VAT

[graziano_68]

Hello

I have a USA business and I sell hosting worldwide using WHMCS

Today an  EU customer asked me this "where can I enter my VAT"

?

Why is he asking me this question if I have a US business ?
Also I checked the Tax configuration page in WHMCS but I cannot enter a US country , I understand the WHMCS TAX configuration page is only for WHMCS UE owners right ?
 

 

Edited October 18, 2019 by graziano_68

[graziano_68]

I read this  

https://quaderno.io/blog/what-you-must-know-about-vat-if-you-have-customers-in-europe/

so any US business must have a UE VAT registration number.
Ok If I get a UE VAT registration number how can I setup TAX configuration in WHMCS since there is no way to enter the Country USA ?  Confused !

How many of you USA business already registered for a UE VAT ?

 

[graziano_68]

another interesting post

https://beanninjas.com/blog/vat-eu/

How can I handle all this with WHMCS ? Is it possible ?

[Remitur]

There's a limit under which you're not forced to have your european VAT number: I don't remember how much higher is this limits, but it has at least 5 zeroes...  So, three fixes:

1. If you're under the limit, do nothing
2. If you're under the limit and want to please your customer, add a "vat number" custom field to your configuration, leave your customers edit it inserting their own VAT number, print it on your invoices
3. If you're over the limit, you need this add on: https://katamaze.com/products/billing-extension

Note: the 2nd is better than the first because few European accountants pretend (wrongly) the customer's VAT number in any buy documents, even if extra-UE...

[Remitur]

Here are the limits:

https://www.avalara.com/vatlive/en/eu-vat-rules/eu-vat-number-registration/vat-registration-threshold.html

 

[graziano_68]

Hello

I read this  https://www.avalara.com/vatlive/en/eu-vat-rules/eu-vat-number-registration.html

So ,  it wrotes

"Generally, non-resident companies must register for VAT immediately.  Resident companies’ VAT registration thresholds are here. "

US business are "non-resident companies" , so they must register for UE VAT if they want sell to EU customers , does not matter the thresholds.
 

[graziano_68]

BTW so WHMCS tax configuration does not permit US business to sell legally products in UE , and we are forced to buy an yearly $160/yearly addon ? 😆
 

Edited October 19, 2019 by graziano_68

[brian!]

16 hours ago, graziano_68 said:

Ok If I get a UE VAT registration number how can I setup TAX configuration in WHMCS since there is no way to enter the Country USA ?  Confused !

https://blog.whmcs.com/133524/feature-spotlight-tax-and-vat-improvements

Quote

Toggle VAT Mode on, and WHMCS will also offer you the option to have VAT rules created automatically for all 28 EU member states. Existing users can also use this functionality at any time to synchronise and ensure tax rules are up-to-date and correct.

the point to understand is that with EU VAT, you charge the  customer at the rate in THEIR EU country, so someone from Italy gets charged at 22%, from Germany 19% etc...

https://www.export.gov/article?id=European-Union-How-the-EU-s-Value-Added-Tax-VAT-Impacts-U-S-Exports-2016

Quote

III. VAT rules on the supply of services to EU customers
The EU’s VAT law considers everything that is not a good (generally a tangible property) as a service.  Services can include everything from the licensing for intellectual property to downloadable software to consulting – to name but a few examples.  The VAT requirements for services depend on the final customer: 

• For a taxable person (a Business-to-Business relationship), the supply of service is taxed where the customer is established; 
• For a non-taxable service (a Business-to-private individual customer relationship), the supply of service is taxed where the supplier of the service is established. 

There are also a number of exceptions to the above described two-way taxation rule, which include – among –others:

• B2C services provided by an intermediary are taxed at the location of the main transaction;
• B2B and B2C services connected with immovable property are taxed at the location of the property.  

When it comes to B2B transactions, in many cases, the business customer will account for VAT using the reverse charge procedure thus making it not necessary for a U.S. based supplier to register for a VAT number in the EU. However, under certain circumstances - depending on the relevant legislation of each Member State -, registration for VAT purposes is necessary. This may occur when the buyer is a non-business customer not registered for VAT purposes. For example, radio and television broadcasting services are governed by specific EU rules requiring non-EU suppliers to register in the Member State where they are providing the service to non-business customers.

the point being - if you want an answer to this issue, ask your own accountants - they should know!

16 hours ago, graziano_68 said:

How many of you USA business already registered for a UE VAT ?

interesting question... and if you're not a large US host with only a few EU customers, are the EU going to chase you down for VAT - probably not I would imagine if it's only a small amount... for the big hosts, it might be worth their while to chase, but not the others...

57 minutes ago, graziano_68 said:

US business are "non-resident companies" , so they must register for UE VAT if they want sell to EU customers , does not matter the thresholds.

you wouldn't have to register with all 28/27 countries, just choose one country and register with their Tax Authority... probably Ireland will be your logical choice.

45 minutes ago, graziano_68 said:

BTW so WHMCS tax configuration does not permit US business to sell legally products in UE , and we are forced to buy an yearly $160/yearly addon ?

you wouldn't need that addon to sell services to EU Customers... you can do it out of the box.

[Remitur]

45 minutes ago, graziano_68 said:

BTW so WHMCS tax configuration does not permit US business to sell legally products in UE , and we are forced to buy an yearly $160/yearly addon ? 😆
 

You can use also the whmcs tax engine, which is free, but I do not suggest it: https://docs.whmcs.com/Tax_Configuration

[graziano_68]

Thank you Brian

However I'm still confused how to configure correctly The Tax configuration page.

I have a US business , so

-1 in "Your Tax ID/VAT Number" should I enter my USA company EIN , right ?

-2 Suppose I sell a digital product at $100.00 .
If I receive an order from USA , I want WHMCS shows the price $100.
If I receive an order from an Italy customer (i.e.)  , I want WHMCS shows the price $100+$22 VAT.
To have this It's enough I set "Exclusive Tax - prices are entered without tax" , am I right ?

-3 Suppose I get an internation EU VAT from Irland , I should enter Irland in
WHMCS >  Tax configuration page > VAT Settings >  Your Home Country  and set it to Irland
 Am I right ?

-4 What to do to show in WHMCS invoice , my US EIN , my EU VAT (only if the customer is from EU) and customer VAT (only if customer is from EU) ?

-5 And last question , not related with WHMCS . Suppose I receive an order from Italy and after the order  I receive a payment of $100+$22 VAT . What should I do with that $22 VAT . Should I return them to EU ? How to return them ?
 

Thank you



 

 

 

Edited October 19, 2019 by graziano_68

[brian!]

3 hours ago, graziano_68 said:

However I'm still confused how to configure correctly The Tax configuration page.

oh EU tax rules can be confusing even when you have to deal with them every day.... 😱

3 hours ago, graziano_68 said:

-1 in "Your Tax ID/VAT Number" should I enter my USA company EIN , right ?

no - it will be your VAT number if/when you apply for it... for example, WHMCS' would be GB927774676 - basically, when you register for VAT, they (the tax authority) will assign you a number, so if you were registering with HMRC (UK Tax), then you would be assigned a unique GB number in the same format as WHMCS above - GB just refers to the UK, so if you applied to Ireland's tax authority, it would start with IE... it doesn't particularly matter which authority you apply to, but obviously IE will be used to dealing in English and so might be the most convenient for you.

technically, which is a polite way of saying legally, I don't think that you should setup WHMCS to charge these VAT rates until you have been given a number by an EU tax authority... because until then, you wouldn't have the authority to  collect the tax.

3 hours ago, graziano_68 said:

-2 Suppose I sell a digital product at $100.00 .
If I receive an order from USA , I want WHMCS shows the price $100.
If I receive an order from an Italy customer (i.e.)  , I want WHMCS shows the price $100+$22 VAT.
To have this It's enough I set "Exclusive Tax - prices are entered without tax" , am I right ?

yes.

if your default country in the localisation settings is USA, then the cart will effectively show the pricing for everyone as without VAT, only when they either click on the Estimate Tax tab in viewcart, or if they checkout then it will shown on their invoices...

3 hours ago, graziano_68 said:

-3 Suppose I get an internation EU VAT from Ireland , I should enter Ireland in
WHMCS >  Tax configuration page > VAT Settings >  Your Home Country  and set it to Ireland
 Am I right ?

yes.

4 hours ago, graziano_68 said:

-4 What to do to show in WHMCS invoice , my US EIN , my EU VAT (only if the customer is from EU) and customer VAT (only if customer is from EU) ?

you would need to add your EU VAT number on the invoice - the easiest way to do that would be to add it to the "Pay To Text" in general settings -> general as that it what is already used on the invoices..

... though you could add it elsewhere to the invoice design if you wanted to.

if the customer is from the EU and has added a valid VAT number of their own, then that will be automatically included in the output as part of their address on the invoices (at least with recent WHMCS versions)... if they're not from the EU, or not added a VAT number, then it won't be shown - so there's probably no need to worry about this bit (unless it's an older WHMCS version or a customised invoice template).

4 hours ago, graziano_68 said:

-5 And last question , not related with WHMCS . Suppose I receive an order from Italy and after the order  I receive a payment of $100+$22 VAT . What should I do with that $22 VAT . Should I return them to EU ? How to return them ?

the way to think about this is that you are acting purely as a tax collector on behalf of the EU (or technically for one if it's member's tax authorities) - that $22 is not your money, and you have collected it on behalf of the EU... which is why I said before to not collect it until you get a VAT Number.

a useful walk though on this might be found on the site below..

https://europa.eu/youreurope/business/taxation/vat/cross-border-vat/index_en.htm

Every three months, you need to complete a VAT return to your chosen tax authority - this can be done online (at least in the UK, but I assume it's the same in Ireland)... you then pay the VAT that you have collected in that quarter to your chosen tax authority.

slightly off-topic, but I think the long-term plan of the EU is for the US tax authorities to collect these taxes on the EU's behalf and then pass the amounts back to the EU when you complete your equivalent US taxes - but I could well imagine that such a system is decades away and certainly not going to appear any time soon.

[graziano_68]

Thank you for great and simple explanation

[Kian]

5 hours ago, brian! said:

Every three months, you need to complete a VAT return to your chosen tax authority

In some countries (eg. Italy) it's on a monthly basis if you earn a lot of money.

Back on topic, there's a very important detail that is missing: VIES. Let's suppose that you register your VAT Number in Germany and that you sell a product that costs 100$

• Italian customer (individual) pays 100$+ 22% IVA
• Italian customer (business) not registered in the VIES system pays 100$ + 22% IVA
• Italian customer (business) registered on VIES pays just 100$ (no tax)
• German customer (individual) pays 100$ + 19% MwSt./USt.
• German customer (business) not registered on VIES pays 100$ + 19% MwSt./USt.
• German customer (business) registered on VIES pays 100$ + 19% MwSt./USt.
• Rest of Europe
• Exceptions:
  • Spain: Canary Islands (Las Palmas, Tenerife)
  • UK: Mann Island, Channel Islands
  • Overseas territories (damn France and Netherlands)
  • Italy: Livigno, Campione d'Italia, Lugano
  • Full list

I'd suggest you to stay away from countries with electronic invoicing or that are going to adopt it. Let me give you an example with Italy (it has electronic invoicing). Here is what happens just with italian customers!

• Individual pays 100$+ 22% IVA
• Business not registered on VIES system pays 100$ + 22% IVA
• Business registered on VIES pays 100$ + 22$ IVA
• Business listed on FTSE MIB stock exchange pays 100$ *
• State-owned business pays 100$ *
• State-controlled business pays 100$ *
• State-partecipated business 70% or higher pays 100$ *
• Public Administration pays 100$ *
• Livigno, Campione d'Italia, Lugano 100$ (I'm not 100% sure!)
• San Marino I have no f**king idea 🤮 Can someone annex this country?
• Vatican City... Dear Pope, we need to talk
• The rest of EU and the world

* You must verify their identities in "awesome" ways

[graziano_68]

in other words , even if you want to be legal you can easly fail  . It's becoming always harder to have a small business.

[graziano_68]

However , is it true what reported above by Remitur  that " The rules in EU are that if you if you exceed the sale threshold for the country in EU you need to register as a VAT company. "
because I have a small business and surely I do not exceed the sale threshold for any country in EU.

 

[brian!]

2 hours ago, graziano_68 said:

However , is it true what reported above by Remitur  that " The rules in EU are that if you if you exceed the sale threshold for the country in EU you need to register as a VAT company. "
because I have a small business and surely I do not exceed the sale threshold for any country in EU.

... but as you admit yourself, you're not resident in the EU, so what he's talking about doesn't apply to you... in the UK, if my business has (or I think will have) sales over £85k, I have to register for VAT; if it's less than that, I can still voluntarily register if I wish to... alternatively, I could register for MOSS and charge EU customers tax, but not those in the UK... but none of that is relevant to you because you're not resident in the EU.

as a non-resident, you'll either have to register for VAT in one of the countries and collect the appropriate tax, or not register and not collect the tax - but then you might face more questions from customers like the one that caused you to start this thread!

[graziano_68]

Thank you Brian.

Edited October 21, 2019 by graziano_68