June 26, 2019
If you are supplying digital services to consumers (B2C) abroad and if You haven’t registered for VAT/GST and filled VAT/GST returns, in those foreign countries, you might face reassessment of VAT/GST on Your remote sales of digital services going back up to 5 years, penalties from 10% to 300% depending on the foreign country’s legislation, late payment interests from the time when VAT/GST should have been reported and even imprisonment.
As digital services market grows extremely rapidly more and more governments are seeking ways to collect value-added tax (VAT) or goods and services tax (GST) from foreign sellers. Currently, there are more than 60 jurisdictions which has implemented VAT/GST rules for remote sales of digital services, including Canada, major US states, Australia, New Zealand, EU countries, Russia, India, South Africa, Saudi Arabia, UAE, etc., and more, including Israel, Malaysia, Qatar, Kuwait, Singapore, etc., has started to think about how to tax these sales.
Even though remote sellers don’t always know what their tax obligations are in every jurisdiction they sell into, governments of these jurisdictions are assuming that they are losing VAT/GST on digital sales, that is why governments worldwide are becoming more and more aggressive in collecting VAT/GST from remote sales of digital services. There are a lot of tax investigations going on currently in Norway, United Kingdom, Germany, UAE and US and results of these investigations are terrifying by amounts of taxes, penalties and interests calculated to remote sellers who even weren’t aware that they have tax obligations in these jurisdictions. For those remote sellers who willfully avoided their VAT/GST obligations because they thought that it is impossible to track remote sales of digital services investigations ended not only with taxes, penalties and interests but also with criminal charges of avoiding taxes.
The above mentioned sanctions might be devastating to Your business and to You personally, that’s why if You want to stay VAT/GST compliant it is crucial for You to (i) determine whether it is B2C or B2B transaction, (ii) determine Your customer’s location, (iii) register for VAT/GST in countries where the registration thresholds are reached, (iv) charge appropriate rate of VAT on supplies and (v) prepare and submit VAT/GST reports periodically in each country.
Tracking your sales and searching for the tax consultants in each country where You supply digital services is cost inefficient and time consuming. Here at 1StopVAT we understand that Your priority is to focus on your business activities, therefore, we are committed to back-up your business in VAT/GST matters – contact us and ensure You’re compliant!