I spent several hours reading up about VAT MOSS, and trying to think of how I can comply with minimal admin work and cost.
After some thought, I came to the conclusion that I can avoid MOSS altogether. It took a bit of upfront time to achieve as my website had to be updated, and there is now a slight extra cost involved when selling to EU customers.
My initial thought was to move all of my sales to an intermediary such as Amazon or Clickbank. Third parties like these can sell digital goods on your behalf and charge you a percentage of each sale. This charge covers them to host your product, and send it to the customer and invoice them, so they’re responsible for paying the VAT to the relevant countries. This means you can avoid registering for MOSS since you’re getting paid by the intermediary (usually based in the US), instead of the customer.
The downside to this however is that third parties take quite a large percentage of each sale, so if you’re selling low value products (which is likely if it’s a digital good) the time spent creating your product may not be worth it when third parties can take anywhere between 20-40% of each sale. This is especially true when you consider additional factors like Paypal and web-hosting fees.
The trouble with the new VAT MOSS rules is that they don’t respect the upfront time, expertise and risk involved in creating a digital product, before any money can be made. The last thing you want is the admin work of submitting a VAT return every 3 months, registering as a data controller (which costs £35 p/a), and storing evidence of every customer’s location.
A micro-business that is already paying several third parties to operate is unlikely to want to give away another 20% margins to someone else just for the privilege of avoiding MOSS. It’s either that or spend an inordinate amount of time and money to deal with the burdens that MOSS bring.
Either way, unless you’re becoming the next big indie video-game developer, your projected hourly rate for all of this means you’re probably going to be better off working down the local supermarket. Doesn’t sound very entrepreneurial does it?
If you only deal with UK customers (assuming you’re UK based) and those who are not in the EU, then MOSS isn’t required. Great, but you can’t sell digital goods to just these people in most circumstances unless you have sufficient legal reasoning. Even if you could, that’s a lot of sales being lost when ignoring everyone in Europe.
The best solution I’ve come up with so far is to continue selling to everyone, but using two different payment gateways.
With my website updated, it now shows 1 out of 2 possible buy buttons for each product, depending on where the visitor is located. If the visitor doesn’t make me liable to MOSS, they get shown the buy button that I’ve always used. But if the visitor is in the EU, they get shown a buy button from a third party that has a low transaction rate, and deals with the burden of invoicing and data storage.
This way I retain as much of the revenue as possible since I am only using the third party for customers that make me liable for MOSS. This is instead of using a third party for every customer, which would cut into all of my profits unnecessarily. This is what most people will be doing after 1st January 2015.
Fortunately, my website is hosted on WordPress so the implementation did not require any coding knowledge.
The steps I took to achieve the solution were:
1) Signed up to FastSpring to set-up my products and use their buy buttons, which will deal with EU customers. Their cost is 8.9% per transaction and their support so far has been great.
2) Once my products were set-up with FastSpring, I installed the plug-in at https://wordpress.org/plugins/custom-content-by-country/. This lets you show content on your website based on the country where the visitor is located.
For each buy button on my site I implemented the following example code:
[CBC country="at, be, bg, hr, cy, cz, dk, ee, fi, fr, de, gr, hu, ie, it, lv, lt, lu, mt, nl, pl, pt, ro, sk, si, es, se" show="y"] Buy button code for EU customers goes here [/CBC] [CBC country="at, be, bg, hr, cy, cz, dk, ee, fi, fr, de, gr, hu, ie, it, lv, lt, lu, mt, nl, pl, pt, ro, sk, si, es, se" show="n"] Buy button code for non-EU customers goes here [/CBC]
Reading the code above you can see that the first buy button will only show for EU countries (excluding the UK). This will be the buy button code from your third party, or FastSpring in my case.
The second piece of code makes the buy button appear only for those NOT in the EU countries listed, which is the usual Paypal button I used before this MOSS kerfuffle happened.
To see this in action, look at the buy button of the product I sell at /jaggyblog/. If you are outside of the EU or in the UK, you will see the buy button that takes you to Paypal (I use Woocommerce for the shopping cart. This stores the customer’s IP and billing address. Storing evidence of the customer’s location is still necessary, whether or not the product is liable to VAT MOSS). If you are inside the EU, you will see a buy button that looks the same but uses the FastSpring check-out process. This will deal with invoicing your customers as well as storing their location.
I hope this post has given you an insight into how I managed to comply with the new rules and still survive as a micro-business. The only downside is that I pay an extra 8.9% for each EU customer because they go through FastSpring. But at least I don’t need to be VAT registered or use MOSS, so I have time to do my actual job!
List of third party solutions (Intermediaries that take on the responsibility of MOSS, and ones that help with the process)
Register for VAT (Has to be done if you want to apply for MOSS)
Register for VAT MOSS (If you’re that way inclined)