This issue will no doubt affect ALL UK, and many other European Purchasers of flight sim software.As of July 1st 2003, all software sourced in the UK and some other EU countries becomes subject to VAT (Value Added Tax), apparently even if the Developer's sales are not at the threshold level in the rules.This is because most e-commerce banks and agents, on whom the vast majority of developers rely, handle the transactions and are obliged (it seems) to charge a levy on sales to EU countries.Our own agent, SWREG, has done its best to get around this onerous rule but short of moving its base to a tax haven country it seems impossible to avoid. We of course resent this, because we are a small business unregistered for VAT and we cannot ever get the tax back, it just floats in the ether to the EU, which is acting not unlike a protection racket thug saying: "Ah, you are running a business. Right give us 17.5% or we'll close you down."Thus it is possible that our payware products will be subject to a 17.5% rise for EU based customers. We are seriously considering two options: either reducing the price to EU countries by 17.5%, or we will at least try to meet halfway by cutting the cost equivalent to half the VAT. Either way we lose. If any EU customers feel strongly about this, as we do, please write to your local MP or MEP and let your views be known. In the meantime we are doing all we can to find a way round this.Rob Young - RealAir Simulations

They say that only two things are certain:Death and Taxes.I think too much of one, brings on the other!!!!!!!

I am intrigued by this - though not totally surprised. There has been an idea that all imports into the UK should have duty on them thus removing the allowance for small purchases that previously existed but in the UK we have been told this has been abandoned as impractical to collect.This is very intersting as it is requires a - presumably - US company to act as a tax collector for the EU. It is intriguing how they would enforce this and collect the tax. How will they differentiate from charitable giving etc. when they have no jurisdiction over the collector.Sounds very strange. I would love to complain but can I have some identity for the relevant order requiring this please.

I wonder if downloads are effected?Afterall the transaction is made in Cyberspace!!!!!!!

>I wonder if downloads are effected?>Afterall the transaction is made in Cyberspace!!!!!!!Yes, I'm pretty sure they are. Some US suppliers have already sent me "last chance to buy at the tax-free price" messages. There has been some coverage of the legislation on www.theinquirer.net and www.theregister.co.uk, so it hasn't just come out of the blue.

Hi Rob,>apparently even if the Developer's sales are not at the threshold level in the rules.http://hifi.avsim.net/activesky/images/wxrebeta.jpg

Yes, all non-EU companies selling goods or services to EU residents over the internet are affected by this.What I do wonder is how they think to track this down, unless they're planning to confiscate the entire administration of all EU creditcard companies and banks and calculate how much money went oversees.

Contacting our representatives will have little or no effect.They stand to gain considerable personal wealth (everyone knows the increased tax revenues will go to increase their salaries over or under the table).

We pay 22% VAT here in Poland :-(Gavin

RobThe simple answer to not being able to get the VAT back is to become VAT registered. It doesn't matter if your turnover level is below the VAT threshold the Custome and Excise cannot refuse your application. And as for the time taken to complete the VAT return, well that just takes minutes with one of the good, inexpensive bookkeping packages available.I know, as I run a small business myself.David

HI David,But surely VAT is claimed back only on purchases, not sales?Regards,Rob

RobYes, you are right but in your post you said:* We of course resent this, because we are a small business unregistered for VAT and we cannot ever get the tax back *I'm confused :-hmmmDavid

What I meant was, we will be obliged to add VAT on downloads (because our e-commerce agent is bound by the regulations). So either we pass on this charge to customers (which we don't want to do) or we sell for the same price then have to pay the VAT anyway (on sales).We can't get this back whether or not we are registered. Although we could get some VAT on purchases if we did register, the bulk of our expense is in research and development for which it is very difficult to claim back VAT.So, we pay out more and receive less. You see the problem?Rob

And us Americans are not exempt from govermental nonsense. The Bush administration is cutting overtime hours for over 8 million blue and white collar workers. Trying to save business's money. Read rest of story here: http://www.msnbc.com/news/931238.asp?0ct=-302#BODY

Rob,If I understand correctly then this regulation on electronic transactions effectively bypasses the VAT threshold? Is there a requirement that all businesses that conduct electronic transactions be registered? I don't think that it is lawful to bypass the threshold regulation this way. In the part of EU that i come from one could challenge this as unconstitutional given that it represents unequal treatment towards small businesses that conduct electronic transactions compared to ones that do not by introducing criteria irrelevant to the purpose of the taxation.Regards,