Kerry-based digital tax company Taxamo is
to help non-EU-based online sellers comply with rules obliging them to pay VAT based on the buyer’s location.
Taxamo's software now supports regions that already have, or soon plan to, implement taxation based on the place of consumption of digital services, rather than the point of sale. The includes Iceland, Japan, Korea, Norway, South Africa and Switzerland. Taxamo is also expanding its global offering to cover US sales tax for digital sales.
Since January 1st, 2015, companies supplying digital services such as music, games, images or videos in the EU must collect two pieces of evidence proving where their customer is based, in order to apply the appropriate VAT rate and collect the right amount.
The problem for those sellers is that they haven’t always had information to identify where buyers are based. An added risk for sellers is that directly asking consumers for more information about themselves could lead to sales being abandoned.
Taxamo developed software-as-a-service technology which learns this information in real time during the purchase process, without disturbing the customer.The technology is available as a plug-in which is designed to make it easy for business-to-consumer merchants to integrate into their web stores.
In the first quarter of this year, Taxamo's system registered sales in 108 different countries, proving that digital sellers are global in nature, said chief executive John McCarthy. "When we started, we had anticipated the vast majority of our merchants would be in the EU, but in January, it turned out that a large portion of them were in the US. We also have merchants from Japan, Singapore and Bolivia and they're complying with this regulation," he said.
Single price
Merchants can decide to offer a single price across the globe and absorb the VAT differences, or else they can automatically update the price to include the VAT in the buyer’s country on the transaction. Mr McCarthy said most sellers choose the latter option. Taxamo charges merchants a fee per transaction, with costs varying depending on the volume of sales.
Taxamo is self-funded and is currently seeking investment. The company employs eight people in Killorglin, Co Kerry and is still in product development phase.
Most of Taxamo's growth has come through channel partners such as merchant platforms or payment service providers including WooCommerce, Rainmaker and Braintree Payments.
