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Dr. Ecommerce,
Please kindly help for the following issues:
Our target e-commerce market will be in European, however, the tax issues are always trouble.
- If we need to have a distributor to distribute our goods in EU, will our sales from the internet be deemed to have an establishment in EU and be chargeable under any tax? ( We know that VAT will not possible be avoid, but how about profit tax or corporate tax?)
- If a server is based in the EU, would we be liable to tax as we carry out business in the EU?
- If we open a bank account, to collect money from sales from internet, in any location in EU, will that be deemed to carry out business in EU and chargeable to any forms of tax?
- We hear that if somebody help you to collect money, then you are not chargeable to any forms of tax in EU including the withholding tax?
Any suggestion for an efficient tax planning to avoid the high tax issues in EU? Please note that our business, sourcing, manufacturing, control, will all be offshore to EU.
Thanks!
CWPL
Dear CWPL:
The first point to keep in mind is that there is not a European tax as
such. European nationals pay tax to their national government and governments
pay a contribution to the European Union government. As a result, the
tax situation varies from country to country and you will need to explore
options in each country that interests you.
If you establish a distributorship, they would normally be some kind of
legal entity (individual, limited liability company, or whatever) performing
business in the EU. Hence, the distributor would be liable to tax according
to the laws of the country in which they are based. You will need to review
potential locations for your distributor, based on your particular requirements.
And bear in mind there is more to it than tax laws. One country might
have a very attractive tax regime, but expensive labour or lack the infrastructure
you require for distribution.
Normally, VAT is added to the retail price and paid by your customers,
not you or your distributor. However, if your distributor collects VAT,
then they will have to pay the VAT collected, less VAT paid, to their
government
On the other hand, if you are based offshore and will simply ship goods
to customers in the European Union, YOU will not be liable to tax in the
country to which you are shipping. But your customers will be liable for
VAT and customs duties when the goods arrive in their countries. The amount
of VAT and duties depend on the country.
I'm not sure what you mean by a "Server" in the EU. If you mean an Internet
Service Provider hosting your web page, then, they would only be liable
to taxes related to their Internet serving business (service fees, etc),
not to taxes for your e-commerce business hosted on their company's computer
servers.
Banking laws vary from country to country and again, you will want to
check each country's rules and regulations about Banking.
Regarding tax collecting, you will also need to check with each country's
rules and regulations.
Finally, I am not in a position to act as a tax advisor. You really need
to contact tax experts in countries where you are considering establishing
a distributorship.
If I were in your position, I would look for existing companies in Europe
to act as my distributors. They would know the market and the tax laws
and could probably generate more sales than I could alone. In addition,
they could make recommendations about how to make my products more suitable
to the European market. But, of course, it is your decision and there
are many factors to consider.
Good luck,
Dr.Ecommerce