The MOSS System
Since the beginning of this year new rules for sales to customers in another EU country are in force: if you are an EU business person and sell to a customer in another EU country you have to apply the tax rate of the customer’s country and to pay the tax to the customer’s country. With the MOSS system this is doable. And the change deserves some credit because some funny regulations to determine the tax regime have expired. If your customer is outside the EU there is no longer a need to determine whether you have sold to a business or a private person.
Determine Your Customer’s Location
In fact the need to determine the customer’s location is helpful to us. Now that we have to prove the customers location it should be allowed to acquire this information and keep it on file. Earlier filing such information was a kind of privacy problem.
Who Is a Customer?
But if you think about it: these new Value Added Tax rules do not apply only to transactions with end customers. If you do affiliate marketing and promote other peoples products or services you get a commission for it. The marketer who pays you a commission is also your customer. And if this marketer is an EU person, you may have to apply the VAT rules on these commissions.
You have to determine the location of every marketer who pays you a commission. If it turns out that this marketer is a EU person, you have to either pay the VAT rate for your commission to the government of your customer’s country, or you have to collect and file his VAT number as proof that he is a business person.
The Solution for Affiliate Marketing
An easy workaround could be to promoting only products which are handled by services like Clickbank. With Clickbank the marketer sells the product to Clickbank. They in turn sells to the final customer and pay commission to affiliates. As they are a US business, VAT does not apply if you sell to them. But this could be quite limiting your choices as an affiliate marketer. You will be able to promote only a fraction of the products on the market.
A better solution is to collect and file the address and phone number of every business whose products you promote. In case you find yourself promoting stuff for an EU business, you need to determine and file also his VAT number.
Show Your Affiliates that You Care
If you sell your product through affiliate marketing receiving payments directly from the customers and paying your affiliates directly: provide your address and VAT number (if applicable) on your affiliate site. This gives you a distinct advantage to find good affiliates. You make it easy for your affiliates to follow the rules and avoid a tax bill eating – depending on your location – 20% or more of the commissions you pay. And, by the way you save a lot of work answering support tickets.
I want to emphasize that I am not a lawyer, nor a professional accountant or tax advisor. This article is strictly for educational purposes and is in no way professional advise. But I strongly suggest that you ask your tax advisor these questions if you are an EU person.