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EU Tax Law - Distance Selling for Excisable goods

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EU Tax Law - Distance Selling for Excisable goods

Postby Deactivated Member » Mon Mar 26, 2007 12:03 pm

Quite recently we have engaged in various discussions as to why many sellers suddenly refuse to accept whisky orders from countries other than their own. I have spent a good few weeks looking very closely into this and am now able to report my findings.

The applicable EU law, or EU dircetive which covers this is called 92/12.
This measn the 12th ruling in the year 1992.
This may seem quite old, but the problem is the amendments which were made late in 2006, mainly to Article 10 within that directive.

Firstly, let me point you to the directive:

http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=EN&numdoc=31992L0012&model=guichett

(Maybe Matt can explain why this doesn't directly link?
Which means you should copy and paste it into your browser or google - sorry)(Don't know, maybe the ! in the URL...Matt)

If you page down the text to where it says "Article 10" you will find:
"Article 10

1. Products subject to excise duty purchased by persons who are not authorized warehousekeepers or registered or non-registered traders and dispatched or transported directly or indirectly by the vendor or on his behalf shall be liable to excise duty in the Member State of destination. For the purposes of this Article, 'Member State of destination' shall mean the Member State of arrival of the dispatch or transport.

2. To that end, the delivery of products subject to excise duty already released for consumption in a Member State and giving rise to the dispatch or transport of those products to a person as referred to in paragraph 1, established in another Member State, and which are dispatched or transported directly or indirectly by the vendor or on his behalf shall cause excise duty to be chargeable on those products in the Member State of destination.

3. The duty of the Member State of destination shall be chargeable to the vendor at the time of delivery



What does this really mean?
Well, I have another official EU link which explains this in basic English:
http://ec.europa.eu/taxation_customs/common/faq/taxation/index_en.htm
(Matt, any help here would be appreciated)

This is the "faq" section of the EU website on taxation.
Point 16 says:
"Excise products sold via the Internet and supplied from one Member State to a customer in another Member State are subject to excise duties in the Member State where the purchaser receives his goods. So, before the excise product can be legally delivered to the purchaser, the excise duties and taxes will have to be paid. Note that in the case of distance selling, the obligation to pay excise duties in the Member State of the purchaser rests upon the vendor."

In order to clarify these points, I managed to establish direct contact with many of the authorities involved. The clearest explanation came from the EU department in Brussels where I spoke to the EU Taxation Department directly. (If anyone wishes to have this contact, it can be supplied privately, but I iwll not post this information on an open forum).

They were very clear:
If a seller of excisable goods (whisky) accpets an order under the distance selling directive, this means by telephone, fax or internet, from a customer in a different EU state, the SELLER must pay the duty in the country of the buyer.


In addition, when I asked the direct question about duty stamps, I was assured that the correct duty stamps for the country of the buyer must be supplied on the goods! Oh, also any duty stamps already on the bottle from the country of the seller, must be removed!

So, if I may now summarise the findings in a very simplistic way:
If someone from the UK wishes to place an order with a seller in another EU country (Germany, Italy, France, Republic of Ireland ... etc)
Or even if someone in mainland EU wishes to place an order with a UK-based seller, by telephone, fax or internet, the seller must do the following:
1. Establish contact with the tax authorities in the country of the buyer.
2. Establish a means of paying the correct duty to those authorities.
3. Actually understand how much duty is to be paid!
4. After paying, he may then ship the bottle.
5. The bottle must have the correct Duty Stamp placed on the bottle for that specific country.
6. If his own country uses another type of duty stamp, that one must be removed, although I was told that it could be obliterated if part of a fixed label.
7. Establish a means of reimbursement of duty already paid in his own country, as duty MUST only be paud ONCE!


As mentioned, if the seller is in the UK, they must conform with these instructions for the coutries of their buyers.

Basically, this is unworkable. How does a UK seller personally establish contact with every tax authority throughout the EU?
How does he pay those authorities in their own currencies?
Does this lead to a scale of customer prices depending upon which country they are in as all duties are at different levels?
When you as a buyer look at a website, will you have to go through a list of around 30 different possible prices before you see how much you have to pay for a bottle for your country?

Finally, I would like to add that this does appear to be a very new amendment and even many of the UK's HM C&E officials which I spoke to, still don't believe this. Especially the ones based here in Germany!
However, this IS the law and has the very real possibility to destroy international - EU sales of whisky!
MT
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Postby Deactivated Member » Mon Mar 26, 2007 12:10 pm

One second point in this "Distance Selling" debate is something called the "Joustra Case".

This is slightly different as it doesn't directly come under "Distance Selling", but transportation of goods bought in person.

The full link is here and if you page to the last paragraph you will see the full explanation of this case:

http://www.etrc.org/current-issue/excise-duties.php

Basically, if you travel on holiday, you may buy as much as you like i nanother EU state and not be charged any duty so long as YOU PERSONALLY carry the goods home with you.
In this case, they personally bought the goods, but contracted a freight company to deliver the truck load of wine and didn't accompany it in person.
Therefore they were charged duty in their own country!
In this case, they were responsible for the duty, not the seller.
MT
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Postby les taylor » Mon Mar 26, 2007 12:13 pm

Thanks MT for explaining all. I wonder some times if bureaucrats meddle and muck up things in order to justify their salaries.

Point 7 that you made, makes no sense at all and seems to me to be totally unworkable. I think many people will think its just to much hastle and won't bother to purchase abroad unless they are abroad themselves and carry the goods home in their own luggage or vehicles.

:)
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Postby Aidan » Mon Mar 26, 2007 12:18 pm

The Oddbins shelves in Ireland are very bare, because they have to change supplier. They used to get it straight from Oddbins in the UK, but now all the bottles have UK duty stamps on them, so they have to look into something else.
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Postby Deactivated Member » Mon Mar 26, 2007 12:19 pm

Les,
please understand this is the law applicable to sellers, not buyers!

For buyers it would be easy. Just order and receive. No duty for them to pay.
The problems now arise for the sellers as they must deal with foreign tax authorities in foreign languages!

It is now actually easier for an EU seller to sell outside the EU than within!
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Postby Deactivated Member » Mon Mar 26, 2007 12:23 pm

The reason for the amendments was that many countires with higher excise duties, like the UK, complained at Governmental levels that they were losing duty from goods being purchased through the internet from overseas sellers.

In order to rectify this, they got their wish and they now receive (or should receive) all duty from sales INTO their countries, as well as WITHIN their countries.

Of course, duty can only be paid once, so they now have to reimburse the duty which UK sellers have already paid on bottles which they sell to other EU countries!

Simple really.
(NOT!)
:roll:
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Postby les taylor » Mon Mar 26, 2007 12:25 pm

MT are you saying then that if I was to purchase say for instance from a German Store I would pay the rate of Tax in Germany. Or would the seller have to charge the Uk rate of Tax?

Bottom line then is will make any difference in price taking out the carriage charge?


:)
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Postby Deactivated Member » Mon Mar 26, 2007 12:26 pm

Aidan,
Oddbins in the UK should sell the stock to Oddbins Ireland.
Oddbins UK should claim the duty back from HM C&E.
Oddbins UK should then obliterate (or remove?) all UK stamps - by hand!
Oddbins UK should pay the Irish rate of duty to the Irish Tax authorities.

Alternatively, Oddbins Ireland should buy stock "in bond" and then pay duty in Ireland to release it to their shops.
MT
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Postby Deactivated Member » Mon Mar 26, 2007 12:28 pm

Les, the German seller would have to charge enough for the bottle so that HE could pay the UK rate of tax.

Of course, German sellers are cheaper because German duty is much lower than that of the UK. But now, the 'German' price would probably have to go up to cover higher (UK) duty when selling to a UK customer.
However, the German price for a bottle sold to a German customer would not be any higher.
MT
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Postby Aidan » Mon Mar 26, 2007 12:29 pm

That sounds right, but maybe there is more to it from their end that I did not pick up. It sounds llike they might be trying the second option.
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Postby les taylor » Mon Mar 26, 2007 12:52 pm

It seems to have made something very complicated. When everybody knew where they were before.



:)
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Re: EU Tax Law - Distance Selling for Excisable goods

Postby Deactivated Member » Mon Mar 26, 2007 3:41 pm

Malt-Teaser wrote:Does this lead to a scale of customer prices depending upon which country they are in as all duties are at different levels?
When you as a buyer look at a website, will you have to go through a list of around 30 different possible prices before you see how much you have to pay for a bottle for your country?


No, the website will post the price without VAT. When the customer selects the country of delivery from a menu of EU countries, the VAT is figured by an automatic calculator and the cart is updated. That's how it ought to be done, anyway. I understand that this is a great annoyance to people who want to buy lower-taxed goods from other countries, but I also understand the governments' point of view that this constitutes tax evasion. A retailer who wants to make this work will find a way, and it won't be that complicated for the customer. The retailer will have to establish accounts with each EU country to which it delivers, and a mechanism for making electronic payments. Nothing too difficult there, if the governments are cooperative, and I don't see why they wouldn't be when someone wants to pay them money.

It wouldn't hurt if the EU countries moved toward standardized duty rates. That would simplify payments and price structures, and eliminate a motive for cross-border buying purely for price.
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Postby Aidan » Mon Mar 26, 2007 3:44 pm

Is it not to do with the duty, rather than the VAT? I don't know the answer, of course.
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Postby Deactivated Member » Mon Mar 26, 2007 3:50 pm

Aidan wrote:Is it not to do with the duty, rather than the VAT? I don't know the answer, of course.


Yes, thanks. I misspoke. Whatever, same idea.
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Postby les taylor » Mon Mar 26, 2007 3:51 pm

Mr T wrote:-


It wouldn't hurt if the EU countries moved toward standardized duty rates. That would simplify payments and price structures, and eliminate a motive for cross-border buying purely for price.


I cannot see the British Govt brining in harmonization with EU countries. They would have to lower tax rates. This is a Govt that tries to get as much tax direct or stealth any way that it can.

:shock:
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Postby Aidan » Mon Mar 26, 2007 3:53 pm

Irish people drink way too much as it is, so I don't think they should reduce the duty on alcohol, which is already the highest in europe, I believe. Maybe on premium spirits.
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Postby Deactivated Member » Mon Mar 26, 2007 3:54 pm

les taylor wrote:I cannot see the British Govt brining in harmonization with EU countries. They would have to lower tax rates. This is a Govt that tries to get as much tax direct or stealth any way that it can.


Well then, maybe they can talk the other countries into raising theirs! 8) Another example, potentially, of the need to be careful what you wish for.
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Postby Aidan » Mon Mar 26, 2007 3:59 pm

But other countries are more mature than Ireland (I mean that seriously), so increasing duty there would punish reasonable Europeans.

I don't know anything about taxation, of course. Maybe if there was a standard charge per bottle, say 1 euro, payable to the country importing the booze.

I have bought stuff from the U.S. several times and pay some kind of tax when it arrives - I pay it to the courier company, who obviously pay the tax for me initially. When I order from Binnys or Sam's Wine.
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Postby les taylor » Mon Mar 26, 2007 4:11 pm

Aidan I think that is an American sales tax. When my wife has bought clothes online from American companies we have had to pay a Tax to the courier when they deliver.

I think its different to what is being discussed here.

:)
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Postby Deactivated Member » Mon Mar 26, 2007 4:18 pm

The EU has indeed issued a proposal to define the "minimum" rate if duty across all EU states.
As you can imagine, there are very few who are currently over this minimum, I know England are one and I seem to recall there are 2 or 3 more, but that's all.
All other countries would have to raise the duty to meet the minimum.

It actually tried to propose one standard rate, but that was not accepted!

Duty is very difficult, it is based upon pure alcohol. I have a seen a few discussions on here about it recently and if I recall, the average ball figure for a non-CS bottle would be 9 GBP to 12 GBP -ish! per bottle.

VAT is something else, that also has to be paid by the seller to the country of destination, but that has always been the case.
Although many people may not realise that the VAT thresholds applicable to non-excise goods - currently something like 70,000 GBP or €100,000 per year DO NOT APPLY TO EXCISE GOODS.
Every whisky seller must pay VAT to the destination country of his sales for every sale, whether he is VAT registered (and applicable) in his own country or not.
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Postby Aidan » Mon Mar 26, 2007 4:23 pm

les taylor wrote:Aidan I think that is an American sales tax. When my wife has bought clothes online from American companies we have had to pay a Tax to the courier when they deliver.

I think its different to what is being discussed here.

:)


Les - What I mean is that the person receiving the whisky could pay the courier in the same way.
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Postby les taylor » Mon Mar 26, 2007 4:24 pm

Is it right that VAT rates vary across europe as well as duty rates?


:)
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Postby Aidan » Mon Mar 26, 2007 4:25 pm

Yeah, it varies a lot.
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Postby les taylor » Mon Mar 26, 2007 4:26 pm

Aidan wrote:-

Les - What I mean is that the person receiving the whisky could pay the courier in the same way.


Aidan I see that, that would work.

:)
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Postby Deactivated Member » Mon Mar 26, 2007 4:31 pm

What you have to remember is that goods are not required to be declared within the EU. There is no concept any longer of parcel contents being declared on the outside so that customs see what is being sent and charge the according duty.
However, for deliveries between EU countries and non-EU countries, goods have to be declared and there is always the possibility of the delivering agent requiring the duty to be paid through him.

This is why selling is now easier from an EU country to a non-EU country, than it is between EU countries.

Sellers just have to make sure that their buyers know and accept they may have to pay duty upon receipt.
Whereas within the EU, sellers have to pay the duty to foreign authorities!

MT
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Postby Lawrence » Mon Mar 26, 2007 4:35 pm

les taylor wrote:It seems to have made something very complicated. When everybody knew where they were before. :)


It's very easy when both sides of the transaction have been ignoring the law (and in this case many would argue that it's not a bad thing). As usual in such situations eventually the relevant authorities crack down on the 'offenders' or at the very least make an example of a couple of high profile 'offenders'. I think everybody should make hay while the sun shines.
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Postby Deactivated Member » Mon Mar 26, 2007 4:37 pm

I would really love to see one of the larger UK sellers like Sukhinder of TWE or Richard Joynson join in this discussion, or even contact me privately to discuss their perspective on this.

We all know a large proportion of their businesses depends upon trade within other EU countries.
How do they contact foreign authorities and pay duty into other countries?
How do they remove UK Duty stamps from bottles before shipping?
How do they claim paid UK duty back from HM C&E?

MT
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Re: EU Tax Law - Distance Selling for Excisable goods

Postby corbuso » Mon Mar 26, 2007 4:38 pm

Malt-Teaser wrote:Quite recently we have engaged in various discussions as to why many sellers suddenly refuse to accept whisky orders from countries other than their own. I have spent a good few weeks looking very closely into this and am now able to report my findings.


MT


From my understanding, the situation is more complex. Your reference is correct, but so far, the law was not applicable as long as the buyer organized the transfer of the goods, a clause that were using the swedish whisky enthusiasts and prevent the governement to get the duties on alcohol. The swedish governement went to the EU court to claim the possibility to claim the duty on alcohol based on the references you mentioned. The EU court ruled out in favor to the SE government last November and this impacted immediately the sales of alcohol. However, some countries have made some agreements between themselves.
Most of the countries don't have the ressources to control this trade, but some will.
That is my understanding, but please correct me if I am wrong.

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Postby Deactivated Member » Mon Mar 26, 2007 4:43 pm

Corbuso,
when you speak about "the buyer arranging the transfer of goods and a ruling in November", this fits with my description of "The Joustra Case" relating to shipping of goods.

However, I have found another link which states that France and Belgium have a private agreement not to puruse this EU directive (92/12 Art. 10) for excisable goods shipped only between their two countries.

I need to search a while, but I will provide the link if I can find it again.
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Postby kallaskander » Tue Mar 27, 2007 12:06 pm

Hi there,

Switzerland has a very neat system for collecting the taxes due to the Swiss state.
As a seller you fix a extra copy of the bill outside the parcel. All parcels going into Switzerland are processed and dilvered first to the main customs office at Basel.
The bill is checked and the taxes and eventual customs fees are calculated. The parcel is than given to the Swiss post and the post service does collect the money on delivery.

Easy enough but not for the EC.

Greetings
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Postby corbuso » Tue Mar 27, 2007 1:32 pm

kallaskander wrote:Hi there,

Switzerland has a very neat system for collecting the taxes due to the Swiss state.
As a seller you fix a extra copy of the bill outside the parcel. All parcels going into Switzerland are processed and dilvered first to the main customs office at Basel.
The bill is checked and the taxes and eventual customs fees are calculated. The parcel is than given to the Swiss post and the post service does collect the money on delivery.

Easy enough but not for the EC.

Greetings
kallaskander

And FYI, we don't have to pay the VAT in the country of origin, only in Switzerland ( 7.6% + duty on alcool). Unfortunately, not all the sellers are willing to sell the products tax free, since it request more administrative work for them. If the EU can not overcome this problem, it is going to be very messy soon. I think that Austria and Germany have a similar agreement as France and Belgium.
For the swedes, with the current situation, they might have to pay twice the taxes on their bottle of whisky, if they want to import it from within the EU

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Postby Deactivated Member » Thu Apr 26, 2007 11:06 am

I am just 'bumping' this discussion as it is still extremely relevant and possibly getting more so.
Any further comments are most welcome.
MT
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