Small businesses across Europe have made it clear that they are strongly opposed to new tax regulations implemented this year that affect how these companies are taxed through the VAT system when providing digital services.
These companies include sellers of products like eBooks and apps, reports said, and the regulations apply to businesses that sell to other nations in the EU. The VAT (value-added tax) rules mean the fees are charged based on the country in which the digital services are purchased, and not the nation from which they are sold.
Reports in The Guardian this week said that the SMEs affected by the rules, which were implemented early this year, may have won their challenge. The European Commission announced plans to introduce a threshold into the rules that would mean SMEs of a certain size are exempt.
[bctt tweet="EU announces plans to exempt SMEs of a certain size from certain tax rules."]
According to reports, the rules were originally developed with the aim of preventing large corporations from strategically avoiding higher tax rates by claiming to be based in nations where the tax rates are lower. Analysts say the policies failed to adequately address how the rules would impact small businesses across Europe, however.
For example, The Guardian spoke with one small business owner who sells eBooks but has had to cease all sales to the U.K. following the policy changes.
Reports said that the policy changes have also added new burdens on small businesses other than taxes. Business owners are required to comply with strict data rules, for example, that are difficult and expensive to implement. Companies are required to collect information to prove where a sale was made, but small business owners say their basic eCommerce platforms are not designed to easily do this.
One small business owner, Clare Josa, set up EU VAT Action, a campaign group that has been joined by other companies that are fighting the tax policies they say unfairly burden their small enterprises.
KPMG U.K. Tax Partner Amanda Tickel told reporters that all businesses must comply with the same rules; otherwise, overseas authorities would demand as much, but she agrees that small businesses are unequally impacted by the rules.
“If you’re a massive organization, then you have the resources to be able to deal with this,” she said in an interview with the publication. “However, many businesses will have enough difficulty in paying their U.K. VAT correctly, never mind 27 other countries, too.”