How the Startup VAT Nightmare Could Have Been Avoided

September 27, 2016

On the 1st of January of 2015, new VAT regulations were put into place in Europe. In a nutshell, it meant that companies with automated digital services (read: anything downloadable or used online), rather than paying the VAT of the seller’s own country, would have to pay VAT at the rate of the buyer’s country. Of course, on the outset this might seem reasonable and it is… for large businesses with the resources to work out the 81 VAT rates across 28 EU countries, prove location of their customers and comply with all other implications of the new legislation.

These new regulations have had tremendous implications for smaller businesses, in particularly, for the small yet highly scalable and internationally ambitions organisations like startups are. So, how can we prevent more of these nightmares of happening?

Dreamcatchers & the startup Copyright nightmare in the making

The Startup VAT nightmare could have been avoided if only the specific needs of startups had been known, understood, and responded to back in Brussels. Is that a one way blaming game? Not at all. If you read my previous post on these matters you will know that the European Commission is both taking action and has the will to understand and connect with startups. However, both the VAT nightmare and the copyright nightmare that is currently on the making (read more on that here) requires us all to work on improving communication. When I say us I mean startups, organisations like Beta-i who represent startups, think-tanks, politicians, policy makers, VCs and all others implied in the growth of the European startup ecosystem.

From my side, here is my commitment: from now on what happens in Brussels, doesn’t stay in Brussels. Or at least, that is the modest personal mission that I am assigning to myself as of today — to bring back to startup founders & members, incubators, accelerators, investors and all other interested parties, the news that I came across on what is being discussed at European Commission level regarding startups.

So what happened last week in Brussels?

Here is what happened last week in Brussels:

  • The European Startup Network was officially created. Nearly a year ago, I met in Brussels with a few other startup associations from other member states to discuss the idea of bringing all these associations together at the European level. The objective: to raise the voice of startups in Europe. This week ESN was officially launched. It counts with startup associations from 14 member states and you can learn more about it here.
  • Startup associations and representatives from 14 member states came together with the European Commission for 2 days of talks. Day 1 was dedicated to brainstorming solutions to address issues affecting startups in Europe. Some of the challenges we focused on: access to talent, corporate/startup collaborations, scalability in Europe. Day 2 was focused on the topic of growth specifically: what needs to happen in Europe to further support the growth of our startups?
  • A Manifesto is being put together that aims to push forward policies at European level to support growth of startups. This “scale-up” Manifesto is the natural successor of the first Startup Manifestos and will be a key for future lobbying efforts.

What do you have to say?

I decided that I will be spending a portion of my own free time working on blogposts and other sorts of contributions to connect these two worlds, of startups and policy makers in particular. Today I am sharing news from Brussels; tomorrow I can be taking your news to Brussels. So here is how you can make it all worth it: get in touch and share your thoughts on the issues affecting your ecosystem and your startup.

Through my work at Beta-i, I am able to bring the voice of the Portuguese startup ecosystem to the European Startup Network and Allied for Startups. These two organisations are think-tanks lobbying, in different ways, for startups at the European level. In addition, I’ve been involved in the making of the Portuguese Startup Manifesto and we are keen to push through for actions both nationally and internationally. Last week we were able to make the voice of Portuguese startups heard by decision makers in Brussels. What do you want these decision makers to know/do?

 — — — — — — — —

On the VAT nightmare: EUVAT Action has been doing a great job reaching out to businesses to bring their voice to the European Commission and make sure the next pieces of legislation follow a direction that works for smaller businesses such as startups. To understand more about the VAT legislation, its implications and how to take action: