Trying to enter the real estate market?
Wondering if you can afford it?
Person 1: “Whoa! This online calculator said we can afford a $600,000 mortgage!”
Person 2: “Sweet!! Let’s buy the house soon before housing prices go up”
Interest rates are at historic lows right now in Canada. This makes large mortgages very affordable…for now.
Here’s a test that I do with all of my clients when answering the question – Can we afford to buy a house?
MY 2% TEST
- Run the numbers using your current info. Can you afford the house? Can you afford to pay for repair and maintenance? Can you afford to still have a social life? Great.
- Now, if we raise the interest rates used in the calculations by 2%, could you still afford the house?
The answer is often shockingly NO.
Many Canadians are VERY leveraged. According to McKinsey Global Institute, House poor adults aged 35 – 44 carry the heaviest debt loads.
The Debt:Income ratio is 155% – AKA, for every dollar we earn, we owe $1.55
These ridiculously low interest rates also make the cost of carrying other debt (like lines of credit and credit cards) cheaper. But, it’s false comfort.
So, ask yourself: If interest rates rose by 2%, could you still afford your life?
If the answer is no, then pay off as much debt as possible RIGHT NOW, and you may want to rethink buying that house.
READ THIS IF: You are selling goods to people in the EU and you are afraid that those goods are considered “Electronically Supplied Services”.DISCLAIMER: EVERYONE IS DIFFERENT. THIS IS NOT ADVICE. PLEASE SPEAK TO YOUR TAX PROFESSIONAL. MORE INFO IS COMING EVERY DAY. STAY TUNED. WATCH WEBINAR: HERE
QUESTION 1: What is EU VAT?
It’s a sales tax – like HST/GST/PST in the EU. Each Member State (country ) in the EU has a different rate that they charge. Like Canada, where each province can either be a HST/GST/PST combo at a certain rate, each Member State sets it’s own rate. This rate is charged ON TOP of the price of goods/services sold, just like HST/GST/PST.
New law as of January 2015 – DOES THIS AFFECT YOU?
From 1 January 2015, EU VAT will be charged in the country where products are bought (where your customer lives) as opposed to the country where they are sold (where you live). The legislation applies to electronically supplied services.
QUESTION 2: Are you selling electronically supplied services?
DEFINITION: “‘Electronically supplied services’ shall include services which are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology.”
TRANSLATION: Where there is automated delivery following the sale, it’s a e-service.
- Basically, it all depends on whether the seller is manually involved or not at some level of delivery and confirmation after sale
- POTENTIAL WORKAROUND: If you MANUALLY email and MANUALLY ATTACH CONTENT then it may not be considered an e-service. HMRC stated this in an online discussion on Nov 27, 2014. YOU MUST HAVE A PERSON MANUALLY ATTACH AND EMAIL CONTENT TO CUSTOMERS IN EU (This could change)
- NOTE: E-books, courses and downloads that automatically send to customer and email them automatically ARE CONSIDERED ELECTRONICALLY SUPPLIED SERVICES. CDs, floppy disks, potentially USBs are NOT… this may be a work around – ship your content in another way than auto-download.
TAKE ACTION: Are you able to manually email and attach content for any customers in the EU? If so, you may not have to worry about this because you’re not considered to be selling electronically supplied services. How manual/human interaction can you get?
QUESTION 3: Who Are You Selling To?
For non-EU businesses selling to the EU
If your customer is a business in the EU, they should be registered for their own VAT number and as a business, they are responsible for collecting and remitting VAT. You don’t have to.
Take Action: Go through your EU clients, who are businesses (B2B) and who are consumers (B2C). Write down which Member State (which country) they live in and how much money you made from each Member State (country) so you know where the important ones are.
You sell to Business: (B2B) If you sell to businesses, you will need to collect their VAT number and confirm that they are responsible for paying VAT on their own revenue and expenses. THIS IS IMPERATIVE. Without their VAT number, you cannot escape the EU VAT. This may be something you require on your site. Maybe customers from the EU need to enter in their VAT number and agree to a waiver or something to accept responsibility. Please wait for more details on this.
You sell to Consumers: (B2C) They don’t have a VAT number and you ARE selling Electronically Supplied Services. This affects you.
QUESTION 4: What do you need to do?
- You can register for MOSS (apparently you have 10 days if you sell to someone in EU after Jan 1 until you register. First quarter filing is March 2015). This is a “Mini-one-stop-shop” in the EU. Instead of registering in each 28 Member States in the EU, you can do it in one place.
- Choose which countries you want to continue selling to and know the laws there (invoicing rules, VAT rates etc.)
- YOU GOTTA KNOW YOUR STUFF
- You are required to monitor WHICH country your client is from
- You are required to monitor WHAT RATE to charge depending on what country they reside in (each country has it’s OWN rates)
- You are required to know what INVOICING RULES for EACH COUNTRY. Invoicing is MANDATORY. E-Invoices are allowed, E-invoices may be sent using two methods (e-signatures and EDI) as long as each invoice fulfills two main conditions:
- the customer must accept receipt of invoices by electronic means (e-signatures and EDI)
- guarantees need to be provided for:
o the authenticity of the invoice’s origin; and
o the integrity of the invoice’s contents.
4. You are required to get TWO (non-conflicting) PIECES of evidence (it’s been suggested to ask for THREE) of where that customer normally resides. (There is a movement to get micro businesses exempt from this since most of the payment systems cannot provide that information – stay tuned)
5. Filing for MOSS is quarterly (20 days after quarter end) online and payment made (this hasn’t been fully flushed out for non EU businesses)
6. Keep the evidence for 10 years
7. Make Your Web-store VAT friendly.
i. Get the billing info
ii. Get the IP address
iii. Show different currency
iv. Show different VAT rates applied
v. Allow for electronic invoicing and e-signature
SOME OPTIONS: No matter what, find a way to TRACK WHERE YOUR CUSTOMER IS. When dealing with EU customers, keep it manual (manual email, manual attachment, manual manual, manual). Maybe try to change your services so they don’t fall under an Electronically Supplied Service. SEE WEBINAR ABOVE. Have your administrative team on board for the additional work. You need to put some sort of notice on your sales page for customers from the EU. If they are from the EU, they email you directly, they DO NOT fill out your regular online shop/marketplace inputs form where they would receive an automatic email or download. (STAY TUNED FOR ANY CHANGES)
If you choose to register for MOSS and go forward, you may want to select only a few number of countries where most of your clients are to sell in. Know the rules inside and out for each of these places, register for MOSS, follow the rules and find an online market place that will help you collect your TWO NON-CONFLICTING PIECES OF RESIDENCE DATA. More on this to come. It is onerous.
Question 5: Is there hope?
Yes. The last person in the supply chain to the customer is responsible for the VAT. If you sell on an online shop/marketplace, things could change.
You are responsible for paying and remitting the EU VAT if the online store/marketplace is ‘acting as an agent’ only – AKA, you are selling directly to the customer. This is likely to be true if, for example, you’re the one processing card payments for your sales like PAYPAL. PAYPAL WON’T HELP YOU HERE
The online store/marketplace needs to do the following in order to be considered the FINAL stop, selling directly to the customer and responsible for EU VAT.
- Authorizing payment
- Authorizing delivery
- Setting terms and condition of sale
AKA, the online store is ‘acting in their own name’. You sell your services to the online store and then they sell to the customer.
You should check with the company you’re working with. CONFIRM THEIR ROLE.
Amazon and Apple currently pay the VAT for their sellers and Google Marketplace is said to be changing their terms from the first of January 2015.
Also – hopefully micro biz is exempt from the onerous two pieces of evidence and can just go by what the customer puts as their billing address.
This is a quick note regarding the new rules from the EU VAT.
This directly affects those who sell digital products (like e-books, e-courses, etc) to customers in the EU as of January 1, 2015.
There’s a lot of panic out there, but everyone just remain calm until we have all the facts. I’m working on figuring out best practices, who needs to register, where to register and how to reduce administration for you, the entrepreneur, so you can keep selling internationally. I’m looking into the One-Stop Shop EU VAT implications and the online tools that may be able to help you out.
If you’re interested in keeping abreast of the situation, I’ll likely be hosting a spreecast/webinar on it shortly to get the word out fast/effectively.
Sign up below and I’ll keep you posted.
Working with New School has been a game changer. As my business became profitable, I wanted to ensure that I was being wise with my finances for both my business and my personal life and they were able to provide a holistic perspective that helped me put effective plans in place, and offer suggestions on how and where I could invest that kept me inline with my values. Shannon functions as an advisor, a coach and a money therapist. She made me feel incredibly empowered and as she is not affiliated with any old, stuffy institutions, wasn’t making commissions off the advice she was giving and is also a business owner herself and understand the uncertainties that can go along with that, I trust her guidance 150 percent. I recommend New School to everyone- my team, my students- everyone! What they have shared with me is information I wish I’d known fifteen years ago when I got my first paycheck. Their services are invaluable, and her guidance has greatly reduced my stress around money and given me a solid action plan to help my husband and I set and achieve our goals for today,five years from now and one hundred years from now.
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