Software Downloads and VAT

[Steve Maskery]

Does anyone know how VAT works internationally? I used to be VAT registered so I know the general stuff, but...

If I download a file from a US company and I put in my address, as soon as iI say I'm in the UK up pops a VAT box and the price goes up. Now I'm a bit of an old cynic, and I would be prepared to bet a pound to a penny that that company does not have a UK VAT Registration Number. So where does the VAT that I pay go to?

I don't mind if it DOES go to the British Govt (well, not as much), as it pays for my wife's salary for a start, but how do I know it doesn't just swell the company's coffers by 17.5%?

I'm not trying to start another US/UK price ding-dong here, so please let's not go down that road, we've been there, done that. I'm looking for an explanation from someone who knows more about it that I do.

Cheers
Steve

 

[Newbie_Neil]

Hi Steve

The only time a company should add on 17.5% vat is when they have a UK vat registration. If they don't have one they're breaking the law.

Customers of mine who have international sites are tending to charge the same price worldwide, but using the "vat" element to pay for the carriage. I hasten to add that they say, where applicable, vat is included.

Cheers,
Neil

 

[Steve Maskery]

The only time a company should add on 17.5% vat is when they have a UK vat registration. If they don't have one they're breaking the law.

I agree Neil; the question is, whose law? How can a company in California break a UK law?

I can use the same credit card, with the same address, but give a different DELIVERY address (for a download?????), such as my hotel in Sierra Leone and Hey Presto, no VAT. Not that I would do anything so underhand, of course.

 

[Dave S]

Interesting question. If you purchase from the US, rather than from a UK distributor, then I guess you are technically importing the software, and as such, you are responsible for paying duty and VAT.
So I wonder where that would leave you if, for instance, you paid the 17.5% on purchase but that sum was not passed on to the government. :?

Dave

 

[Steve Maskery]

So I wonder where that would leave you if, for instance, you paid the 17.5% on purchase but that sum was not passed on to the government. :?

That's exactly my point.

S

 

[Scrit]

From my (limited) understanding having attended a VAT day a few years back, US companies can arrange for an EU based agent, who is registered for VAT to import and supply goods on their behalf. The agent will be treated as the principal for VAT purposes. They will make any necessary customs entries as importer, pay or defer the VAT and take delivery of the goods. However, under recent legislation aren't companies trading in the EU required to show such details, including VAT registration numbers, etc. on their web sites? Certainly VAT invoices have required the VAT registration country and number to be shown since its inception in 1971. If they don't issue proper VAT documentation then HMCE will regard the software as a non-VAT paid import and can and will levy duty and VAT on you as the purchases.......

Scrit

 

[Mike.C]

Steve this may help http://www.twobirds.com/English/publica ... dedTax.cfm

The strange thing is I have bought a lot of software from the US lately, but it has never been made clear to me that I have paid VAT, if indeed I have. On reading your post again I can certainly say that the price has never gone up when I have entered my UK address.

Cheers

Mike

 

[Steve Maskery]

That's actually very helpful (I think), thank you.

"The US is an advocate of the position that digital products such as software that are delivered electronically should be classified as “goods” and thus benefit from the protections of GATT. The EU position is that digital products delivered electronically should be classified as “services” and thus benefit from GATS. This issue has not been resolved. It is important because the Directive is more likely to violate the anti-discrimination provisions of GATT than those of GATS."

What a surprise!

The older I get the more I think we live in a crazy and godforsaken world.

 

[RogerS]

Steve this may help http://www.twobirds.com/English/publica ... dedTax.cfm

"To eliminate this competitive advantage, the Directive treats the service, i.e. the electronic delivery of digital products and services, as occurring at the place where the consumer resides."

So presumably if I buy a bacon buttie in Waitrose and take it with me over the channel and eat it in France then presumably I have to pay French VAT?

We've still not answered Steve's question ...ie how does the VAT get back to the UK Govt!

And what's to stop us simply quoting any old VAT number? Not that we'd do such a thing, of course :wink:

 

[Newbie_Neil]

Hi Steve

In a directive that went into effect on July 1, 2003 the European Union (EU) council has extended the Value Added Tax (VAT) to electronically supplied goods and services provided by non-EU vendors to customers living in the EU. EU-based vendors of electronically supplied goods and services are already subject to the VAT. Non-EU companies selling tangible or hard goods over the Internet to EU customers have been subject to the VAT for some time. The new directive is designed to help EU suppliers compete more effectively with non-EU vendors, who were until now exempt from the tax.

This is the complete link.

So now you know. :wink:

Cheers
Neil

 

[Steve Maskery]

[And what's to stop us simply quoting any old VAT number? Not that we'd do such a thing, of course :wink:

I don't think that would have any effect, Roger. You'd stillpay the VAT, get a VAT receipt but not then be able to claim it back, because you don't fill in a VAT return.

Neil, that makes sense, though how the EU has jurisdiction over a company in Nebraska or Colorado or somewhere, I don't understand.

I can understand the onus being put on the purchaser, just like when you import anything, really, but on the vendor?

So I buy in the UK something sold to me by the US and pay VAT to the Luxembourg government. I don't think I like that very much.

Thank you all.
Cheers
Steve

 

[RogerS]

[And what's to stop us simply quoting any old VAT number? Not that we'd do such a thing, of course :wink:

No you don't pay any VAT. I'm VAT registered and when I give my VAT number then the VAT disappears!

 

[Steve Maskery]

Ah I didn't realize that. So buying internationally, the VAT system is different is it, instead of paying and claiming back, you simply don't pay in the first place?

Very sensible, as bureaucracy goes, I guess, but way open to abuse?

In fact, now I come to think, isn't that the basis of these carousel scams, where the same goods are traded back and forth over the channel?

I still don't want to pay VAT to anyone other than the UK Govt!

Thanks
Steve