Open letter to Prestashop and the Community, EU VAT rule

[Jimbola]

Hello,

 

You may be aware of a new EU VAT rule that will come into place on the 1st of January 2015 which will mean that businesses that sell downloads (like you and us) will now have to charge consumers VAT based on the residential location of the customer for EU customers.

 

Will there be an update to Prestashop to help merchants comply with these rules otherwise PS will not be suitable for selling downloads, and in the future when the rule is extended to physical sales it will also not be suitable.

 

Ideally the changes that needed to be made from what I can tell are;

 

1. Store the merchants VAT registration number and display it on invoices.

 

2. During customer registration to have a VAT registration number field which can accept and validate the VAT number against the VIES VAT site, http://ec.europa.eu/taxation_customs/vies/

 

3. A setting that prevents VAT being charged to those with a valid VAT registration number. Set by country to prevent non-EU sales having VAT applied.

 

4. During customer registration a location field that specifically prompts for location.

 

5. Customer IP address to be added to order confirmation and customer invoice.

 

Please let me know if any of these will be addresses.

 

Yours Sincerely

NM

Edited December 11, 2014 by Jimbola (see edit history)

[Jimbola]

The purposes of posting this here was to get feedback from PS and also if there are any developers who will be developing (free/premium) modules to solve these issues.

[El Patron]

I suggest also to bring this to the attention of PrestaShop developers.

 

You can open a bug or preferably and improvement ticket with details.

 

If you would then be so kind as to post link to forge report in this post so that others can comment/follow/vote up.  Thanks

[Jimbola]

I suggest also to bring this to the attention of PrestaShop developers.

 

You can open a bug or preferably and improvement ticket with details.

 

If you would then be so kind as to post link to forge report in this post so that others can comment/follow/vote up.  Thanks

 

 

Done

http://forge.prestashop.com/browse/PSCSX-4093

[tuk66]

Some information about Directive 2008/8/EC are at

http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm

http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-commerce/index_en.htm

http://www.simplyvat.com/new-eu-ecommerce-vat-rule-changes-2015-apply/

http://www.ey.com/Publication/vwLUAssets/EY-Digital_products_and_services_in_2015/%24FILE/Digital_VAT_Campaign_Brochure.pdf

 

I contacted my tax authority and the best way is to register at MOSS, "mini one-stop shop".

 

The problem in PrestaShop has several layers:

 

- how to identify and mark electronic services in the shop

- create tax rates for all EU countries

- charge the appropriate tax rate (only for identified products)

- calculate right voucher discount (distribute discount to all tax rates)

- print all tax rates (and appropriate countries) on the invoice

+ bonus: create a tax report containing all law requirements (12 points, Council Implementing Regulation (EU) No 967/2012, Subsection 10)

Edited December 11, 2014 by tuk66 (see edit history)

[the.rampage.rado]

This directive will be a carnage for such platforms...

[tuk66]

Why? Only adds complexity.

[the.rampage.rado]

Keeping in mind that PS team tried 1 year to sort out taxing I'm not wanting to guess how much time this would take.

 

This had to be fixed in 1.6.0.11 which is rolling in few days, it was known for at least 6 monts.

[tuk66]

Stay tuned. I am trying something and things look quite easy at PrestaShop's side, I hope.

 

Follow this topic to know the solution published here.

[Xavier du Tertre]

Hi everyone, hi Jimbola, hi Vladimir,

 

Thank you for creating this topic and raising the subject, the new VAT rules in the EU is a most important matter that needs to be tackled as soon as possible. 

 

The product team is very aware of this and we are working on it right now. I'm actually emailing you, Turek, this very minute, see if we can work together on this one.

 

Thank you for your trust and dedication!

[tuk66]

Interim results are shown in http://www.prestashop.com/forums/topic/270613-module-m4-pdf-extensions-with-online-editor/?do=findComment&comment=1901559

[Xavier du Tertre]

Great news for PrestaShop users:

 

Next update of PrestaShop 1.6 (1.6.0.11, first week of January) will be compliant with the new EU VAT regulations.

 

For earlier versions of PrestaShop, we will make a module available for free on Addons. 

 

I'll get back to you as soon as possible with more details, I just wanted to share this information with you as soon as I got it.

 

Happy Friday to you all!

[tuk66]

For those who want to try out orders with new EU tax rules:

 

http://www.prestashop.com/forums/topic/270613-module-m4-pdf-extensions-with-online-editor/page-11?do=findComment&comment=1903730

[Vank]

Question to Xavier: I'm wondering if the new update/module will include the identification of type of product. I sell physical products and wanted to start selling downloadable products too (pdf). Will it be possible with this module to apply the new rules to the downloadable product ONLY?

 

FYI for everyone: this new regulation is a HUGE hit for us small and micro-businesses. Seems we can't even register to the MOSS system. I have no idea how will we do. 

http://euvataction.org/key-facts/

 

This was planned to attack the big shops that have seats in countries with lower VAT rates, but they didn't think at all about the small businesses who are badly affected by these rules now. Read that link to understand more how this is affecting everyone. IMHO, this change should be stopped, or at least an exception made for small and micro businesses. 

[Vank]

Here is a very well explained guide about all this mess..

 

http://www.twobirds.com/~/media/PDFs/Books/Bird%20%20Bird%20%20Pocket%20guide%20to%20VAT%20on%20digital%20ecommerce.pdf

[tuk66]

Seems we can't even register to the MOSS system. I have no idea how will we do. 

 

Why? I can and it is only about initial registration and extra reports every quarter. Of course, every country can implement the system differently.

[Vank]

tuk66: because I'm small business in Germany under the Kleinunternehmer (small business) rule §19. I need to register first to apply VAT and then will have to register to MOSS system. 

[tuk66]

Sure. I have my business already registered for VAT.

 

There is another law that forced that earlier, so I am one step ahead. It is about selling services (software) to another EU countries and very likely the same applies in Germany.

Edited December 21, 2014 by tuk66 (see edit history)

[Xavier du Tertre]

Question to Xavier: I'm wondering if the new update/module will include the identification of type of product. I sell physical products and wanted to start selling downloadable products too (pdf). Will it be possible with this module to apply the new rules to the downloadable product ONLY?

 

Yes and no.

 

Yes, this update/module will work for stores that sell both physical and virtual products.

 

No, it will not be automatic. You will have to select the new tax rule for each product impacted by these new regulations. Only you know exactly if your products are concerned with the new EU VAT rules.

[Vank]

You will have to select the new tax rule for each product impacted by these new regulations. Only you know exactly if your products are concerned with the new EU VAT rules.

 

Exactly what I meant.. thank you!

[Jimbola]

tuk66: because I'm small business in Germany under the Kleinunternehmer (small business) rule §19. I need to register first to apply VAT and then will have to register to MOSS system. 

 

 

Vank, exactly same issue here in the UK. Those that were not VAT registered could not use the system, and if they register for VAT they had to apply VAT to domestic sales despite there being a UK VAT threshold. It was only on the 10th December that the Revenue Service here has introduced a simplified VAT registration for small/micro businesses under the threshold. But it takes a month to get until then, not sure what happens on the 1st Jan.

 

No one here seems to know anything about MOSS VAT, not me, our accountant, our local government, even the Revenue Service!! their helpline person said there was no change!! It's only now the EU has admitted that only 40% of digital product sellers are platforms a lot less than they thought. They need to do a Pause and Review, this is about a million times worse than the cookie law implementation.

Edited December 22, 2014 by Jimbola (see edit history)

[Vank]

Jimbola, (and for everyone else): in case this is helpful for you, I've been learning about all this, thanks to this website (from UK), and the Facebook group where there is a lot of movement looking to stop this madness or at least to make the EU take the Thresholds (of income) again on consideration.

 

http://euvataction.org/

 

https://www.facebook.com/groups/DigitalVAT2015/?fref=nf

[musicmaster]

Will the new Prestashop module and version also provide reporting options? VAT receipts will need to be reported by country.

[tuk66]

By country and their tax rates.

 

Do you think that a report like http://www.presta-addons.com/pdf/Tax report (XLSX, formatted).xlsx would suit your needs?

[musicmaster]

By country and their tax rates.

 

Do you think that a report like http://www.presta-addons.com/pdf/Tax report (XLSX, formatted).xlsx would suit your needs?

 

I am not sure. My tax service hasn't published anything about MOSS yet.

[tuk66]

For me, I need to register before December 31st to use MOSS in January, February and March! Late arrivals are not tolerated.

 

Then I have to fill in a special web form for the first 3 months until April 20th, containing these fields:

- supplier (my company)

- country of consumption

- tax type (standard, lower)

- tax rate (%)

- tax base (EUR)

- tax (EUR)

[musicmaster]

Hi, thanks. I had overlooked something. I have now submitted my application. 

 

I guess the report you propose should work. Is there a tool for that?

[Xavier du Tertre]

Hi,

 

We've come up with this patch module (see attached) that we would like you to test before we make it available more widely. Thanks for your help!

eurovatgenerator.zip

[webplus]

Hi Xavier,

 

thank you for the module. It doesn't work on my 1.4.9.0 (just in case you plan to support such old version too):
https://www.dropbox.com/s/rwpmpvjuuxrk14v/Screenshot%202015-01-05%2010.27.08.png?dl=0

Notice: Undefined property: Eurovatgenerator::$context in ....\modules\eurovatgenerator\eurovatgenerator.php on line 74

Notice: Trying to get property of non-object in ...\modules\eurovatgenerator\eurovatgenerator.php on line 7

Fatal error: Call to a member function assign() on a non-object in ....\modules\eurovatgenerator\eurovatgenerator.php on line 74

 

I hope to find time to test other versions too. On my 1.4.9, selling only digital products, I'm fine with setup of one VAT tax rule with different VAT rate profiles for each EU country (and I create invoices outside Prestashop).

Edited January 5, 2015 by webplus (see edit history)

[tuk66]

The eurovatgenerator module looks nice. But, it generates one EU tax rule only and it doesn't correspond to reality.

 

There are some special categories of goods with different tax rates. For example e-books - in France (5.5%), Italy (4%), and so on.

 

I haven't prepared analysis of how many different groups exist (assuming two). Anyway, it would be possible to create more than one tax rule.

[Xavier du Tertre]

@Webplus: I should have mentionned it, this module works with PrestaShop 1.5x and 1.6x only.

 

@tuk66: You're right. Specific tax rules (e.g e-books in France) need to be implemented manually, as the software can't guess the type of virtual good you sell.

[tuk66]

Still, you need more EU tax rules. Those who make up shop will have to do an analysis of tax rates in individual EU countries.

 

It would be great if the work would be done by the module. Just to create as many EU tax rules as needed. There are at least two such groups and I would very surprised if there are much more ones.

 

 

Nice http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_fr.pdf

http://www.vatlive.com/vat-rates/european-vat-rates/eu-vat-rates/

[webplus]

@Xavier - no problem, I understand.

I quickly tested on 1.6.0.9 with debug mode on and didn't find any issue. For me it works well - it created the same settings that I've already created for my 1.4.9 shop manually. So very usefull for people selling "general e-Services" products, like templates in my case. It can save some time with the setup.
I also think that people selling some specific products can setup it on their own manually, according to this:

http://ec.europa.eu/taxation_customs/tic/public/vatRates/vatratesSearch.html

Edited January 5, 2015 by webplus (see edit history)

[webplus]

Xavier,

comparing the rates in module with the link I sent before, I think there may be one error in rates:

LU - Luxembourg (you have 15%, the link says it should be 17%)

Edited January 5, 2015 by webplus (see edit history)

[Lucas Cerdan]

Xavier,

comparing the rates in module with the link I sent before, I think there may be one error in rates:

LU - Luxembourg (you have 15%, the link says it should be 17%?)

Thank you - you're right, most of the VAT in Luxembourg have changed on January 1st.

We'll update the localization pack for Luxembourg and the module.

 

Thanks again for bringing that to our attention.

[tuk66]

This is it webplus, thanks.

There are 9 different groups
 

Broadcasting Services
Broadcasting Services - Offre triple play
Broadcasting Services - Offres TV seule
Broadcasting Services - Radio and TV programmes
Broadcasting Services - Super reduced
Telecommunication & e-Services
Telecommunication & e-Services - eBooks
Telecommunication & e-Services - eNewspapers
Telecommunication & e-Services - e-Periodicals

 

It would also be nice to have the link to this page http://ec.europa.eu/taxation_customs/tic/public/index.html in the module. Searching and understanding of this issue is very time consuming and it would reduce the steep learning curve.

Edited January 5, 2015 by tuk66 (see edit history)

[Hel.et.zel]

Hi everybody!

 

Thank you very much for this new "module"! This new law is such a mess...

 

I have a few questions about it:

 

* How is the country chosen? The law is asking for two evidences: the billing address and for exemple the IP address.

* Is it possible to have these two evidences in the report? It is asked by the authorities in case of audit by the tax office.

 

Thank you for your answer.

[tuk66]

I don't know if every country has implemented that on your own.

 

Anyway, there is COUNCIL IMPLEMENTING REGULATION (EU) No 1042/2013 of 7 October 2013 amending Implementing Regulation (EU) No 282/2011 as regards the place of supply of services.

 

It says that services are to be taxed in the Member State in which the customer is established, has his permanent address or usually resides, regardless of where the taxable person supplying those services is established.

 

To my mind, it is rather the delivery address. No IP address is mentioned in the regulation.

[Vank]

In this website, from the UK, they are keeping up-to-date about the actions doing to help prevent or at least modify this law at the highest levels. They have had some smaller successes. On the site you can find very clear explanations to all this mess of a law that is not clear at all.. 

 

The IP is indeed one of the 3 main evidences requested, which makes it completely unbelievable because someone from Holland let's say, might buy a digital product (let's say a mobile app) when they are in the train, crossing the Channel from UK to France. What IP are you going to take in consideration? AND, if the person is at home, and using a Proxy server, VPN or so?  It is a mess. 

 

http://euvataction.org/key-facts/

[Hel.et.zel]

tuk66, we have to proove that the country taken into account is really the home country of the client...

In the same document (Councli Implementing Regulation 2013), you can read the article 24a, 24b and 24c.

 

Article 24a1: "where a supplier of telecommunications, broadcasting or electronically supplied services provides those services at a location such as a telephone box, a telephone kiosk, a wi-fi hot spot, an internet café, a restaurant or a hotel lobby". It's not the case of most of ebooks services, I think (it's not my case and it doesn't talk about billing address).

 

Article 24a2: it's about ship, aircraft or train

 

Article 24b: fixed land line (we can't know it), mobile country code of the SIM card (we can't know it), use of decoder (not our problem). And the last paragraph is when we don't have any of these evidences, "it shall be presumed that the customer is established, has his permanent address or usually resides at the place identified as such by the supplier on the basis of two items of non-contradictory evidence as listed in Article 24f of this Regulation."

 

And Article 24f has the list of all possible evidence: billing address, IP address, bank details such as location of the bank, Mobile country code of the SIM card, fixed land line, commercially relevant informations.

 

If the IP address and the billing address are not in the same country, a solution could be to ask the customer.

It's writting in the explanatory notes (http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/telecom/explanatory_notes_2015_en.pdf), §9.5.1 (6): "Customer self-certification: When the subscriber provides confirmation (e.g. within the online ordering process) regarding his country, his bank details (especially information where a bank account is) and credit card information, this could be taken to be ‘commercially relevant information’".

 

This new law is really a big mess!

 

I see on the Taxamo website that there will a be a Taxamo plugin for Prestashop, to keep control about this law. But I don't find anything. Do you anything about it?

 

Thank you!

 

 

[Jimbola]

@Xavier

 

Can you tell us the EUVAT compliant feature of PS 1.6.0.11 and this module that you have presented?

[Xavier du Tertre]

Yes, sorry Jimbola!

 

It's native from PrestaShop 1.6.0.11. For earlier versions (from 1.5x to 1.6.0.9), there's a module: https://github.com/prestashop/eurovatgenerator

 

We're going to upload the module on Addons soon.

[johnthunder]

https://www.taxamo.com/prestashop-eu-vat-module/ here is the plugin.

 

It satisfies the new golden rule of using two or more non-conflicting pieces of evidence to locate the customer. Also handles B2B and a lot of other scenarios. In short, it makes it easy for etailers to calculate VAT accurately and prepare the necessary reports for tax authorities.

 

My company developed it for Taxamo so send us feedback and any tech support questions.

Edited April 30, 2015 by johnthunder (see edit history)

[ewoudvijf]

Hi,

 I am selling physical products and in that case other vat rules apply, if I am not mistaking.

 

basically, the rules are like this:

non-EU customer > pays no vat 
EU customer without vat numer > pays vat (NL 21%)
EU (B2B)customer with valid vat number > pays NO vat
(B2B)customer from own country > pays vat (NL 21%)

 

Is there any way to solve this? I have bought 2 different modules that don't work and I am getting desperate...

Thanks in advance!

[tuk66]

You don't need any special module for this. Just use the European VAT number module and properly set all things.

[ewoudvijf]

what do you mean by properly set all things? It only shows a country selector and whether or not you want to check the validity of the number. What else needs to be set?

[tuk66]

That's not enough. It was described more times on the forum. Please search it. I think it is about 5 steps to check and set.

[johnthunder]

Remember that VAT compliance when it comes to calculating it for the customer is one thing, but reporting VAT (for 10 years) is also a requirement of the new law.

 

You must report all EU VAT collections.

1. Report VAT to a Mini One Stop Shop (MOSS)
2. Register and report all member states where you supply digital services

When reporting VAT, you must differentiate between domestic, EU, non-EU sales, digital and physical goods, Business-to-Business (B2B) versus Business-to-Consumer (B2C), and VAT rate across the EU and any changes implemented by member states.

You must complete reporting within 20 days of the end of the quarter as define by the EU. Note that this period may not align with your accounting periods. The EU quarters are:

• January 1 to March 31
• April 1 to June 30
• July 1 to September 30
• October 1 to December 31

 

You must submit and store the following information for ten years from December 31 of the year of the transaction:

• Country code of the Member State of consumption
• Standard VAT rate in the Member State of consumption
• Reduced VAT rate in the Member State of consumption
• Taxable amount at the standard rate
• VAT amount at the standard rate
• Taxable amount at the reduced rate
• VAT amount at the reduced rate
• Total VAT amount payable

 

The free* Taxamo plugin fulfills these requirements.

 

* while the plugin is free the Taxamo service is not, pricing info here https://www.taxamo.com/pricing/

[tuk66]

2016 VAT rate changes (compared with http://www.presta-addons.com/pdf/eu_service_taxes_2015.png):

 

- Cyprus 19%

- Romania 20%