EU VAT Rates 2017

[brian!]

As there has been at least one VAT rate change in the EU this year already, I thought it might be useful to post an updated table of EU VAT Rates for 2017 - similar to the 2016 thread.

 

* Greece raised their VAT Rate from 23% to 24% on 1 June 2016.

* Romania lowered their VAT Rate from 20% to 19% on 1 January 2017.

 

Existing users can follow the instructions from the documentation on changing tax rates...

 

http://docs.whmcs.com/How_To_Guides#Change_Tax_Rate

Setup > Tax Rules:

• Delete the original tax rule by clicking the corresponding red delete icon,
  
• Create a new tax rule with exactly the same country and state but enter the new tax rate.
  

That's all there is to it, any invoices generated after this change will have the new tax rate applied, but any existing invoices will keep the old tax rate.

 

New installations with no existing EU VAT rates in WHMCS, can use the SQL query below to import them.

 

INSERT INTO `tbltax` (`id`, `level`, `name`, `state`, `country`, `taxrate`) VALUES
(2, 1, 'VAT', '', 'AT', '20.00'),
(3, 1, 'VAT', '', 'BE', '21.00'),
(4, 1, 'VAT', '', 'BG', '20.00'),
(5, 1, 'VAT', '', 'CY', '19.00'),
(6, 1, 'VAT', '', 'CZ', '21.00'),
(7, 1, 'VAT', '', 'DE', '19.00'),
(8, 1, 'VAT', '', 'DK', '25.00'),
(9, 1, 'VAT', '', 'EE', '20.00'),
(10, 1, 'VAT', '', 'ES', '21.00'),
(11, 1, 'VAT', '', 'FI', '24.00'),
(12, 1, 'VAT', '', 'FR', '20.00'),
(13, 1, 'VAT', '', 'GB', '20.00'),
(14, 1, 'VAT', '', 'GR', '24.00'),
(15, 1, 'VAT', '', 'HR', '25.00'),
(16, 1, 'VAT', '', 'HU', '27.00'),
(17, 1, 'VAT', '', 'IE', '23.00'),
(18, 1, 'VAT', '', 'IT', '22.00'),
(19, 1, 'VAT', '', 'LT', '21.00'),
(20, 1, 'VAT', '', 'LU', '17.00'),
(21, 1, 'VAT', '', 'LV', '21.00'),
(22, 1, 'VAT', '', 'MT', '18.00'),
(23, 1, 'VAT', '', 'NL', '21.00'),
(24, 1, 'VAT', '', 'PL', '23.00'),
(25, 1, 'VAT', '', 'PT', '23.00'),
(26, 1, 'VAT', '', 'RO', '19.00'),
(27, 1, 'VAT', '', 'SE', '25.00'),
(28, 1, 'VAT', '', 'SK', '20.00'),
(29, 1, 'VAT', '', 'SI', '22.00');

Proposed 2018 Rate Change

 

* Croatia reduces their VAT rate from 25% to 24% on 1 January 2018.

 

As with all tax rate changes, they are subject to amendment.

[brian!]

I received an email this morning from HMRC (The UK Tax Department) which stated the following...

 

Hungary have now informed us that they have a new reduced VAT rate for ‘internet access’ services of 18% which is valid from 1 January 2017. The standard VAT rate of all other kinds of telecommunication, broadcasting or electronic services remains at 27%. If you are unsure whether this new rate applies to the services you provide, please email the Hungarian Authorities for guidance.

 

the link given in the email goes to the European Commission website - but it doesn't define what it considers 'internet access' services. so you should make your own investigations on that if you think this might affect your business.

[Varial]

I emailed them to ask if web hosting qualifies as an internet access service and was directed to an article which states:

 

‘internet access service’ means a publicly available electronic communications service that provides access to the internet, and thereby connectivity to virtually all end points of the internet, irrespective of the network technology and terminal equipment used.

 

So definitely not a clear answer. How are others interpreting this?

[brian!]

So definitely not a clear answer. How are others interpreting this?

going from the link on the HMRC website about this (probably the same one you were given?), it looks to me like its for web connection services only - e.g broadband, cable etc rather than later component parts (hosting, domains etc)... if so, I wouldn't have thought this would affect any business based outside of Hungary.

 

in any event, we're going to continue charging @ 27% until told otherwise as we don't offer 'connectivity' in the sense I think they mean... but i'm not a tax specialist, so there's no guarantee i'm correct.

[ChrisTERiS]

Very helpful post. Thank you. I've activated EU VAT Addon but the table tbltax is empty. Is this normal?

 

And a notice for those who are dealing with Greek clients and have problems to validate Greek VAT ids. The problem is that the country code is not correct. Is not "GR". The correct is "EL". You can check it in the official EU VAT rates:

http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf

 

This is a long time mistake. The official name of my country is HELLAS (Hellenic Republic) and not Greece.

[brian!]

Very helpful post. Thank you. I've activated EU VAT Addon but the table tbltax is empty. Is this normal?

yes - you have to enter the tax rates yourself... either manually or via the SQL query.

 

And a notice for those who are dealing with Greek clients and have problems to validate Greek VAT ids. The problem is that the country code is not correct. Is not "GR". The correct is "EL". You can check it in the official EU VAT rates:

http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf

 

This is a long time mistake. The official name of my country is HELLAS (Hellenic Republic) and not Greece.

it is a long term mistake - I made it in 2016 too!

[ChrisTERiS]

i've corrected the Excel table, so going forward this should be fixed for future years.

 

Very professional but problem is deeper than you can think. It depends on the API provider that you're using to validate EU VAT ids. Some of them need GR as country code, some others need EL

For example, don't know which provider Hostgator uses, but it needs GR instead of EL.

 

http://ec.europa.eu/taxation_customs/vies/checkVatService.wsdl that I've used in my eCommerce mod for vBulletin (and I think that is the official API), needs EL and rejects GR

[brian!]

Chris,

 

you might want to check with WHMCS support about this and also try the EU VAT Addon with a Greek VAT number and see if it prefers GR or EL.

 

I remembered where I got the original country code list from - it was taken from the WHMCS VAT Moss report and that uses GR for Greece... therefore, to avoid any potential confusion, i've removed the updated table image for now... if users were to start using EL instead of GR, it might invalidate the results from the VAT MOSS report (e.g tax values from Greece transactions would be unreported).

[ChrisTERiS]

Chris,

 

you might want to check with WHMCS support about this and also try the EU VAT Addon with a Greek VAT number and see if it prefers GR or EL.

 

I remembered where I got the original country code list from - it was taken from the WHMCS VAT Moss report and that uses GR for Greece... therefore, to avoid any potential confusion, i've removed the updated table image for now... if users were to start using EL instead of GR, it might invalidate the results from the VAT MOSS report (e.g tax values from Greece transactions would be unreported).

 

Never had a Greek client:twisted: ... As for WHMCS. If I remember well they also use wrong API. I was unable to validate my VAT id but this was 4 years ago.

[Chris74]

We're in the UK and we have some clients in the Channel Islands, who are not part of the EU VAT system - however for some reason WHMCS has completely omitted the Channel Islands from the country / state list and so these customers have been forced to choose UK as their country and are then charged 20% VAT - then they complain that they are VAT exempt and should not pay VAT.

 

In the past we have added the Channel Islands into the state list with a "state" for each of the islands - but last time WHMCS was updated we forgot to add these again, so the clients were charged VAT at 20% again. I was about to correct this but decided to research what other companies do. It turns out that a few other hosting businesses in the UK are charging VAT to the Channel Islands and have a FAQ that says the service is provided from the UK, so VAT applies. This is based on HMRC's definition of "place of supply of services".

 

If the above is really the case - doesn't that mean we should be charging VAT at 20% to ALL countries outside the EU?

 

This page on the HMRC website provides info on how to charge VAT, depending on the place of supply...

 

https://www.gov.uk/guidance/vat-how-to-work-out-your-place-of-supply-of-services

 

I find it quite confusing and linked from that page is another, which suggests there are specific rules for "e-services". Does web hosting come under "e-services"?

 

For those of you charging VAT to customers outside the EU - how are you justifying this and what "rules" are you quoting from HMRC? Also, why would you charge VAT to somewhere like the Channel Islands, but not the US or Australia for example?

Edited May 31, 2017 by Chris74

[ChrisTERiS]

If the above is really the case - doesn't that mean we should be charging VAT at 20% to ALL countries outside the EU?

 

Nope. You're not charging EU VAT to any non EU country. Let's say that your shop is locating in UK:

 

1.- For EU citizens (except UK), without a valid VAT id, you charge VAT depending on the country of origin of the client and NOT the VAT of UK.

Example: I'm Greek citizen. If I don't have a valid VAT id you must charge me 24% , the VAT of Greece and not 20% the VAT of UK

 

2.- For EU citizens (except UK) WITH a valid VAT id you don't charge VAT

 

3.- For UK citizens, with or without VAT id, you charge VAT 20%

 

4.- For non EU citizens you don't charge anything.

 

The confusion appeared when on January of 2015 and according to EU directives, any shop, locating anywhere in the world, if sells something to EU citizens must collect VAT.

[Chris74]

Thanks Chris but I'm not sure I agree.

 

There is a distinction between goods and services and also a distinction between "citizens" and businesses. An individual can not use a VAT ID because a VAT ID is specific to a company. So all "citizens" in the EU must pay VAT at their countries VAT rate. An individual is not allowed to use a VAT ID -only a business.

 

I understand the rules you have mentioned - but these apply to the supply of goods. As you say - a "shop".

 

Web hosting is not the sale of products - it is a service that is supplied from a particular country - in my case the UK - so in a way the customer is "renting" web space in the UK on a server that is physically located here. So it would appear that the usual rules don't apply if the place of supply of services is within the UK, VAT would be applicable at the UK rate - to non EU customers.

 

This is what I'm trying to clarify.

[ChrisTERiS]

Thanks Chris but I'm not sure I agree.

 

There is a distinction between goods and services and also a distinction between "citizens" and businesses. An individual can not use a VAT ID because a VAT ID is specific to a company. So all "citizens" in the EU must pay VAT at their countries VAT rate. An individual is not allowed to use a VAT ID -only a business.

 

I understand the rules you have mentioned - but these apply to the supply of goods. As you say - a "shop".

 

Web hosting is not the sale of products - it is a service that is supplied from a particular country - in my case the UK - so in a way the customer is "renting" web space in the UK on a server that is physically located here. So it would appear that the usual rules don't apply if the place of supply of services is within the UK, VAT would be applicable at the UK rate - to non EU customers.

 

This is what I'm trying to clarify.

 

Sorry. I was not clear. All what I wrote were for digital products and services. So "Shop" is not the right word. I don't mean a real store.

 

In anycase, you know English much better than me, the only that I can help you is by giving you the official EU terms for taxation:

http://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/vat-invoicing-rules_en

[ChrisTERiS]

Web hosting is not the sale of products - it is a service that is supplied from a particular country - in my case the UK - so in a way the customer is "renting" web space in the UK on a server that is physically located here. So it would appear that the usual rules don't apply if the place of supply of services is within the UK, VAT would be applicable at the UK rate - to non EU customers.

 

If you want to "loose your mind"

 

1.- The server's location applies only to laws and not to finance. Real example of my experiance. I was operating an Adult site in Greece (.gr domain). According to our laws this was (talking for 2002) prohibired. But because my server was in USA where such content is allow, they were unable to do anything. So for laws, the location counts. But for Billing no. If you know Envato marketplace you may noticed that since a year ago, and even if their business is locating now in USA (before was in Australia), they collect VAT for all sales to EU citizens.

 

2.- EU says that non EU business must collect VAT, but still hasn't found a way on how those companies will pay this VAT to countries. To use the same example, Envato collects that extra amount for VAT but they don't know yet where to pay them. In simple words they keep it in their pockets. If you read those terms you'll see about collecting VAT (outside EU) but you'll not find anything on how to give this money to goverments.

 

3.- I agree for what you wrote about Business and Individuals. But nobody cares of it. As long as the official EU system, accepts the VAT id as valid Business id, nothing bad.

[Chris74]

Thanks for your comments Chris.

 

In point one you are talking about the publication of content, which is completely irrelevant to this discussion and also you're talking about 2002. Much has changed since then.

 

In point two, I think you are talking about a non EU business selling goods or services to the EU where EU VAT is applicable. Again, this is not relevant to our discussion. We are talking about an EU business charging VAT at the correct "place of supply of services" to either other EU member states or to those outside the EU. However the VAT MOSS system was set up to sort this out, so all Envato would need to do would be to sign up for VAT MOSS in each EU country.

 

There are hosting businesses in the UK charging VAT to non EU countries and stating the "place of supply of services" as being in the UK as the reason for doing this. I'm hoping others can comment about how they do it and whether those doing the above are actually not supposed to be doing so. It would be good for all of us if we could know for sure 100%

 

This document is supposed to help businesses work out where their place of supply is, but I find it too complicated....

 

https://www.gov.uk/government/publications/vat-notice-741a-place-of-supply-of-services/vat-notice-741a-place-of-supply-of-services#introduction

[ChrisTERiS]

The only that I can say is that HostGator charges EU VAT depending on the client's location.

http://support.hostgator.com/articles/european-union-value-added-tax-vat

http://support.hostgator.com/articles/sales-tax-vat-rates

 

Don't know if this helps. My advice is to ask an attorney specialist on internet sales to be 100% sure.

[Chris74]

This document is much more helpful.

 

It specifically defines Web Hosting as a digital service...

 

 

https://www.gov.uk/government/publications/vat-supplying-digital-services-to-private-consumers/vat-businesses-supplying-digital-services-to-private-consumers

 

Then if you go back to the original document it states this...

 

If you supply digital services B2C then the place of supply of your services will be the place where your customer belongs. If your customer belongs:

 

in the UK then UK VAT will be due

in another member state then VAT will be due in that country according to its rate and rules and you’ll be required to either register in that member state or register for the MOSS (see section 15)

in another country - you’ll need to check that country’s rules as you may have to register for VAT or its equivalent in that country

 

For EU VAT you can assume your supply is made on a B2C basis if your customer does not provide you with a VAT number.

 

So that's business to consumer. The document doesn't actually say anything about B2B - business to business in specific relation to "digital services" - but when working out the place of supply of services, I don't see why that would change if the customer is a business.

 

So I think as it stands, the rule is that the service is deemed to be supplied at the place the customer resides, not the place the service is running from.

 

So why are some hosting companies charging VAT to the channel islands?

 

I think the answer is pretty simple, the Channel Islands cannot be added to WHMCS as a separate country because they are actually deemed to be geographically part of the UK and share the "GB" country code, despite not being part of the EU. So you'd have to make up a fake country code to add them as a country. As the UK country has a VAT rate of 20% inside WHMCS, those who are charging customers 20% are doing so because they don't know how to charge a different rate for the Channel Islands , so they are making up an invalid excuse about "the place of supply of services" to avoid any customisation.

 

However, it is simple to just add "Channel Islands" as a state inside the statesdropdown.js file and then set a zero rate tax on that state. So pretty easy to accomplish.

Edited May 31, 2017 by Chris74

[sentq]

2.- EU says that non EU business must collect VAT, but still hasn't found a way on how those companies will pay this VAT to countries. To use the same example, Envato collects that extra amount for VAT but they don't know yet where to pay them. In simple words they keep it in their pockets. If you read those terms you'll see about collecting VAT (outside EU) but you'll not find anything on how to give this money to goverments.

what you talk about is VAT MOSS, where EU and Non-EU business need to collect VAT from EU consumers.

 

how to pay that money and to whom?

you can signup with HMRC for example and pay using the instructions here: https://www.gov.uk/pay-vat/moss