I’ve been tuning into a webinar with a representative from the HMRC this afternoon, covering the EU VAT MOSS situation.
They’ve been saying that PayPal will be helping merchants by somehow providing evidence about their customers’ locations that may help merchants comply with the 2015 EU VAT changes regarding digital services.
It could certainly make sense for payment gateways such as PayPal to help merchants with the new VAT rules. The payment gateway is often the only part of the system that gets to see the customer’s credit card number (something that could be used to identify the country in which that card was issued). The payment gateway could also be well-placed to capture and record the customer’s IP address, saving the merchant from having to do that themselves.
It will be interesting to see what payment gateways do to help merchants with these new rules. With lots of merchants concerned about the VATMOSS changes, this is an area where payment gateways can potentially make a real difference.
I haven’t yet seen PayPal’s announcement about this. Have you? If so, do post a link in the comments below.
Update: here’s the announcement from PayPal. It describes how you can retrieve the customer’s country of residence via the PayPal API. Unfortunately, as pointed out in detail by Clare Josa on her blog, the new EU VAT rules call for merchants to capture the customer’s location when they’re making the purchase not whatever location is associated with their PayPal account.
So PayPal’s guidance could be risky to follow. Will the tax authorities of EU member states end up turning a blind eye to the distinction between country of residence and location of sale for small merchants? It remains to be seen.
For now, a couple of safe solutions are to (i) switch to using a payment processor that handles VAT for you, for example Paddle (check it out if you’re selling software or games for Mac or Windows) or Fastspring, or (ii) switch to selling through a marketplace or app store that handles VAT for you, e.g. the Apple app store or LoveKnitting’s knitting pattern marketplace.
Have you seen any other payment gateways offering good ways to help merchants comply with VAT-MOSS? Let us know in the comments.