Is this idea VAT fraud or legal?

[Bexxley]

Hello guys,

Imagine this setup:
I have an e-commerce shop where I sell digital products.
My company is an UAE Freezone with 0 tax.
I sell to the German market.

Usually I have to pay 19% VAT to Germany on my revenue.
Therefore I had this idea:
In the checkout of my shop I make "Cayman Islands" (0% VAT country) as the default billing country in the customer details. (Shipping country does not exist)
So if the customer doesn't manually change his country, the invoice is addressed to a Cayman Islands citizen and I don't have to pay any VAT.
If the customer switches the billing country to Germany, I add 19% VAT on top of the total. This 19% would go regularly to the German tax office.

Does this work?
Excited about your opinions 🙂

 

[JohnnyDoe]

Bexxley said:
Hello guys,

Imagine this setup:
I have an e-commerce shop where I sell digital products.
My company is an UAE Freezone with 0 tax.
I sell to the German market.

Usually I have to pay 19% VAT to Germany on my revenue.
Therefore I had this idea:
In the checkout of my shop I make "Cayman Islands" (0% VAT country) as the default billing country in the customer details. (Shipping country does not exist)
So if the customer doesn't manually change his country, the invoice is addressed to a Cayman Islands citizen and I don't have to pay any VAT.
If the customer switches the billing country to Germany, I add 19% VAT on top of the total. This 19% would go regularly to the German tax office.

Does this work?
Excited about your opinions 🙂
Click to expand...

If your customer enters a wrong billing address, it is not your fault.
This is what you will have to tell to the judge when you are called in court. Let's hope the judge is a friendly member of this forum and not a silent vicious reader.

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@JohnnyDoe ”“ Your #1 Source for Guidance in Different Offshore Fields​

 

[Bexxley]

Okay, having to hope for a friendly judge isn't my standard. I need to be‌ 100% legal.
So what could I do different?

The shop is available to all countries‍ in the world (because digital products).
Therefore setting the default country to Germany wouldn't make⁠ sense either.
(Btw, Germany is just an example here. This would apply to all VAT⁤ countries.)

I really have no influence on what address the customer enters.
What would be⁣ the 100% correct way?

 

[Martin Everson]

To follow the‌ VAT rules and charge were applicable.

It's also VAT Fraud. Do you think your idea‍ will pass a Forensic or Tax Audit? You never want to be accused of false⁠ accounting for VAT in UAE never mind Germany. You may get away with it but⁤ if you ever get investigated.....hi%#.

 

[Marzio]

If you sell products‌ then you must apply customer's country VAT.

If you sell services then it matters the‍ country where the service is rendered from: UAE in your case

The only legal solution⁠ would be to add a service to your product so that you could claim you⁤ are selling services with 0% VAT

All other solutions are VAT fraud.

 

[Sols]

This will work as long as your plans don't include growing your business to any‌ major size. For a small business, no one will care. If someone ever does care,‍ you're going to be in a bad spot.

Keep in mind that UAE is on⁠ FATF's grey list and may be extra willing to cooperate with and please the EU⁤ at the moment.

As a general word of advice, don't base your business success around⁣ evading EU VAT. There is room for improvements in your business plan and financial model⁢ if tax evasion is a requirement.

 

[Wellington]

Small companies have to collect VAT when selling digital goods to people the UK/EU now?‌

How's that work with Web 3 goods ?

 

[Ibus]

There is‍ a threshold in UK and in most of EU countries. UK : 85000 £/year. Estonia⁠ : 40000 €/year ...etc

 

[ShillGates]

no thats abolished

 

[Ibus]

Yes if you sell outside from the‌ country where the company is registered. But it remains possible from UK company to UK‍ consumer. Or a french company to a french consumer. If not you can use MOSS.⁠

 

[JohnLocke]

I was wondering where do you live OP ? depending on the country you may‌ slip away with it as already mentioned.

 

[Wellington]

So a BVI to EUROZONE? UK?

 

[Sols]

Yes, that's been the case for years.

There is no exemption or‍ other difference for Web 3 goods in the relevant laws.

No, but selling into EU/EEA creates a taxable event⁤ in many cases.

 

[Wellington]

Gonna be crazy we have micro⁠ api calls of 2 cents, trying to calculate VAT rates on that.

 

[ShillGates]

yes indeed - but its al reportable and vat is due...... even 0.000001 , go‌ figure , socialist europeans