The company from PA (USA) needs a EU VAT number to operate in the EU... The VAT registration would be revoked in the specific member state where it was issued.
If there is a tax agreement between a specific member state (EU) and the US, IRS can show interest in Joe.
If there are like a thousand sales in a specific member state (the taxation is not EU wide global), no one will show interested, so if Joe is small - it's very likely Joe is safe.
Operating w/o the VAT could also spring money laundering interests -- the institutions concerned with anti-money-laundering cases tend to have rather long reach.
No, it does not. A company in PA, USA does not give two cents about EU VAT. It charges EU customers in the US and provides services in the US and tells EU to shove it. Actually, it does not even do that. It simply ignores everything that EU does.
Like I've said if you are small enough to avoid any interest, it's ok - but selling electronic services to EU residents without VAT in the EU is not legal.
Overall VAT is taxation on the consumption, the consumption is within the EU member state, the state receives the tax.
Summary:
When US companies encounter European VAT: When doing business in the territory of the EU a company will deal with VAT: when selling something, the company will have to charge the customer with VAT... [0]
Also: The EU’s VAT law considers everything that is not a good (generally a tangible property) as a service. Services can include everything from the licensing for intellectual property to downloadable software to consulting – to name but a few examples. The VAT requirements for services depend on the final customer
U.S. Foreign Commercial Services for U.S. Companies [1], [2]
This is not at all what I’ve encountered at several jobs, and the auditors have confirmed.
The VAT structure in the EU is the responsibility of the EU. An EU customer buying something or some service in USD from a US company with no presence in the EU is responsible for handling their own tax liability with the EU.
Conversely, I have bought many items and services online from EU companies who don’t have presence in the USA. Not one has charged me VAT nor the local “use tax” the People’s Republic of Chicago charges for internet-based services.
In short, my experience is you’re just plain wrong. A bunch of expensive and competent accountants hired by my various employers agree that you’re wrong.
>The VAT structure in the EU is the responsibility of the EU. An EU customer buying something or some service in USD from a US company with no presence in the EU is responsible for handling their own tax liability with the EU.
If you import goods (receive them via mail), there is a customs clearance required + VAT for prices over N euro (where N varies on the country but usually less than 25e). Indeed that's a direct responsibility of the receiver.
>Not one has charged me VAT nor the local “use tax” the People’s Republic of Chicago charges for internet-based services.
Please don't mix the laws in different jurisdictions. VAT is quite different than sale/use tax. Try and buy goods from USA (even ebay suffices) and receive it within the EU w/o paying VAT (unless explicitly exempt from the tax)
Electronic services have no customs clearance or physical presence and what I explained above (VAT number, etc.) applies.
>A bunch of expensive and competent accountants hired by my various employers agree that you’re wrong.
Proof by authority ain't cool. VAT does apply to the end user (companies can receive it back, etc.), so I am unaware if your employers used to sell to end users directly. If selling services was that easy, registering outside EU would so temping as pricing ~20% less would be great. As proof goes: I consulted an accountant about US offered services to a local EU member state. (didn't have to pay anything)
Examples of not being able to sell services to US residents are forex and gambling. Non-US companies practically can not take US customers. Selling services online ain't that easy even to US.
> Like I've said if you are small enough to avoid any interest, it's ok - but selling electronic services to EU residents without VAT in the EU is not legal.
You are confused. Selling services to EU residents without VAT is perfectly fine if the company has no nexus to EU. Just like it is perfectly fine for a company that has no nexus to the United States to sell services to residents of New York City without collecting NYC sales tax. Not only is this done all the time, it is a standard tax minimization strategy peddled by the likes of DT and BDO.
It's HipNewStartupLLC in Delaware that's got more to worry about. VCs will want growth, and at the start things go up. Then they want to expand to the EU, and they've hit the road block.
Maybe they can do that, but that would require piercing corporate veil first which is costly. JoeSchmoeLLC is probably judgement proof. Any attempt to force it to comply would cost a boat load of money.
However, it is a lot more likely that the LLC is owned by those with no nexus to Europe it is extremely unlikely that EU can do anything to punish this company. Hell 99% of web forums have European users.
Maybe it will have teeth against Google/Facebook/Tinder/Match/etc because those companies actually have assets in Europe but it won't be effective against companies with no nexus.
Not really a problem for EU if JoeSchmoeLLC is really treating this as not a law for them. US and pretty much every country in the EU have excellent extradition agreements. [0]
