Monday, 12 October 2015

Back from a wonderful weekend.

These past few days were wonderful, and very relaxing, and much-needed. I got to spend time with friends, and eat lots of lovely food, and play many, many games, as the big game fair in Essen took place on the weekend.

As usual, we went there and ambled through the halls full of people and games. The fair at Essen is the world's biggest boardgame fair, and they had about 800 new games this year, released at the fair. There's tables with games set up that you can look at, there's usually someone there who explains the rules to you, and then you can give the game a try and play a round or two or even the entire game in some cases to see how you like it.

We spend a long weekend there, with three and a half days at the fair, plus more gaming in the evening, and we usually play (or test for a few rounds) about 30 games. As usual, some of them were nice but not mind-boggling, some were fun, some were really, really bad (mind-bogglingly bad in one case) and some were so much fun that a copy had to travel home with us.

Today was busy with doing things for the shop (all in the background for now, though) and preparing for the next blog tour together with Gillian - the US release of the Beast is coming up!

Wednesday, 7 October 2015

I'm taking a breather.

The last few weeks were incredibly busy, and I'm proud and happy that they ended with several successful projects or several things sorted out (new book about gold embroidery! new scarf knitting kit! new special colours on thin lace-weight two-ply wool yarn! new gold embroidery starter kit! fair in Weikersheim!). That was exhausting, though, and I'm in need of a little break now.

I've planned several months ago to take the rest of this week off - it was already obvious it would be a very busy time just beforehand, and I'd need some time to relax and get my mind off work-related things. I had also planned to do some blog posts beforehand, though, and to post them on schedule... and I realised yesterday night that this plan will have to quietly slink away and pretend it never even existed.

For you, that will mean blog silence until next week, and I'll be gentle with myself and declare the blog silent until Tuesday. Meanwhile, there's a lovely story over at the Toast - maybe you'll enjoy that until I'm back...

Tuesday, 6 October 2015


You're getting the promised blog post, even though you're getting it very, very late... today was completely gobbled up by lugging stuff out of the car (with plenty of help from the most patient husband of them all) and getting the book-keeping up to date, including sending off the taxes for the past quarter.

That on top of the post-fair exhaustion, and the blog post almost got forgotten!

Sabine and me behind our sales table in the former carriage shed.
The fair, by the way, was in an extremely lovely place, with brilliant weather on both Friday and Saturday. The baroque gardens showed themselves at their very best, the castle staff had prepared special guided tours with more textile information than they give usually, and we had lots and lots of very interested visitors. Sunday was rainy, unfortunately, and thus more towards the drab and grey side of autumn, but it did clear up in the afternoon.

I had a lovely time at Weikersheim, and I've already heard that they are planning to do this again. Not next year (that is already booked with events), but probably in 2017, and if my schedule will permit it, I'll definitely be there again.

Thursday, 1 October 2015


I'm packing up today and leaving to set up everything for the Nadelkunst, and I'm all excited about it.

If you're going there, you can find me in the "Remise". If you're not going there and only read this blog, I'll be back and writing for you on Tuesday, when I will be able to tell you more about how the fair went and how beautiful the castle in Weikersheim really is...

Wednesday, 30 September 2015

Thoughts about the Survey.

I promised yesterday to write something about the issues I have with the survey.

I'm running late on my prep for the Nadelkunst fair, though, and I have to leave tomorrow to set up the stall - which means I have to pack today. So, as much as it would have delighted me to write a special post about the survey questions just for you, with a lot of lovely, lovely snark and links and weird references, I'm out of time for that, and the thing is too important for me to put it on hold until somewhen next week.

So you're not getting a blog post written specifically about this. Instead, I'll share with you the letter I wrote about the survey questions, sent off to the contact address listed with the survey (at least they had that!). I really hope that it will get read, and that it might do a little bit to help improve the situation.

Dear Sir or Madam,

I am one of the small business owners that has been hit by the changes in EU VAT law, and with the proposed extensions of these changes to all goods and services, I am very much afraid for the future of my business. I am running a tiny business with very specialised goods and services, and some of them used to be digital. I was also planning to do more digital content in the future, but these plans have been put on hold due to the VAT rules change.

The very specialised nature of my business, however, means that I am very reliant on getting customers from outside of Germany, which count for up to 60% of my turnover in the online shop. The size of my business means that I cannot invest in expensive shop software, legal counselling, an IT specialist or a tax assistant, and this effectively makes it impossible for me to sell digital content under the new rules. Similar problems would occur with an extension of the new rules to any goods and services, and would probably force me to shut it down entirely.

Hence I was very happy to hear about your survey for the open public consultation. After looking at the survey, however, I am even more concerned. Many of the questions you pose are hard to understand or unclear in their intent; the whole survey is written in a way and in a language that makes it necessary to already be very well informed about the VAT changes, both extant and planned. If the questionnaire were really intended to take in public opinion, the language alone would make that about impossible. The questionnaire gets even less inviting to be filled by the fact that there is no information on whether any of the fields are compulsory or not, and then asking for a name and contact data.

The questionnaire is also not stating anything about how the data will be used, by whom and for how long it will be stored, and whether it will be treated as confidential. If you were running a shop in Germany, this would be enough to serve you a notice for insufficient information about data security and privacy (incurring costs, of course, of at least a few hundred Euro).

There are even more issues in regard to the individual questions or wordings.

This already starts with the introductory texts.
"In parallel, a Mini One Stop Shop has been implemented to reduce the costs and administrative burdens for businesses concerned."

This sounds like the new legislation were entirely introduced to reduce burdens that were already extant for a long while. This, however, is not true. In many cases, the new system and the MOSS have not reduced the costs and burdens, but added to them considerably, even driving single entrepreneurs out of business entirely.

"The open public consultation will seek the views of business, the public and representative organisations [...]"
As stated above, it is a wonderful thing that everybody, including the public, is invited to have their say here. However, the explanations and the survey both are not accessible enough for the public - they are hard enough to understand even for educated people who are already familiar with the new rules for digital VAT.

Qu. 2 & 3 - Why are you asking for a name and email address? Is there any need for this? What will you do with this information? How will it be stored, where, and for how long? Every business has to inform their customers about how their personal data will be handled, and any such information is missing completely here.

Additionally, since you will be asking questions about how the changes have been handled by businesses, this is not conducive to getting straight, honest answers, since one might risk being lined up for an audit or being fined for non-compliance.

Qu. 4: If you are asking after the head office, shouldn't that be a BO question? Or should it be place of residence?

Qu. 5: There is no possibility to later change one's mind?

Qu. 11: Shouldn't that be a BO question? I also find unclear what you want to know here.

Qu. 12&13: You are asking about supplies not reported under MOSS. What about the extra burden added by registering and using MOSS? What about the burdens of extra work to try and comply with the new rules, only to spend many hours to file VAT to another EU country of under 1 €?

(By the way, the German wording implies that the question only asks after the calculation of the VAT of the other country, not the calculation and actual administration/payment to said country.)

Qu. 14 and other "please rate the difficulty" - the term "representing the most difficult" sounds like I am supposed to rate the individual answers from 1 to 5 in a hierarchy - which is technically not even possible in case all of them, including "other" applies, since there are 6 answers here. Or did you mean "scale of 1-5 with 1 representing not very difficult and 5 extremely difficult"?

Qu. 21: This is where having to state a name and email (or feeling that one has to, since there is no explanation on whether it's a can or must) will probably skew results. I also have a hard time understanding why "You also supply goods" would be a reason not to use the MOSS - as far as I understood, if I'd be selling digital goods and non-digital ones I would have to register for MOSS for the digital ones even while well underneath a threshold for registration in another country with my goods turnover. Or is that wrong?

Qu. 25: Does this question ask for my agreement with the objective to minimise burdens (including, or especially including, the burdens that have newly been added by the VAT rules in effect since January 2015)? Or for my agreement with the changes in VAT rules that are planned for the future, which might, according to the text in the intro, also be seen as "minimising burdens" even though it adds complications for small businesses?

Qu. 26: Are you asking for whether I would want all businesses to charge the same VAT rate throughout Europe? Or the same VAT rate when selling to one specific country? Or for my agreement that whatever the rule, there should be no exemption at all? What about an excemption not based on the price of one single small consignment, but based on the turnover of the company that is selling?

Qu. 27: If I answer with "I agree" to this question, it could be equally interpreted as my agreement to: a) the MOSS needs to be improved; b) the current Digital VAT rules need to be expanded to physical goods, c) a single registration and payment mechanism has to be set up so that registration when exceeding the turnover limits for VAT registration in another country can happen at the MOSS.

Qu. 28: It is difficult enough to find out, in some cases, what VAT to apply under domestic rules. How is it supposed to be technically possible to tax according to the customer's country? Most of the companies do not have their own law department that could spend a lot of time looking into this. There is not even an official reference list stating all the different tax percentages of VAT on the EU website (the list that is there is full of disclaimers that it may be wrong, or not up-to-date, and thus cannot be used as a legal basis for taxing). Am I supposed to learn Hungarian to find out what has to be taxed at which level in case some Hungarian customer orders a 5 € item from me? How is shop software going to handle the fact that an ebook in one country might not use the reduced tax level, but the higher one, and maybe super-reduced in a third country?

Qu. 29: This question is hard to answer without more context. It sounds as if the current rules would allow every single country in the EU that one has sold something to, no matter how small, would be entitled to do an audit. Now, apart from hoping I'd never have to deal with an audit in, say, French (which I can understand a little, and speak a little, but far removed from anything suitable to do Legalese with) - how is that supposed to function? How can a French auditor deal with my all-German book-keeping documents? Or do the rules mean that I will have to do multilingual book-keeping from now on? And will somebody from France come over to me in Germany to do the audit? Or am I supposed to ship copies of all my documents to France? Or go to France myself? Who will pay the expenses for this? What about the data security when my documents are sent somewhere out of the country? Whose rules about customer data confidentiality would then apply? German rules? French rules? An entirely different third set of rules?

Qu. 30: Again - how is this supposed to be enforced? If the EU hasn't managed to even tell their own citizens and businesses in time, and clearly enough, about the changes in VAT rules (see awareness level estimates in the full report available at, how are you going to communicate to the myriad of kitchen-table entrepreneurs and microbusinesses in the US, Australia, New Zealand, the Philippines, South America, ... that they are now supposed to follow different, much more complicated rules and pay taxes to a multitude of different countries within the EU? The results, should it be possible to actually tell them about it to raise levels of awareness to somewhere of, say, 50%, will either be that a) these microbusinesses will ignore the new rules or b) stop selling to customers within the EU. Already businesses in the US have stopped providing services such as software updates to EU customers - even to EU businesses because making a distinction there would be too much of a paperwork/shop software change burden.

Qu. 31/32: This is unclear on whether the threshold would apply to a certain amount per parcel/consignment/sale, per turnover of a business, or per sales made in a specific country. (Well, Qu. 32 makes it clear it probably does not mean amount per sale.) It's impossible to properly answer a question on the appropriate level of a threshold without knowing what the threshold will be based on!

Qu. 33: Does "easier management for tax administrations" mean easier management of tax issues for businesses, or are you actually asking businesses and members of the public whether they think a threshold would make internal administration in the tax departments of the individual member states easier?

Qu. 34: How is "uncertainty on whether a business will exceed the annual threshold" a risk of cross-border thresholds? Whenever there is a threshold, there's always a risk that if a business does well, it might be crossed. However, usually this is considered a good thing as it means business growth. This question sounds as if what lies beyond that threshold is so hard to handle and so difficult to navigate that a business would be happy to curtail its own growth just to keep beneath it. Which is, in fact, a very fitting description of the actual situation for digital micro-businesses right now, only that there is no threshold below which they could still prosper.

Qu. 35: Again, two questions rolled into one. Do I agree that any threshold needs to be harmonised? Do I agree that any threshold should apply to both goods and services? Also: any threshold in connection with VAT? Or also any internal threshold in connection with commerce and business within a member state? How about the thresholds for complete VAT exemption for supermicrobusinesses like it exists in Germany? What about differences in the size and annual turnover from member state to member state, are these going to be taken into account, or is every country now supposed to work the same way, instantly?

Qu. 36: Thank you for including an open text box in the survey so that survey takers can tell you what they actually think. This is, for me, the only thing redeeming the whole survey, and I do hope that you will get a lot of input through this text box.

I was very excited to hear about a survey that would allow micro-business owners like myself and my customers to chime in and help find a better way for the VAT issue in the EU. I do realise that VAT is an important income for every single state, and that the EU wishes to spread the earnings fairly. But this survey has questions that can be interpreted in many different ways, and you might thus get answers that were the actual opposite of what the person filling out the questionnaire actually wanted to say.

So now I am very deeply concerned about this survey. As so many of the questions are so unclear or so open to interpretation, it does not matter what the actual opinion and actual answers of those filling out the survey are – the survey can serve as a carte blanche for any end result desired.

I still hope that there will be instant action to relieve the incredible burden on microbusinesses that are caused by the new EU VAT rules, and that there will be no extension on physical goods and non-digital services until there are workable solutions and sensible thresholds for the EU VAT. I still hope that there is a future for my business – but the way this survey is built up and worded has dampened my hopes considerably.


Katrin Kania

Tuesday, 29 September 2015

Please help me save my business.

I'm sorry if the title shocked you - but I am really afraid of the future for my business at the moment. Not because I don't love what I do anymore, or am running out of ideas, or projects, quite the opposite. It's because of the planned changes in the EU legislation regarding taxation for businesses.

If you've been reading along for a while, or have read yesterday's blog post, you will know about the changes in the EU VAT for digital goods, and the mess it brought along. (If you have no clue what I'm talking about now, go back to yesterday's post to have VAT and EU VAT explained, or go straight to the EU VAT Action Group's info page. Or TL;DR: We sellers have to cope with a mess of new rules to sell outside our home country since January 2015, and these rules are literally impossible to comply with.)

So. I can tell you, by now, that I have been losing sales on the Pirate Robert hat because I'm offering it as a printed pattern and not as a pdf file. A lot of knitters are annoyed that they're not able to just download it. I can understand this, even though (obviously) I'm not thrilled about it.

It gets worse, though - much worse. An extension to all goods and services is on the slate for 2016. All goods and services. So if you'd like to buy a spindle in the US? May well happen that the seller refuses to sell to you, because of the VAT paperwork that would entail. Things like this are already happening - sellers are blocking anyone from the EU and refuse to sell to them. (Even EU businesses though there are different rules for this, and they could sell to them no problem.)

This extension might mean the end of my business, too. I have built up what I am doing, and developed the products I am selling, for eleven years now. My business is not making a lot of money, but it's enough to let me keep flying, and that's all I ask for.

Serenity by BKSmith
A lot of the sales I make are in other EU countries, so this legislation would hit me really hard, right in the face. I could probably cope with that. I'm not sure I could cope with the additional anxiety, though. Running a business as a single entrepreneur always means a lot of bureaucracy, and always means you can slip up and mess something up, or not be aware of a change only to find out a year or two later you have not complied because you freaking did not know about it. You are only a single person, after all, and you want to spend most of your time and energy on developing and promoting your business, and not jumping red tape.

Now, I'm a person who worries about stuff, especially about getting stuff wrong. Every year around tax time, I have a few weeks of feeling ultra stressed, having to file about six individual report thingies, which all have to be correct. Every time I put something new up in the shop I triple-check to make sure it includes the correct VAT. Every time I find out about a change of rules and regs, I spend a few hours making sure I'm compliant, and several more days to weeks feeling stressed about the fact I might have missed something. And there are really stupid changes, too - such as having to label the button for "buy now" something different (equivalent to "yes, I do agree I will have to pay for the order if I press this"). There's newsletters you can get to try and keep up to date, and every single instance of these letters begins with some news on how you can be served notice for this typo or that wording or that attempt to explain how your shop works to your customers. (Very, very helpful. Thank you so much. Not.)

So. I am wishing very, very hard for this plan of extension to all goods to go away, and since that was never enough in this world, I'm also doing what I can. I have written to Members of the EU Parliament, and politicians here, and donated to the EU VAT Action Group, and tried to spread the word. But the more people that do things to make the EU realise we need help, and we need it now, the better.

And here's where I ask you to please help.  The EU Commission is running a survey with a long title about the EU VAT. The aim of this survey is said to see how the current system is working, more or less.

The survey is a very, very good thing, because it means there is awareness of our problem (our meaning small businesses like mine).

Unfortunately, it is also all written in Legalese, and I find it complicated to understand in both English and German. Some of the questions are highly confusing, in some cases even misleading, or open to interpretation. In short, the whole survey feels very weird to me. (I'll do a separate post about that, probably tomorrow.) In several of the questions you are asked whether you agree to blah and chatter, and it is impossible to discern whether your "I agree" would mean you agree to blah, or to chatter, or to both of them, or to the general idea behind both blah and chatter - so your answer would be open to interpretation. Also, Legalese. Never good in a survey that's supposed to be inclusive...

Still, the fact that we have this survey is a very, very good thing. It looks daunting, but it is actually rather easy to work with.

The survey does not have any field that is compulsory. You do not have to fill out or answer anything (which includes the fields for your name and email addy at the top) in that survey. So please don't be scared off by all the legalese, or the length of it.

If you would like to help my business, and countless others like it, you can do so easily with help of that survey.

Click the link to open up the survey (it opens in a new window).
Ignore all questions that you don't understand, or don't feel comfortable answering. Just leave them blank.
It would be nice if you could answer questions 1, 4, and 15 to help those evaluate the survey get an idea of where you are from, and for statistics about how many people are affected by the new rules, especially as customers.

Now for the important bit. Go down to the box. If you have taken the time to read the survey and you found any of the questions were hard to understand, or if you felt any of the questions was skewed, or open to interpretation, or uncomfortable - tell them so in the box.
If you only heard about the EU VAT rules today in my blog, tell them you only learned about it today even though it's been active for nine months.
If the new legislation has impacted you in any way whatsoever, tell them so in the box. In any way. This could mean a business not selling pdf patterns to you anymore (I have switched to print, for instance), geo-blocking you, or having to cope with lots and lots of clicks in checkout. If you feel concerned about all your customer data being kept for 10 years (one of the new rules), tell them so.
If you feel there has been way too little education about the new rules to businesses, customers, or both, tell them so.

If you agree that it will be desastrous for micro-businesses that are suffering already to wait for several more YEARS until the legislation is amended and a threshold is introduced, tell them so. Small businesses need a cross-border digital sales threshold, below which domestic VAT rules will apply, and a 'soft landing' threshold above that, for the next phase of business growth.

If you feel concerned about a huge impact on your abilities to buy things from smaller vendors from out of your country when this goes into effect for all goods and services (and I think you should be concerned about that), please tell them so! (Personally, to me, this would be the most important thing in the survey that you could do.)

Please help me save my business, and help save countless others (most of which are probably not even aware of the trouble coming up). Fill out the survey. Spread the word. Link posts about the EU VAT. Tweet about it. Tell your facebook friends. Tell your real friends. Tell any politician you might know. Feel free to comment here, too, if you have any questions or would just like to vent about these quixotic laws that completely ignore the reality of small traders. The more this is spoken about, the more voices that are raised, the better. We small traders need your help, and we need it now, before the brown stuff really, really hits the fan.

Monday, 28 September 2015

Here is where I explain VAT.

If you've been reading along for a while, you will have read about the EU VAT on my blog. If you have no clue what I'm talking about now, let me give you the TL;DR version of the whole thing.

When a business sells something to a customer, the amount paid includes a certain tax that we'll call the VAT (for Value Added Tax. The German word for it is Mehrwertsteuer*, and every EU country has their own term for it, but it functions just the same everywhere). The business then sends that tax money on to the state, who grins and takes it. You must pay VAT if your business is over a certain threshold of turnover (that is the money taken in and spent added up - so if you spend 20 € and get 20 €, your turnover is 40 €. Your winnings, however, is zero, so high turnover does not necessarily mean you're getting rich.); the threshold varies from country to country.

VAT is everywhere and it's on everything you buy, every day, everywhere. It thus shouldn't surprise you that the income from VAT makes for a huge chunk of the income that any EU country gets.** This tax is thus very important to any EU country. Accordingly, they feel rather strongly about their money, and they will afford you little slack for transgressions.

How much VAT is charged, however, and which rates apply to what kinds of goods, differs from country to country and is not always straightforward, or easy to understand. For instance, when I sell a book, I have to charge 7% VAT instead of 19%, because books have the reduced German VAT. When I get paid my royalty fees from my publishing house, however, they are charged at 19% VAT even though all that money is coming from selling books charged at 7% VAT!

Are you still with me? (I hope so!) Here's where it gets interesting. Each member state of the EU has this system, with their own issues and confusions about what gets charged what, and they all have different rates of VAT - as many as five rates in a single country, and 75 rates altogether in the 28 countries. There's a list online (German version here), so if you like numbers or would like to see how complicated the framework of all this is, go take a look. I'll wait here. Make sure you scroll down to at least page four to get an impression. Heck, just scroll through the whole thing once, you don't even need to read it to see how frazzled this all is.

Here's where it gets interesting. The rates. When you live in a country that charges high VAT, your customer effectively pays more money to you, so your prices have to be higher than they would need to be in a low-VAT country. That is the reason Amazon has its business centre in Luxembourg - lowest rate in the EU.

Essentially, the big players go where they don't pay as much VAT, helping them outprice the competition. This has two effects: firstly, the competition, especially local and small businesses, can't match that pricing and suffer, or have to fold. Secondly, the low-VAT state gets a lot of VAT money even though most of the goods are shipped out of the country.

Remember how I said that VAT is not where countries have a relaxed attitude?

So. There's money to be had, and the EU Commission realised that there might be some skew to the system. Enter a plan to make it all different. What if the business has to pay the VAT to the country they ship the goods to? Wouldn't that be fairer all around? The company pays VAT according to where they make their turnover, and the corresponding country gets the money. The customer does not notice any changes and always pays the same VAT rates at their home country rules (which few customers probably ever thought about, or care about).

Sounds good? Well. That's what the EU Commission thought, and they wrote a new law, and that would start with applying the new system (pay VAT based on the buyer's country) to digital goods and services - mp3s, ebooks, software, games, anything that is digital and downloaded via the 'Net. This rule came into force in January 2015.

Since then, countless small businesses have closed down, and many more startup plans have been laid into a shallow grave. Why? The rules are in effect for everyone, from the first penny or cent of turnover you have.

If I would sell a 1€ knitting pattern on pdf to one person in the UK in 2015, I'd be forced to register for VAT in the UK, do the VAT accounting (probably four times, once for every quarter of the year) and send the money over (which includes paying for any bank charges for currency conversion). For one single euro. Can you believe that? There's a threshold under which you have to pay no VAT in most countries for a reason, but there is no threshold at all for the new EU VAT. There's a thing called the Mini One-Stop Shop for small businesses where you can register once for all the EU countries, and which is supposed to make things easier, but it's not making it much easier, and it's not working really reliably yet. (This legislation is in effect since January, by the way. It's not working reliably yet, about 9 months in. That's enough time to make a human baby.)

So many businesses folded because they could not invest the time and money to make sure they can work with the new system, or they did not want to face this wall of bureaucracy that can bite you in the ass, hard, if you mess up. (That thing about no slack being cut.)

Now, for those who did not want to throw in the towel yet, the rules are so hard to follow that even the Big Players have huge trouble implementing it, and they have teams of software people and accounting people and law people. Small, single entrepreneurs? This regulation adds so much paperwork, consumes so much time, and costs so much money that trying to comply can make a business fold. (You can find out more about the impact, and the problems, here.)

Oh, and by the way, this is in effect world-wide. So if an US company (not in the EU) sells me a knitting pattern download, they have to charge me 19% VAT and send that VAT over to good ol' Germany, who will grin and take it.

That's not all, though. An extension to all goods and services is on the slate for 2016. All goods and services. So if you'd like to buy a spindle in the US? May well happen that the seller refuses to sell to you, because of the VAT paperwork that would entail. Things like this are already happening - sellers are blocking anyone from the EU and refuse to sell to them. (Even EU businesses though there are different rules for this, and they could sell to them no problem.)

This is, as you will hopefully agree, a Bad Thing - for many, many businesses as small as my own, or also quite a bit larger. It's impossible to comply with the legislation as it stands at the moment - but there's been a lot of complaints, and the EU commission is finally aware of the issues, and willing to do something against it, so there is still hope that this mess may be resolved.

And you can help - though in the interest of not boring you to tears with an insanely long blog post that nobody ever wants to read to the end, I'll tell you how tomorrow...

*Which lends itself wonderfully to being called "Märchensteuer", literally "fairy tale tax". The one little bit of humour this whole mess affords me is thinking "fairy tale tax" every time I say or write MwSt, or VAT. Also helps hoping for a fairy-tale-like happy ending.

** I had a phone call on Friday about this topic, and I think I remember being told "the biggest", but I don't want to misquote.