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hohl

Does Blesta support EU VAT handling?

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I only found an article from 2015 about this topic, so I wanted to ask again whether this is now already supported?

What I (or basically any other enterprise headquarter within the European Union) would require is:

  • once a customer supplies a VAT ID this ID should be verified against the corresponding SOAP service
  • if the customer supplied a valid VAT ID and is located in a different country than my companies headquarter: charge 0% VAT on it and add a "reverse charge" not on the invoice
  • if the customer is a private customer or another business located in the same country then my company then the VAT-rate of the country of the customer should be applied
  • some GeoIP validation (especially when non-EU country is chosen) to match the location of the user with the infos he provided isn't mandatory, but would be nice

I checked the Blesta demo, but it doesn't seem to be possible to achieve this kind of behaviour? Looking at the Blesta docs it also doesn't seem to be possible to add the VAT handling through a module or plugin either, am I right?

One more thing, not related to VAT, but also EU specific:

  • add a second checkbox "agree to privacy policy" below ToS checkbox, as privacy policy should not be merged with ToS in general
  • add an info block about EU consumer protection law and another checkbox that they waive their 14-day right of refund without reason (otherwise it always applies to customers, and for a lot of services 14-day refund is simply not possible)

There seems to be an "create order form" menu in the staff area, but it doesn't seem to be possible to add arbitrarily checkboxes/information there either?

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On 6/17/2020 at 6:05 PM, hohl said:

 

  • add a second checkbox "agree to privacy policy" below ToS checkbox, as privacy policy should not be merged with ToS in general
  • add an info block about EU consumer protection law and another checkbox that they waive their 14-day right of refund without reason (otherwise it always applies to customers, and for a lot of services 14-day refund is simply not possible)

There seems to be an "create order form" menu in the staff area, but it doesn't seem to be possible to add arbitrarily checkboxes/information there either?

It's ok about VAT MOSS needs, but regarding EU requirements would be nice to have _ONLY_ if them can be disabled for non-EU Customers otherwise people not feeling on will leave in a glance at checkout. I think people don't expect that.

Also processors / banks ask to have these rules on terms / refund policy only. Remember that consent has not only to check but if you request it like this, you have to save it somewhere and logging it too!

 

About VAT MOSS and VIES requests please vote here and add your concerns too!

1. https://requests.blesta.com/topic/vies-check-and-vat-rate-update-support

2. https://requests.blesta.com/topic/vat-moss-complete-support

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Much of the EU VAT requirements are a mystery to us, but we'd like to make necessary changes to properly support it. From what I understand there needs to be an option to integrate with VIES to verify that a VAT ID provided is real, and then take some action on that. Presumably, setting the client as tax-exempt, and some other things.

At the risk of sounding like an idiot, can you explain it to me like I'm a 5 year old? :) There seems to be several moving parts here, and we want to know how things should function, and how they ought to be configured within Blesta.

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Sure, I will try as best as I can:

tldr; VAT always has to be collected based on the customers location. But, there are two exception: when the customer is a business located in another EU nation or when the customer isn't located inside the EU. In that case, no VAT needs to be charged. Whether a customer is a business (in VAT perspective) is determined whether he provides you with his VAT ID, which you first need to verify.

long version; The core concept of Value Added Taxation (VAT) within the European Union is that the consumer of any product or service has to pay tax on it. This is usually handled transparently for the consumer (prices always have to be inclusive of tax): the seller needs to collect theses taxes and send a report to their local tax authorities at the months or quarters end (depending on the size of the sellers company). The VAT rates can be chosen by the individual EU member state and the rate to apply depends on where the sale happened. For decades the question of "where the sale happened" was easy to answer: think of a local shop in Denmark. The shop is located in Denkmark, where there is a 25% VAT rate, and the sale happened inside this shop. The shop owner would thus just collect 25% on all the sales and pay them to the tax authorities of Denmark. Life is so simple in traditional businesses. ;)

If we would stop here, there would be one problem: when there are multiple processing steps, VAT would have to be paid multiple times. For example, in the furniture industry: first, wood would be chopped and sold (so VAT is paid on the raw wood). Second, wood would be cut into planks and the planks are sold (VAT paid again). Third, the actual furniture might be produced and sold to whole sale businesses (again VAT is paid). And so on, soon we would pay more VAT than anything else in our value chain, thus businesses have to be excluded from paying VAT. In general, this is handled in the following way: any seller always charges VAT and hands out a “VAT invoice” which has to follow specific rules to ensure that these are verifiable unique. If the buyer is a business owner he can then go to the local tax authorities to reclaim the paid tax.

But, local in that perspective means the tax authorities of the nation where the sale happened. Thus, if you shop all over Europe you would need to visit multiple different tax authorities to ask refunds for the individual purchases. So, the EU thought about one more rule to make that process easier: if you shop outside your home nation, you show the seller your VAT ID (which he has to verify) and then doesn’t need to charge you VAT on your purchase. But remember, only in other nations, within your home nation the system continued to work as before.

That system actually worked well for decades. But then the internet appeared, and some businesses tried to save some tax by declaring that their shop was the place where the sale happend. And - suddenly - many online shops where hosted in Luxembourg where there is just a 19% VAT rate (Amazon and Apples iTunes, for example). Well, governments didn’t like that so they declared: in e-commerce the sale always happens at the place where the customer was at the time of purchase. (Nobody knows how the legal guys thought one would determine the place where the customer was at purchase, but most businesses just interept this law as “whatever address the customer provided me with” and that seems fine and common practice).

One positive note to finish that post: VAT is one of the very few tax concepts that are regulated on an EU level. EU member states are only allowed to choose their VAT rate and declare exceptions for very small businesses. (In contrast to for example, income taxes or capital gain taxes, this VAT stuff can actually be considered "simple".) Some more cautionary note: I'm not a tax consultant, just a business owner for nearly a decade.

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14 hours ago, Paul said:

Much of the EU VAT requirements are a mystery to us

Oh I can say the same for US Sales Tax too, man ... but the principle is the same as your (new) Economic Nexus

A part of this, you should be aware that sometimes specific VAT VIES country system go offline for maintenance , and so the VIES check cannot be done. That's because in EU VAT VIES system is decentralised and updated on a 24hrs (almost) basis.

Again, when calculating the VAT Rate-Country almost two pieces of information must be matching the customer details. Eg. Customer IP + Phone Number, Customer IP + Address, Customer IP + Credit Card issue country ... so also a Phone number verification, must be made if you want to use that number as a tax residence proof, of course.

Hope this can help. Woocommerce for example do that.

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Just wanted to bring that topic up again (since I would love to use Blesta, but EU VAT handling would be necessary to do so). Maybe my above wall of text was a bit too much. Let me try with a "rule-based" description.

The following rules apply for any VAT-registerd company located within the European Union (basically every company, except very small ones):

 

which_vat_rate_to_apply.png

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In addition to that,

  • ...for business clients: you are responsible to ensure that any VAT ID provided by the customer is actually valid (there is a free-to-use web service for that provided by the EU)
  • ...for private clients: you have to collect evidence that the address provided by the customer is actually his address and that he didn't just make up a fake address in the VAT-cheapest location (as pointed out by vedova above, for example through checking its IP address, through cross-checking credit card information or by simply asking the client for manual verification)

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