Post Brexit EU VAT Woes
A few years back (pre Brexit), the EU decided to try and tackle the problem of large businesses locating themselves in Low tax countries and charging VAT from there. They did this by applying VAT for digital products (software downloads, video streaming, electronic manuals etc) based on the consumers location instead of the sellers. This applied to all countries world-wide.
To settle this anyone outside of the EU had to register with a country (or possibly several countries) in the EU and record and charge the applicable VAT, and report it to the relevant authority. If you were within the EU you had a MOSS (a local government portal to register all of these and settle it much more easily).
Small businesses complaining about the rather hefty amount of work involved in this were told to use larger marketplaces who would take care of it (they also take a hefty part of the margin as well).
Since Brexit, the UK also counts as one of the countries outside of the EU and as such we no longer have a MOSS portal to use. As such you have a few options.
- Register in the relevant authorities and pay the relevant taxes.
- Use a marketplace to sell your digital materials (Freemius, Envato, etc).
- Block sales to the EU
- Only sell to EU Businesses that have a VAT number (ie you will be using their reverse charging mechanism).
To this aim there is an excellent (and free) plugin for WooCommerce called EU Vat Assistant, this plugin will help you with either of the second two options.
With option 3 while you can do this manually in WooCommerce settings, the EU VAT assistant has an option (on the sales page) to fill all the EU countries in and prevent sales to them.
For Option 4 It can force the collection of VAT numbers before people based in the EU can checkout, thus providing the reverse charge mechanism for you.
For Option 1 (if configured) it will collect and report all the VAT that has been charged to allow you to register where you need to and report and pay the necessary tax.
As a B2B business ourselves we have this configured purely for option 4 above. As we tend to find that WooCommerce is used by smaller businesses who would not be able to consider option 1 we can only recommend one of the other 3 options.
If this all sounds like a foreign language (does to us too most of the time!) feel free to give us a call to run through it in plainer English!