The UK’s departure from the EU on 29th March 2019 has left most of the businesses across Europe in a complete blue, and they are still struggling to understand how this change will affect them. For WordPress Themes and Plugin businesses mainly, the whole affair of Brexit has made EU Vat collection and payment even more complicated than it already is.
If you have been handling the EU VAT on your own, most chances you may be feeling already overloaded with a vast number of invoices, complex requirements of filling each of the EU state members and, investing a chunk of money and lot of time on bookkeeping.
Now, this article is going to help you by breaking down the upcoming charges and explains what Brexit in a simplified manner:
When it comes to selling digital products to Europe, it’s necessary to collect and manage the exact amount of VAT rate from every sale of the WordPress products.
Your tax situation for the EU solely depends on where your customers are located, and tax should be collected for each sale depending on whether you are selling it to the businesses or consumers.
When your WordPress Business Is Based Inside The EU:
1. You should charge local VAT from both the businesses and consumers in your country
2. There’s no need to charge VAT from companies that are based in another EU country. They will account for tax in a Reverse Charge Mechanism manner. According to this policy, to exempt a business from VAT, you will have to collect, validate, and store their local VAT number as a proof in case of an audit.
3. If the consumer is based in another EU country, you will need to charge the consumer according to their local VAT rate.
For example: if your business is based in Spain and your consumer is from Finland, you will have to charge him/her the correct Finnish VAT.
4. There’s no need to charge VAT from the consumers or businesses situated outside the EU.
1. There’s no need to charge from the businesses based in EU because they will account for taxes in reverse mechanism way.
2. You must charge VAT for the consumers based in Europe. The VAT amount differs from country to country in the European Union.
Right now if you are selling WordPress products to the consumers in Europe, but you are not a member of European Member State, you must register yourself for VAT MOSS (Mini One Stop Shop) to be able to submit your regular tax report to one EU country for your sales across Europe.
Now, you should know precisely how Brexit would affect the MOSS, as well as the apparent effects on the EU based businesses.
Brexit is Britain’s Exit officially from the EU’s political and economic union on 29th March 2019.
Most voters in England and Wales wholeheartedly supported Brexit, specifically the voters from rural areas and smaller cities. The number of Brexit supporters overcame the majority support to remain in the European Union in London, Scotland and, Northern Ireland.
From the data given below, we can find that young voters supported against leaving, while the older people supported it overwhelmingly.
The preferential agreements for countries within the European Union allow for the freedom of movements of goods, people, and services on a common platform of taxation and regulation. As an obvious consequence, when Britain left the EU, almost all the agreements have already ceased. Right now, it is improbable that the EU and UK will come to a negotiation that may retain some of the original benefits of the European Union. The truth is that meeting all the tax regulation will likely become more challenging for businesses across Europe.
A little good news for the WordPress themes and plugin businesses dealing with the EU and UK countries is that the EU has agreed to postponed Brexit again and, this time for a much longer period of October 31, 2019.
If you take a closer look and observe the trend at the tax rate for each European country, you will find that they vary widely (and are updated in a usual manner). VAT MOSS allows you to simplify the taxes for all the European sales. Before the Official date of Brexit-March 29, 2019, MOSS used to enable you to register in any of the EU countries (including the UK also) and, cover all the sales for Europe. Now, Post-Brexit, the MOSS system has gotten split, and you are no longer able to return one tax return to one country for the entire sales in UK and Europe. The software developers selling digital products consumers and businesses in the UK and Europe are filling the taxes separately, which leads to doubling the hassle of handling VAT for the European customers.
If you are business situated outside the UK and selling products to the customers in the UK, you will need to register for the UK VAT system, which is the only way to pay taxes.
To continue with handling taxes in the EU, no matter where your location is, you will have to register MOSS in an EU based country. This can be a challenging job for you. If you are not familiar with the language of the country where you are registering. You can check the official website of the European Union to get useful information which will help you to make the right decision depending on your location. If you are from a different country and are selling responsive web designing solution or web solution service to the EU and UK based customers, hiring an independent merchant of records for the sales of your software products could be a good idea to handle all the taxation job conveniently.