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Sale of software outside the U.S.

That was a quick but fun call this morning with the good people from Collobos Software. They produce software that is typically purchased by businesses and they have a growing customer base outside the U.S.

For VAT in the EU, the sale of software business-to-business means that the place of supply is where the recipient is resident.

Does Collobos have any overseas offices? “Nope, and we don’t plan to for now.” Any servers overseas, or office-less employees “No.”. OK, then you’re good. No VAT liabilities.

Same applies in most countries outside of the EU – actually I would not know any country that requires a non-resident company to register for tax under these circumstances.

“Thanks Mark – what can we do in return?” Spread the word!

So I just saw this twitter message. Thanks Collobos!

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Next up: Costa Rica

The Wall Street Journal writes about Costa Rica’s plan to accelerate the introduction of a 13% VAT:

“One of the reasons why Moody’s decided to downgrade us was because the incapacity of governments in the past to agree with the legislature for comprehensive tax reform,” Mr. Solís said in the interview.

Hat-tip: Peter Devlin

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Oh, those 2015 rules…

It seems like every VAT consultant, in the US and in the EU, has jumped on the new EU VAT rules that kick in on January 1, 2015. I have not paid as much attention to the changes, simply because the impact on U.S. companies is rather limited.

As a reminder, this is about the supplies of online services (downloads of all sorts of automated supplies, like video, games, music etc) to EU based individuals. VAT is due at the rate of the country of the buyer. See for more information.

For a U.S. based company there are really only two things to keep in mind:

1. If the U.S. company has an EU branch or subsidiary  – then the rules that used to apply to the U.S. parent company now apply to the EU branch or subsidiary as well.

2. If these online supplies to EU individuals are only made from a U.S. based company, then the U.S. company was required to register for VAT. Under certain conditions, the U.S. company could register for VAT in a single country (in practice this was mostly the UK). From January 1, the U.S. company will have to change its registration to the so-called mini-one-stop-shop (“MOSS”) registration. See for the guidance of the UK tax authorities.

Here is an email that one of my clients recently received from HMRC. It is a tough read, but the gist is that the US company has the change the VOES registration into a MOSS registration… Yes, it sounds weird, but they say that this swap is painless.

Download (PDF, 65KB)

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Scandia – supplies to a branch

In a wholly unsurprising ruling the European Court of Justice ruled last week that supplies by a head-office to a branch are within the scope of VAT if the branch is part of a VAT group / fiscal unity.

The Netherlands at least has had this rule in their regulations for decennia, but see here at LinkedIn for the UK view, which is rather different.

I pdf’d the ECJ ruling below. Like all ECJ rulings, this one is not very easy on the eyes…

Download (PDF, 518KB)

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“Base Erosion & Profit Shifting” sounds like something that has nothing to do with VAT. VAT expert James Robinson penned his thoughts on this OECD initiative – well worth a read.

Download (PDF, 386KB)

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I’m back…

Last week at the IPT VAT conference I was encouraged to pick up blogging about VAT. Thanks everybody! Here we go…


Starbucks session at IPT

Reagan airport

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Portugal – VAT rate up to 23.5%?

Just when you thought that VAT rate increases have died down, Portugal announced plans to increase their VAT rate from 23% to 23.5%…

From January 1, 2015, or so they say now.

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