If you thought normal taxes were bad...

I apologize. I am about to go on a rant about what might possibly be the most confusing, boring subject int he world - the world of taxes.

I have just entered the controversial world of VAT. Not just VAT in general, but VAT between EU-countries. Far worse, VAT paid on electronic services. I just emailed my friendly local tax office asking a series of bewildering questions. It seems that everywhere I look - including the European Commission website, (which is actually extremely informative concerning all other scenarios except my own), random forums (where freelancers are asking the same thing and receive only replies that disagree with each other on everything except that they should go to their own tax office), and the Finnish tax website (which includes only replies on what to do when selling services that involve stuff going from one country to another, not pixels) - everything is confused and controversial.

Holy shit, this stuff is annoying to try to figure out. There are so many scenarios… In addition, there are monstrosities, like this sentence lurking behind every definite answer that make you even more confused when you finally think you found the answer:

actual rates applied vary between Member States and between certain types of products. In addition, certain Member States have retained separate rules in specific areas.

ARGH! At first I thought this sentence might be relevant:

In the case of services consisting of valuations of or works on movable tangible property, taxation is imposed at the place where the services are physically delivered.

But as my friend Tiago pointed out, pixels have no physical volume, even if they have a volume in bits.

Services like publicity services, services of consultants, financial services, telecommunications services, broadcasting services and electronically supplied services are taxable at the place where the customer is established provided the customer is established in a non-EU country or he is a taxable person established in another Member State than that of the supplier.

Now, this looks better, but it’s still confusing as hell, because once I dug deeper into the world of electronic taxation, it seemed to just go 100% against what it said at first. I assume that webdesign or computer illustrations might fall under this category rather than that of “moveable property”. Digging a little deeper on the internet, I find another statement in a forum:

“If the country making the purchase from me is in the EC for VAT purposes and I have their VAT number and display their VAT number on my invoice then I do not charge VAT on the transaction.”

But then they go on to say that it’s controversial and that I should ask my own tax office anyway. So I start to dig around on the Finnish website of taxes, trying to figure this out. I find out that if I have my client’s VAT number and can somehow prove that pixels are flying to another EU country, I don’t have to charge EITHER country’s tax. Otherwise, if I am missing the VAT number or can’t prove that the product is going to another EU-country, I have to charge tax… but it doesn’t say WHOSE tax.

I decide that the only sensible thing to do is to write to the tax office and ask for a reply.

Hello, I cannot find any information about VAT on electronic services within EU countries. If my own company builds a website from Finland for a company in Portugal, whose VAT do I apply? Is it mine since I am based in Finland, Portugal’s since the client is in Portugal, or neither because it is a company with a VAT number of its own? Apparently I should be able to prove that the pixels fly to Portugal? Is the situation the same if I create an illustration and sell the product in computerised format, that is to say as a computer file instead of a physical product? What is the difference if I were to send a physical piece of art instead? And how does VAT function if I sell consultation services within EU countries? Thank you.

In the hopes of getting a reply faster, I send it to the Swedish department, gambling on the fact that Finland is a bilingual country and there are less Swedish-speakers. Hopefully, the Swedish helpdesk does not consist of one underpaid, overworked civil servant who has somehow nevertheless managed to escape to a vacation in Madagascar or something.

Let’s see if I get a reply… You would think that googling “how to charge VAT within EU countries for electronic services” would get a single clear website explaining simply and clearly how to do it, but nooOooo… Urgh. I need a walk.