MAS and the VAT Rules

I see MAS are now sending VAT invoices out after you make a purchase in the store. Strikes me they have been very clever about the new EU VAT charges. Normally as a UK customer I expect to see a price in an online store and then VAT and Delivery be added on at checkout. Not the case in the MAS, I pay the same price as everyone else, EU or Non-EU and the developer foots the bill for the VAT, very wrong!

Now I guess their thinking is that all developers will put up their prices to compensate for the VAT rules and therefore not loose out. This way Apple then get 30% of your increased prices and hey presto they are quids in. Unfortunately non-EU customers see a price hike due to your increased net pricing.

I am really surprised they can get away with this. You are meant to charge your customer VAT, not pay the VAT for them.

A well thought out business model by Apple.

Apple’s disdain for the people who provide the software for their systems is beyond understanding.

I do not like the stupid abhorrent VAT either, but it is not Apple fault, and no, they are not pocketing the increase due to VAT enforcement.

Fact is EU has been wanting for over 15 years to force online sales to pay VAT in the country of the buyer, and finally succeeded this year. Incidentally, that is also part of the push to get more tax money from not only Apple, but also Google and Amazon, to pay taxes in countries where they do business, instead of in Ireland or Luxembourg.

The way it works is that whenever Apple makes a sale for 100, the state claims 20-25% VAT on that amount. So in effect, in France for instance where VAT is 20%, Apple no longer perceives 100 gross amount, but only 80. Then it takes its usual cut of 30% on 80 only. Not on 100. Both the developer and Apple get ripped off by the state, in fact.

Now about putting up the prices. To compensate for the VAT would require to push the price 25%, so with 125, Apple+Developer gross sale would be 100 again. In effect, in that scheme, Apple would not get more money, but just the same as before.

The problem, at least for me, is that I do not want to lose sales in the US, which represent about 2 thirds of my sales. Prices cannot be differentiated between regions, but as they go by tiers I would have to increase the price in the US too. So I am not going to push the price of a $9.99 app to $12.99 just for an extra profit on 1/3 of my market. Especially since, just as they do for computers, Apple applies the same amount in Euros as they do in US$. So when an app is $9.99, it is also €9.99. The exchange rate compensates the VAT, since at 1.30 dollars per a Euro, the effective price is $12.99.

In the UK, £7.99 at the current rate is equivalent to $12.10, which more than offsets VAT on the dollar amount. Actually, UK VAT being 15% only, the effective gross sale after VAT is $11.70. So you will get more in the UK than in the US.

It is never nice to have to pay taxes, but for once, Apple has made it pretty painless for developers by setting European prices at levels that make the remaining gross approximately the same as the dollar amount.

Correction : I just noticed that UK VAT is not 15% anymore, but 20%. In effect, the UK price just offsets the impact of VAT, and comes down to the same dollar amount as in the US.

Sorry.

That was not my understanding of how Apple’s MAS prices worked, but my understanding is, admittedly, very limited. Do you have a source showing this to be true?

Mike, are you saying that if you purchase an app for say £10 - you will then (after making your purchase) also shortly receive another bill for the additional VAT required?

So basically you pay once for the app, and then you get billed again for the additional VAT?

When you set the price of your app in iTunes Connect, you get a page where appear all the prices corresponding to the tier you selected.

All the examples I gave I verified there before posting. Here is an excerpt :

Price Tier 10 App Store Customer Price Your Proceeds U.S.* US$9.99 US $7.00 Mexico MX $129.00 MX $90.30 Canada CA $11.99 CA $8.39 U.K. £7.99 £4.66 European Union* 9,99 € 5,51 € Sweden SE 95,00 kr SE 53,20 kr Denmark DK 79,00 kr DK 44,24 kr Norway NO 95,00 kr NO 53,20 kr Switzerland CHF10.00 SE CHF6.48

Sorry for the format, the forum is not the easiest place to create tables with.

[quote=160034:@Richard Summers]Mike, are you saying that if you purchase an app for say £10 - you will then (after making your purchase) also shortly receive another bill for the additional VAT required?

So basically you pay once for the app, and then you get billed again for the additional VAT?[/quote]

No. Apple will pay VAT. The customer does not have to pay anything additional.

You will just perceive your proceeds of £ 4.66 net of any tax.

It’s a good thing to have VAT being included in the sale price. The US should do that, too.
Also if the US would have a VAT like in Europe, there would be enough tax to have nearly no deficit!

[quote=160066:@Christian Schmitz]It’s a good thing to have VAT being included in the sale price. The US should do that, too.
Also if the US would have a VAT like in Europe, there would be enough tax to have nearly no deficit![/quote]

You are talking about Germany, right ? Ask France, who incidentally invented VAT, but still has an abysmal deficit.

Not every country has the excellent financial management of Germany :wink:

[quote=160036:@Michel Bujardet]No. Apple will pay VAT. The customer does not have to pay anything additional.

You will just perceive your proceeds of £ 4.66 net of any tax.[/quote]

Richard, then deduct your UK income tax or corporation tax and you are left with… Not a lot… You gotta sell an awful lot of 0.99p apps to buy a loaf of bread…

Why limit oneself to 0.99p ? Low self-esteem ? None of my apps is less than $5.99, and most are either at $15.99 or $19.99.

And I pay much more than bread with my MAS sales, thank you.

Speaking from an American point of view, and feeling burdened enough already with all the taxation and regulation that weighs down my small business (and a president who doesn’t want it to stop there), I can only say … Have you lost your mind???[quote=160066:@Christian Schmitz]there would be enough tax to have nearly no deficit![/quote]
That’s where it falls apart in a heartbeat … introduce “politicians” with their own individual agendas to build their power base and single-minded purpose of just get reelected at any cost … and the end result is there NEVER will be an end to the deficit! For every dollar collected, they will find a way to justify spending two.

VAT is a European creation … we have enough abominations we’ve created ourselves over here already … you can kindly keep that one to yourselves, Christian! ^^

Trust me … when your business is located in the USA you do not pay a lot of taxes at all !!

For example:
When I sell for 5.000$/months
This is what happens with my money in Belgium (similar in other EU countries):

Social taxes:
5.000$ - 20.5% = 3.975$
Personal taxes:
3.975$ - 45% = 1.788,75$

Out of 5.000$ i have 1788$ left.

Now do the math when having a business located in USA. :wink:

No argument from me on that at all, Christoph … I’ve spent plenty of time in Europe (mostly Sweden and Germany) and know very well the situation you face with what you earn versus what you actually take home. But what we have hurts enough already (I could likewise itemize the BS taxes we pay as a business, but I begged our CPA to stop telling me since I was running out of anti-depressants ^^).

Asking someone to tack on more to that would be like saying, “You know, my left foot hurts like hell, but in Europe both of their feet hurt like hell … gee, I sure wish I was like Europe.” … don’t hold your breath waiting to ever hear that one out of me. ^^

BTW … you do realize that you just crafted your own solution (and everyone else who’s been up in arms about this MAS/VAT action)

… Now, there’s this nice little 4-bedroom, 2-1/2 bath, brick 2-story Southern style home (with a swimming pool, no less) for sale just down the street from me here and … better get in on it quick before some of the other folks here beat you to it! Sheesh, I knew I should’ve gotten into realty after all ^^

I’ve often suggested that if the European governments reduced taxes, they’d collect more… No one believes me (mind you I could be totally wrong). Also don’t forget that something like 0.7% of the population are millionaires, while 70% of Politicians are millionaires in Europe. Constantly award themselves better benefits and higher raises than anyone else in the public sector.

Most governments are inbreed, corrupted and haven’t got a clue what it’s like to live as the kind of people they govern. I recall once an interview with the politician who was responsible for raises taxes on petrol, when she was asked how she felt, she responded with that it doesn’t ‘boffer’ her, as the government pay for her to be driven wherever she goes.

Just for comparison, in Taiwan.
If you’re self-employed, running a small business from home. 0% income tax, this is legal and why so many young people run their own businesses.
Limited company 17%.
If you work for a company 6%.

Sales tax is 7%.
Petrol is 88¢ (USD) a liter (or 3.36 a gallon).

Healthcare is not free, unlike Europe, but it’s really cheap. $20 (USD) a month and $3 when you see a doctor.

There is zero unemployment benefit, you don’t work, you don’t get money (from the government). There is only just a state pension, but you only get what you put in.

Obviously this is not a fair comparison, as the cost of living is cheaper.

You’re kidding…right?

Governments in general, and our government in particular, increase their spending to consume all new sources of revenue and then some. Our deficits cannot be fixed by revenue. They can only be fixed by slashing budgets. And the waste that’s in our budgets…Federal and state level…is criminal. As in literally if a private sector company played the same games the people involved would all serve prison time.

You’re correct. This has been demonstrated time and again.

Couldn’t have said it better myself.