Hi, anyone in the uk sell software via the internet?
Looked at HMRC today and it seems that the VAT situation is a total nightmare!!!
As I understand it I would register for VATMOSS even though I am not registered for VAT (being under the VAT threshold)
make a VATMOSS return to HMRC for sales to consumers, not VAT registered businesses.
As well as obtaining a VAT reg number from registered businesses, as proof of VAT exemption,
I would also have work out the VAT for EACH COUNTRY and invoice for sales to unregistered consumers.
Has anybody got any advice or experience relating to online software sales and VAT.
Welcome to the stupidity that is VATMOSS
Yes, you can talk to me and probably quite a few others.
I chose not to follow the ‘register for VAT’ route when deciding how to stay legal… but whatever you choose to deal with it, someone somewhere will take an unwarranted slice of your expected price.
It has put many people out of business, and/or prices up
Why I chose not to register is that as a software company, any VAT reclaimable is minimal.
Even though turnover is below the UK VAT threshold, some countries demand that VAT is charge if the software is delivered by download.
The idea was to make sure that VAT was grabbed from Amazon etc.
Good luck with that… they still dont pay all the tax they should.
But the heavy burden of VAT then falls on micro businesses.
As you have found, either you register for VAT , record an endless amount of detail about your customers, and charge a variety of rates based on where they live.
OR
You use an intermediary such as Paddle or FastSpring, and deal with them on a B2B basis.
They handle all the tax burden, you remain VAT free, but the price is ‘their running costs’ instead of ‘some other countrie’s VAT’
You lose money either way, unless you put your prices up to cover. (also unattractive)
OR
You only sell software on CD or USB drive… physical transmission does not incur these ridiculous rules.
To date, I dont know of anyone who has actually been brought to book for ignoring the rules, but thats not a suggestion that you do so, and I am sure if it hasnt happened yet, it is only a matter of time before a public case is made.
(The people most likely to not follow the rules, of course, are the micro businesses with tiny turnover and no knowledge of the 2015 VAT changes…)
I highly recommend to use a service like Share-It (Digital River), FastSpring, Paddle or others.
Don’t worry about the 28 EU countries yourself as well as the many more you need to collect VAT for.
Share-It is good for me as they allow me to sell in Euro and get the Euro back without intermediate conversion to USD which can loose 5%.
If you sell through Apple’s App Store, they’ll do it also.
Indeed. As I said.
The annoying thing is that even so:
The price the customer pays is then either inflated to account for the loss due to VAT, or your realised amount is lower.
And
Paddle and FastSpring take their own cut.
So the VAT will cost you money regardless (even if like me you are NOT subject to UK VAT registration and do not have to charge it)
What Paddle and FastSpring are effectively charging for, is a way to avoid the complex documentation and form filling.
Country Tax Form Tax Rate
South Korea VAT 10%
Japan Consumption Tax 8%
New Zealand GST 15%
Russia VAT 18%
Taiwan Sales Tax 5%
India GST 18%
Australia GST 10%
Norway VAT 25%
US States (where applicable) Sales Tax depending on customer location
[quote=367874:@Jeff Tullin]Paddle and FastSpring take their own cut.
So the VAT will cost you money regardless (even if like me you are NOT subject to UK VAT registration and do not have to charge it)
What Paddle and FastSpring are effectively charging for, is a way to avoid the complex documentation and form filling.[/quote]
That is why, as I am still under the threshold in France, I keep Paypal and my own delivery system, so I don’t charge VAT or be charged for it.
It’s hard not to feel angry about the total lack of support for micro business and the lack of fairness when it comes taxation system, but thank you Jeff and others for your comments.
I have decided that the provision of a physical product seems to be the most feasible solution at this stage.
Advice to other budding UK developers: check with HMRC and your accountant about your VAT liability for selling digital goods online.
You don’t want to have a tax audit which leads to paying 20% of your income or so to cover the VAT you missed to collect plus a fine.
I only sell directly to customers with VAT ID, in Germany or in a country where I don’t need to collect VAT.
All others must go through Share-IT or Fastspring.
I had that system , loved it, and could still turn it back on - if the UK leaving the EU meant we could avoid the issue again in future.
I am also under the UK VAT threshold.
But its illegal since 2015 to sell downloadable software to people in the EU unless you collect the VAT for their country of origin, not yours.
I can sell VAT free if I only send the software on a CD or USB stick.
For any EU customer you are obligated to add VAT unless the customer has a VAT ID (B2B). Otherwise it is sort of illegal what you are doing.
About PayPal:
My income easily quadrupled (yes x4 !) when I also accepted non-PayPal payments (via Paddle). A lot of people do not like PayPal.
About Paddle, Fastspring, …
Yes, they do cut a small part of the income (as PayPal does too). But I happily pay the small part so they can take care of the MOSS stuff for me. They also offer all sort of tools like Coupon codes, Stats, advertising, … you really win by using those services!
I don’t even want to think about how Brexit will effect trade with the EC and in what form any trade deals with the US will take. Im guessing the 2015 HMRC change in legislation will fade in comparison to whats down the line.
It just pays to be flexible, see new opportunities and keep on top of this stuff.
Well, I don’t expect that Brexit will change much on those rules.
Countries do not want to loose tax revenue, so I bet there will be an agreement between UK and EU, that forces each other to collect VAT for each other, just like now. Otherwise Apple and Google could go around collecting VAT…
[quote] @Michel Bujardet About PayPal:
My income quadrupled (yes x4 !) when I also accepted non-PayPal payments (via Paddle). A lot of people do not like PayPal.[/quote]
[quote=367895:@Christian Schmitz]Well, I don’t expect that Brexit will change much on those rules.
Countries do not want to loose tax revenue, so I bet there will be an agreement between UK and EU, that forces each other to collect VAT for each other, just like now. Otherwise Apple and Google could go around collecting VAT…[/quote]
I have asked Paddle about this, a long time ago, but they could not comment on this matter atm (probably because nothing has been decided yet). But they did mentioned a HQ in Ireland is a way around.
