Digital in hand: European law tightens on digital transactions
If you have a web shop, you should be aware of changes to harmonise European sales tax and ensure companies do not slip through the net. New rules known as the DAC 7 (directive on administrative cooperation) will come into force in January 2023, to ensure firms that sell via intermediary platforms ‘also pay their fair share of tax’, the European Commission says.
Whether or not the web shop (or platform) is located within the European Union, if your customers live in there, you need to pay the sales tax due.
The new rules will put joint responsibility on keeping records about the location of customers with the company running the platform as well as the seller – so, for example, if you have a firm that sells via Bol.com, it too must keep records of your end customers, to ensure value added tax (VAT) is properly paid. Every year Bol.com must report the sales data of the sellers on their platform to the Tax authorities, in the EU country Bol.com is registered. In addition, Bol.com must inform the sellers on their platform which information they report with the Tax authorities. The Tax authorities within the EU inform each other and share the data about the sellers.
If the platform is not registered within the EU it has to make sure that it registers itself in one of the EU countries. Also it has to check the residency of the sellers who make use of the platform. The platform has to keep records of the following activities from the sellers:
- Rental income from real estate located within the EU
- Revenue from sale of services
- Revenue from sale of products
- Income from rental of means of transport
If the platform only takes care of the payment, advertising and refers customers to another shop, the platform is exempt from this regulation.
‘If you have a web shop or you are the provider of a web shop, where sellers register products to your platform, you have to register end customers and
where they are located,’ says a Blue Umbrella expert. ‘This is so the authorities can see in which country you should pay and declare VAT. The intermediary has to keep a record of all transactions.
‘If your customers are private individuals and you sell more than €10,000 worth of products or services to a country within Europe, you have to chargethe VAT from the clients country. If you sell less than €10,000 worth of products or services to a country within Europe , you can charge Dutch VAT.’
It is wise, the Blue Umbrella spokesman said, to keep a track of your VAT obligations and record-keeping rules if you are selling to outside Europe too. Meanwhile, if your shop or platform is registered elsewhere in the world but has large enough European sales, you need to register through one country in Europe (and might be able to take advantage of the One Stop Shop ruling to pay all VAT there).
If you are providing services abroad via an intermediary, and they only handle payments and invoicing, the DAC 7 rule will mean that you need to keep client records and ensure VAT is correctly paid.
If the platform you use does more than handling your payments, they will request information about your residency and will ask you to check the information they will send to the Tax authorities about your sales in the EU.
Another European ruling to regulate the digital economy, DAC 8, is also being drawn up to regulate the crypto market, and crack down on tax evasion and fraud. ‘Banks tell the government how much you have in your bank account, and they also want that for crypto currency,’ said the Blue Umbrella expert. ‘They are working on a new European standard.’ For advice on your personal situation, contact Blue Umbrella.