Last month I wrote about Patreon’s rather creative interpretation of the VATMOSS rules. At the time, I replied to their email with a far clearer and more accurate explanation of how VATMOSS works than they had apparently received from their clueless consultants at PriceWaterhouseCoopers.
Sadly, Patreon have now confirmed that they will not be fulfilling their obligations as a third party provider. (Note: Patreon’s taxes page has gone offline – what a coincidence – but here’s what it said.) People who use Patreon as creators to share digital output within the EU will be personally responsible for calculating and processing VATMOSS taxes for each and every patron.
On the surface this would suggest that Patreon is effectively off limits for digital creators within Europe. Those who choose to use it will have to personally query each European patron for their tax status, VAT number, IP address, and/or any of the information required to substantiate the proof of supply. They will be responsible for issuing their own tax invoices to their patrons. They will have to supply the invoice and proof of supply data with their VATMOSS return. They will also, of course, have to store this information in a secure format on an EU-based and data protection compliant server for ten years.
Those rules will be difficult for creators using Patreon on a monthly subscription basis. For the creators who use the system on a per-creation basis – say, their patrons commit to making a payment per podcast or blog post – they will have to do all of that, and divvy up all of those tax payments, for all of those people, several times a month.
Remember that we are not talking about high flying international finance here. We are talking about pennies. Most creators start their Patreon subscriptions from $5 USD a month. Convert $5 into pounds or Euros (£3.29 and €4.58 as of today, respectively) and then shave off your country’s digital VAT amount. Say, France’s 5.5% digital rate. That’s what, about 25 Euro cents due in VAT thanks to your Gallic patron.
The time that creators will have to spend micromanaging the finance and admin of those 25 Euro cents ad nauseam is time that creators will not be spending…you know…creating. The thing is, they should not have to be doing that at all. But they will have to because their third party provider has creatively interpreted the rules to pass the responsibility on to them. As Frank Sinatra sang, “put your dreams away.”
Aside from the hideous administrative burden Patreon has now forced onto their European users (who in all likelihood will abandon the service altogether), this is important news for another reason. We have all seen European-based platforms and sellers opting to curb sales or shut them down altogether in response to the administrative burdens created by VATMOSS. We have also seen small-scale retailers outside of Europe threatening to close off sales to EU customers.
Patreon is, to the best of of my knowledge, the first major platform provider outside the EU to use VATMOSS as leverage to call time on Europe. They have not barred European creators and patrons from using the service, of course; they don’t have to. By stating that they have no responsibility for complying with or enforcing European law, they pass the full burden on to those directly affected by it. It’s a bold and necessary move, and one which may raise eyebrows at the EU. Those eyebrows frankly need to be raised. But as with everything in VATMOSS, this geopolitical chess game takes out the pawns first.
This, then, is the grim reality of the EU’s “level playing field”.
Patreon is a huge income for me… I don't know what the hell I'm supposed to do now… I'm fucked. https://t.co/HQY8hhNWsM
— Gabbi 🌷 (@MayotGabbi) February 6, 2015
Update 6 February: PriceWaterhouseCoopers, the accountancy firm who gave Patreon the incorrect interpretation of the VATMOSS rules which caused them to declare noncompliance, has been accused of “promoting tax avoidance on an industrial scale” by Parliament. You don’t say…
— DigitalSingleMarket (@DSMeu) February 12, 2015