VATMOSS in practice
Published by Danny van Kooten on .
If you’re selling a product or service online, you probably know how much harder accepting payments from European consumers got since the new 2015 VATMOSS rulings.
You now have 27 distinct VAT rates to keep track of and gather location evidence for each individual in the European Union that you’re doing business with. This can lead to some gnarly edge cases, like when selling to someone who’s traveling .
Blocking EU countries
When asked how to handle VATMOSS, I usually advise to ignore it until at a later stage. I wouldn’t delay a product launch when it is far easier to simply block out European private consumers for the time being. It’s sad, but it’s true.
Apparently, this is also a feature that shop platforms have been offering for some time now. SendOwl, a company that helps you accept payments for your digital products, tweeted this earlier today:
The blog post they link to is from late 2014, so they have been offering this feature right from the start of VATMOSS.
Missed out revenue from EU customers
Curious what blocking European customers (not businesses) entirely would actually mean in terms of revenue for our products, I pulled up the following data for Mailchimp for WordPress. It is taken from sales data for the last 2 years, since the ruling came into effect.
| Category | % |
|---|---|
| EU Consumer | 18.5% |
| EU Business | 13.0% |
| Non-EU | 68.5% |
About 18.5% of revenue came from individuals (not businesses) living in one of the 27 EU member states. So getting ready for VATMOSS is like a reversed Pareto principle – a lot of work for a minority of our revenue share.
With profit margins as high as 90% in the software industry, it’s not hard to imagine this being a viable option for businesses that do not yet have the resources available to properly handle VATMOSS.
This is the sad result of VATMOSS in practice. Hurting where it shouldn’t.
¹ Since the ibericode business is located in The Netherlands, the actual missed out revenue would be about 2-3% lower. Blocking EU countries becomes more viable when your business itself is located in one of the larger member states.