VAT and Content of Affiliate Income

Does it matter what EU affiliates sell?

[Spanish Fiestas]

I am based in the EU and currently in dispute with my tax advisor over which affiliate income is liable for VAT (sales tax).

We agree that if I sell any product or service based in the US which is processed by Commission Junction then the payment I receive from CJ is not liable for tax.

However, he believes that if any of the affiliate sales made through CJ originate from a EU supplier then they are subject to VAT.

Similarly, with regard to hotel room sales through a US company (eg hotels.com), he says that any commission from hotel rooms booked in European hotels are subject to VAT whereas if they are outside the EU they are not liable.

I agree that commission from EU companies such as tradedoubler.co.uk are subject to VAT. However, I am under the impression that I am working with US companies (CJ and hotels.com) who pay non-VAT commissions.

Affiliate marketing is an unknown concept here in Spain so it's no surprise that the situation has become so complex. He seems to be looking for clarification of the relationship between CJ and the merchants they represent (ie. CJ does not own these companies but merely promotes them).

If I am right (?) how would you explain the situation to him?

Thanks.

[Sanenet]

Now the way I play it is if the company that pays me the cheque is not based in Spain (excepting Canaries, they aren't subject to IVA), then no IVA is applied.

At least, that's what my accountant put on my last few tax forms, and nobodys complained yet.

[Sanenet]

BTW, if you're running a company behind your website, you need to put the company details on the frontpage. i.e., "Spanish Fiestas S.L.", CIF, registered address, and the inscritura mercantil.

[bird]

However, he believes that if any of the affiliate sales made through CJ originate from a EU supplier then they are subject to VAT.

If your contract partner is located in the EC, then the income (technically for advertizing services) was generated within the EC. That means you need to add VAT to it or if both you and the supplier have a VAT-ID number and the supplier is located in a different country than you are, then a simplified declaration is possible, and no VAT money needs to be actually moved around. It is important to note that both VAT-ID numbers need to be present on the invoice, and both sides need to file such a declaration.

If your contract partner is CJ, then you provide services to them in the US, and no VAT is due. This assumes that you have no contractual relation with the actual supplier, which I believe to be the case if you go through CJ.