EU VAT and our Darkfloor Bandcamp.
From January 1st 2015 you will not be able to purchase our label’s EPs from our Bandcamp page (currently the only place that has our entire catalogue).
We can confirm our EPs will remain available from Bandcamp as in the eleventh hour the company came through and we can now process the EU VAT through their platform. Massive shouts to all at Bandcamp for resolving what was a complete clusterfuck – however the issue of EU VAT is still there and still has a big impact on small creative industries and labels like ours so this page will remain as it was when we published this back on December 28th 2014.
New EU VAT laws come into effect that will be causing many thousands of small independent labels in the UK and EU, like ours, complicating issues. At Darkfloor, we don’t yet know the full picture but are looking into it as are other likeminded imprints – whilst we do our EPs will not be available digitally (they are for the next few days up until December 31st).
What we do know is that it affects digital sales. Shouts to Hibernate who gave us the heads up earlier today when they wrote about it.
From 1 January 2015, a new regulation will come into place where VAT on digital products sold in the EU will be chargeable in the place of purchase rather than the place of supply. VAT MOSS or VAT Mini One Stop Shop to give it its full name is being introduced to stop big corporations such as Amazon diverting sales through low-VAT countries such as Luxembourg. But sadly it affects smaller companies and sole traders like ourselves as any download we sell via Bandcamp will require VAT adding for our EU customers and we will be required by law to pay the added VAT back to the country of source. This would mean registering for VAT via MOSS which involves heaps of paperwork, a crippling amount in fact. By law for every digital order we would be required to keep the billing address of the customer, the IP address of the device used, the location of the bank, the country code of SIM used by the customer and the location of the customer’s fixed land line through which the service is supplied to him and keep the data for 10 years!
Their post was the first time we’d heard about it ourselves, and from various tweets and Facebook discussions on our fan page and my personal page this is news to a lot of people. And with just days before this all comes into effect it’s throwing a serious spanner in the works for independent labels that sell digital files through Bandcamp.
New EU VAT regulations could threaten micro-businesses – The Guardian
UK businesses are currently exempt from paying VAT if they sell under £81,000 worth of products a year. However this threshold will be removed for those exporting digital products and services to Europe, from New Year’s Day.
From January, if a UK business makes a sale in another EU member state they will have to pay VAT there. The only way to comply is to register for VAT with that country or register for HMRC’s Mini One Stop Shop scheme (VAT MOSS). According to the HMRC website, the VAT MOSS scheme requires businesses to submit a ‘single calendar quarterly return’ and VAT payment to HMRC, which then sends the ‘appropriate information and payment to each relevant member state’s tax authority.’
If you are a label and you use a 3rd party (like a digital distro) then you’re fine as this PDF explains.
Unfortunately Bandcamp isn’t a 3rd party because the label themselves handle the payment. Bandcamp is working on it, but, from what we understand they only became aware of it themselves a month back.
Effective January 1, 2015, Bandcamp helps artists and labels collect and pay VAT on digital album and track purchases in the following ways:
For each purchase that includes a digital item, Bandcamp automatically determines if the buyer is based in an EU country.
If they are, we calculate the proper VAT amount and add it to the order total. As usual, the proceeds from these transactions flow directly to you.
If you know you fall below your country’s VAT exemption threshold, a setting on your Profile page will allow you to disable VAT collection for domestic purchases.
Effective March 1, 2015, a downloadable VAT report will be available on your Tools page. This report, organized by calendar quarter, will include the data necessary to submit a VAT return for your Bandcamp sales. To report and pay tax for sales in which VAT was charged, EU-based artists and labels:
Register for MOSS (or “Mini One-Stop Shop,” a website used to report and pay cross-border VAT) in your country. UK MOSS sign up is here. In some countries this might involve becoming “VAT registered” first. See your country’s MOSS site for details.
Each quarter, submit a VAT return using MOSS and pay the tax owed. Your Bandcamp VAT report includes all the information needed for the return, including your total taxable sales broken down by country, as well as the evidence used to determine the buyer’s location for each sale.
Under our current system, in which buyers pay you directly, the above is the easiest we can make it for sellers to meet their VAT obligations. In the first half of 2015, we plan to make payments for digital transactions flow through Bandcamp. Among other advantages, this will allow us to take care of everything related to digital VAT, including tax reporting and payment.
Ed Upton (DMX Krew) got his eyes on a VAT MOSS tax return earlier this evening.
I’ve just seen an example VATMOSS return and it’s basically one page of a VAT return per country you sell in, so if you sell in, say, 20 countries in a given quarter, you’re still doing 20 VAT returns’ worth of paperwork, and having to keep track of all the VAT amounts for each country separately. For companies selling thousands of downloads that costs a few pence, this is going to be a death blow.
He also spotted the following, from December 22nd.
This is the only ray of light i found: “If you are below the UK VAT registration threshold (currently £81,000) you can register for UK VAT to use the UK VAT MOSS. You can charge and account for VAT in respect of your EU cross-border B2C supplies but won’t have to charge and account for VAT on your UK domestic supplies.”
In the next few days our digital catalogue will be taken down as we will look at alternatives and solutions. And, just try to understand the situation better.
There is a petition asking Vince Cable (the UK’s Secretary of State for Business, Innovation and Skills) to uphold the VAT exemption threshold for small businesses (£81,000) because there is no threshold for the EU. And there is another here, petitioning Pierre Moscovici (EU Commissioner for Economic and Financial Affairs, Taxation and Customs). We strongly encourage you to sign and share both.
The implications of this new EU VAT are huge – lots of small independent labels (and startups) are gonna be caught up in this, many more are going to be totally unaware of it. Here’s some more links you should read –
All you need to know about VAT regulations for websites selling digital downloads – Business Matters
Bandcamp and the New EU Vat LAW… – Steve Lawson
The horrible implications of the EU VAT “Place of Supply” change – Rachel Andrew
Those selling through bandcamp etc etc……… EU VAT – Basschat