether the UK stays in or leave will actually make no difference to who they can trade with.
…but Leaving might reduce admin costs.
Removing customs charges is not the only part of a free trade area. If those customs fees are going to be replaced by VAT and admin costs, costing nearly £4,000 a year so already unattainable for small businesses, this is hardly free trade.
And if we don’t have free trade, why vote to stay?
(1 They seem to be forgetting the costs and technical skill required to geoblock. Good luck if you are a small cat sanctuary with an online Paypal button and two retired owners…)
Meanwhile I will spend the rest of the week implementing geo-blocking for about 15 small nonprofits. No, I don’t get paid for it.
This blog has now moved to http://www.rablogs.co.uk/tirial, where the original article can be found. Update on EU VAT - Oh boy - http://rablogs.co.uk/tirial/2016/06/01/update-on-eu-vat-oh-boy/ was published on June 1, 2016 at 9:10 am.
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