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VAT to rise on Google's paid placements

     
9:49 pm on Jan 9, 2004 (gmt 0)

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[internet-magazine.com...]

More google news

11:59 pm on Jan 9, 2004 (gmt 0)

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How people in the UK can be made to pay tax in Ireland I'll never know. So we pay VAT to a goverment in a different country and then we claim it back. Also Ireland uses the Euro not Pound Sterling so I guess you loose on the exchange rate twice.

"Google says it is investigating alternative methods of payment"

Ever heard of a bank-wire?

11:01 am on Jan 11, 2004 (gmt 0)

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People who pay VAT (like me) is in disadvantage, because they pay almost 20% more than some of their competition, just because they are in a different country... this is really bad...
1:08 pm on Jan 11, 2004 (gmt 0)

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The Irish rate is 21% not 19% ...
6:43 pm on Jan 11, 2004 (gmt 0)

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And in Sweden is 25% (or at least it was last year) :)
Here in Portugal its 19%, and I already think that its a lot... for a bad economy like ours!
When VAT raised from 17% to 19%, VAT revenues lowered, because the economy "didnt liked that".
But 2 years later they maintain the 19%. It would be so easy to give a boost to the economy, and raise VAT revenues again, but those politicians dont seem to see that... again, who is a webmaster to argue about that...

I just know what I see...

6:56 pm on Jan 11, 2004 (gmt 0)

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Google is applying VAT to AdWords since July 1st, isn't it?

[adwords.google.com...]

"All AdWords accounts with EU billing addresses will be subject to VAT after the new rules take effect as of July the 1st 2003"

7:10 pm on Jan 11, 2004 (gmt 0)

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Another non-issue for VAT registered businesses - just as it was the first time around in July. Most businesses didn't have to pay VAT then and won't now.

The good news is that VAT registered businesses will get 21% more bang for their buck over those who aren't registered. Suits me just fine!

9:05 pm on Jan 11, 2004 (gmt 0)

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Germany has 16% and I thought that was a lot ;)
9:21 am on Jan 12, 2004 (gmt 0)

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Hi there!

Yes Im paying VAT for Adwords, for a long time. And in my tax revenue model, I dont "mess" with VAT, so when I pay "Googles VAT", its just money down the drain...

10:08 am on Jan 12, 2004 (gmt 0)

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[QUOTE]People who pay VAT (like me) is in disadvantage, because they pay almost 20% more than some of their competition, just because they are in a different country... this is really bad... [QUOTE]

That isn't really true because you can also take an extra 17.5% on B2C sales that a VAT registered company has to pay to the VAT man.

So if I sell something for 235.00, I only get 200. If it costs 117.50, I only pay 100.

So for me: (235-35)-(117.50-17.50) = 100 Profit, 17.50 to the VAT man.

For you: (235)-(117.50) = 117.50 Profit.

If you are so worried about it, then become VAT registered.

12:07 pm on Jan 12, 2004 (gmt 0)

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Depending on how much you spend on Adwords it may be worth setting up a company just to handle the ads.

Your VAT registered company name is Widget Ltd. You set up Widget Ads Ltd that serves as an ad handling company. WAL buys ads from Google to advertise WL. WAL invoices WL every month for its services. WL does not advertise with Google directly. Provided WAL's turnover is less than the VAT limit it would not need to charge WL any VAT. There would of course be the extra cost of submitting accounts for a second company but considering it has only 12 sales invoices and approximately the same number of purchase invoices that shouldn't be too onerous. There will be the 15 a year company house fees and one or two other incidentals but they wouldn't cost anywhere near what the VAT would.

Or is there a flaw in this plan?

12:10 pm on Jan 12, 2004 (gmt 0)

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Oh, I've just passed 0.5K postings! :-)

All I've got to do now is make some sensible ones ;-)

1:05 pm on Jan 12, 2004 (gmt 0)

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<Or is there a flaw in this plan?

TAX, you might just alert the Taxman, have you considered paying tax and not just claiming VAT back?

1:17 pm on Jan 12, 2004 (gmt 0)

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Based on other postings here I'm assuming that WAL won't pay VAT to Google as it is not a VAT registered company.
(contrary to how VAT normally works within the UK where everyone pays VAT and those who are VAT regd claim the input tax back)

WAL will file returns every year showing 0 profits. No profits, no corporation tax liabilities. The tax man won't like it but I can't see how it's not a valid, legal setup.

Question is - is there any benefit to doing this at all?

[edited by: Macro at 1:40 pm (utc) on Jan. 12, 2004]

1:32 pm on Jan 12, 2004 (gmt 0)

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How people in the UK can be made to pay tax in Ireland I'll never know.

Because both are in the EU. Products and services bought by a resident (tax-payer) of one EU state from a provider in another EU state are liable for VAT at the rate applicable in the country of purchase.

I'm assuming that WAL won't pay VAT to Google as it is not a VAT registered company.

Yep, they will pay VAT, but will be unable to claim it back. If VAT regisetered you can claim it back, if not you just wave goodbye to it. So basically it is just a bookkeeping/tax returns issue, a pain but not an increase in the charge.

1:55 pm on Jan 12, 2004 (gmt 0)

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I buy AdWords in Dollars and Cents.
Vat will be paid in Ireland in Euro's
I claim it back in Pound Sterling

One thing is for sure, I will lose out on the exchange. Its a good thing the dollar is so weak.

2:01 pm on Jan 12, 2004 (gmt 0)

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abbeyvet, I understand that businesses act as unpaid tax collectors and that you reclaim input tax paid on purchases. I've filled out a few hundred VAT returns in my time.... but I am no expert. People have been saying in this thread that if you are not VAT registerd you won't need to pay VAT on Adwords.
2:02 pm on Jan 12, 2004 (gmt 0)

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Hi PCInk!

The problem is that I dont sell anything!
So if my competitor from "Country without Vat" wants to "buy x visitors", he pays $100.
If I want to buy the same visitors, Ill pay $119.
A guy from Sweden will pay $125.

Just this simple... Ill pay more $19 for the same service.
But Im used to injustices, and no I dont want to deal with the VAT man. That only brings headaches...

2:04 pm on Jan 12, 2004 (gmt 0)

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Im not VAT registered, and I do pay VAT to Google and to lots of other companies, and of course I cant get that money back.
This is how it works, at least in my country.
If you are a VAT collector, you can make your math. If not, say bye bye to that money.
2:24 pm on Jan 12, 2004 (gmt 0)

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The problem is that I dont sell anything!

Brilliant! Then get registered for VAT. You can register voluntarily even if you don't have the minimum turnover for cumpulsory registration.

3:31 pm on Jan 12, 2004 (gmt 0)

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I agree with abbeyvet. Unless you have adwords solely in the UK you are liable for VAT in any country your keywords are shown. This is why google has gone euro-ised. My company is in the Canaries and we are exempt from VAT, but we have paid VAT for both overture and google adwords because our ads are shown europe wide.

The good news for me is that everytime I order from Amazon I can claim back 17.5% on all my DVD orders at the end of the year.

3:35 pm on Jan 12, 2004 (gmt 0)

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"Country without Vat"

Can someone give me an example,

I am guessing that VAT is the same as Sales Tax in the US, is that right. If so is anyone in the States paying anything like the rates in Euroland?

3:39 pm on Jan 12, 2004 (gmt 0)

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I think that in my country I have a minimum to pay, even on months that I dont collect any.
And the money Ill save doesnt pay up the headaches...
12:25 am on Jan 13, 2004 (gmt 0)

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VAT it is something different than Sales Tax. See more ditails here: [eurunion.org...]

Someone here wrote"
"Because both are in the EU. Products and services bought by a resident (tax-payer) of one EU state from a provider in another EU state are liable for VAT at the rate applicable in the country of purchase."

I think, that it is different:
{taken from site mentioned above)

"For individuals, VAT liability was incurred "by transactions," as it is under a national system. This meant that individuals could purchase goods and pay VAT on the goods in a Member State other than their own (i.e., at origin)" BUT
"While private individuals have benefited from origin-based VAT, companies have been subject to various destination-based methods. Though tax controls at frontiers have been abolished, businesses are required to maintain detailed records of purchases from, and sales to, other Member States, and the system is policed by administrative cooperation between Member States tax authorities." AND

"Non-EU companies that export to the EU are taxed at import"

Any coments?

2:04 am on Jan 13, 2004 (gmt 0)

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see also this:
[hmce.gov.uk...]
9:24 am on Jan 16, 2004 (gmt 0)

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If my company is in the EU and I buy/import from the US, do I have to pay US VAT?

And since I'm already paying VAT in the EU for the services I sell (I'm VAT registered), can I deduce my paid US VAT from the VAT I would have to pay on selling my services?

Complicated. PHP is easier :)

9:37 am on Jan 16, 2004 (gmt 0)

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Normally you pay the VAT % of your own country.
For example, I bought some stuff from UK Amazon, and they charged me my portuguese VAT % (19%) not UKs VAT (17.5%).
You usually pay the VAT % of the country you are living in, not the % of the country that is sending you the product.
10:02 am on Jan 16, 2004 (gmt 0)

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> You usually pay the VAT % of the country you are living in, not the % of the country that is sending you the product.

This is how it has been in the past, but VAT has been changing, you may need to check if this is still true. (This is why imported cars into the UK are cheaper than buying a UK car. Manufacturers tried to set the price the same in EU countries, including VAT. But if you buy one from Holland or Belgium, where they pay 50% VAT on new cars, and end user can claim the 50% back and then pay the 10% new car tax plus 17.5% VAT in the UK)

> But Im used to injustices, and no I dont want to deal with the VAT man. That only brings headaches...

People always think that this is going to be difficult - like a UK tax return, page after page after page. But it is not.

There are 9 boxes to fill in. Two relate to supplying and buying from other EU countries. Two are for total sales and total purchases and a further four are the total VAT for each of the totals above. The last is a simple subtraction.

Eg)

Sales: 100,000
Purchases: 50,000
VAT on sales: 17,500
VAT on purchases: 8,750
(Same four boxes for EU purchases)
(Last box tells you which boxes to subtract, assuming EU are all zero, box would be 17,500 - 8,750 = 8,750)

That's it!

(This Inland Revenue complicate the issue, VAT is like child's play by comparison!)

11:32 am on Jan 16, 2004 (gmt 0)

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> Sales: 100,000
Purchases: 50,000
VAT on sales: 17,500
VAT on purchases: 8,750
(Same four boxes for EU purchases)
(Last box tells you which boxes to subtract, assuming EU are all zero, box would be 17,500 - 8,750 = 8,750)

More complicated:

Sales: 100,000 EUR (in Europe)
Purchases: 100,000 $ (from US)

Assumptions:
1 EUR = 1 $
VAT Europe = VAT US

Can I deduct my US purchases from my Europe sales so that I don't have to pay VAT at all?

11:46 am on Jan 16, 2004 (gmt 0)

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As the US does not charge VAT and is not part of the EU - the simple answer is no.

The more complicated answer is that imports from the US into the EU should be charged VAT at point of entry, this is reclaimable. Certain software downloads also may be VATable and that can be reclaimed.

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