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Question on accounting for the google checks.

my account insists that I should be sending a bill to google.

     
7:12 am on Jul 22, 2005 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



Hi all,

I am looking to see how other people deal with this.

I have been in the adsense program 3 months now. I got my first check a couple of days ago.

I then realised that I am using a business account to recieve the check into. That means (here in Spain) that I need to send a bill for my services to Google (they are paying me, when I pay them I get a bill from them).

What do others do with these google checks when going into a business account and not a personal account?

7:27 am on Jul 22, 2005 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



I create an invoice in my accounting software (QuickBooks), but I don't actually send it to them.

I think the main reason I started doing this is that it makes it easier to categorize the income. I enter the number of impressions as the "Quantity" and the amount paid as the total. The software fills in the "Rate/Unit Price" which is the effective CPM. Then I can easily compare it with FastClick, Tribal Fusion, and other earnings.

9:49 am on Jul 22, 2005 (gmt 0)

10+ Year Member



Like john_k, I create an invoice in my accounting software, but I don't actually send it to them.

I'm in the EU too (Netherlands) and we're required to send invoices by VAT legislation, but that doesn't apply to customers of advertizing services located in the US. We don't have to charge VAT and don't have to send an invoice, therefore. Doublecheck your assumption.

10:40 am on Jul 22, 2005 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



Hi Arrowman,

so if the if the service provider is based in the USA you do not have to send a bill, but by making a bill out, and not sending it, you get to discount the vat.

ok i think i can understand that (please feel free to correct me).

but by not actually sending the bill are you not violating local tax law?

10:48 am on Jul 22, 2005 (gmt 0)

WebmasterWorld Senior Member vincevincevince is a WebmasterWorld Top Contributor of All Time 10+ Year Member



and not sending it, you get to discount the vat.

So far as I'm aware Google Adsense payments do not include VAT, please correct me if I'm wrong.

10:57 am on Jul 22, 2005 (gmt 0)

10+ Year Member



there is no VAT on adsense payments.

If you raise the bill and keep a record then who on earth knows it hasn't been sent?

So i don't see what the problem is has long as you actually raise it.

11:04 am on Jul 22, 2005 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



The problem is that under local tax laws in most EU countries, adsense payments are assumed to be payment for services rendered (in this case, adverts on your site). So, the tax office takes 16% as VAT (IVA), and requires you to issue an invoice.

If you issue the invoice, and you have a VAT surplus in your company, then you can offset that 16% VAT against your surplus, thus claiming it back.

11:13 am on Jul 22, 2005 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



exactly.

but by declaring (giving to the tax man) a bill that you do not send you are in violation of tax law.

ok so the probability of being caught is very small.

if i start to do this i will always have a vat rebate in my favor (if the adsense checks stay hte size they are).

12:06 pm on Jul 22, 2005 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



On similar subject:

Don't know if this applies to EU but has anyone investigated whether adsense income can be considered 'passive' income. This might be similar to when you write a book or a song and then subsequently get income from the sales and royalties.

This might be income at a lower tax rate?

4:21 pm on Jul 22, 2005 (gmt 0)

10+ Year Member



but by making a bill out, and not sending it, you get to discount the vat.

No, like I said, we're not required to charge VAT on Adsense earnings. I enter the invoice in my accounting software to add the Adsense earnings to my company's turnover.

but by not actually sending the bill are you not violating local tax law?

No, sending a bill is mandatory only for VAT invoices.

The problem is that under local tax laws in most EU countries, adsense payments are assumed to be payment for services rendered (in this case, adverts on your site). So, the tax office takes 16% as VAT (IVA), and requires you to issue an invoice.

Although I can't speak for other EU countries, I don't think this is correct. There's a whole bunch of rules about which services are and are not subject to VAT, and this is based on common EU directives these days.

There are exceptions for services rendered outside the EU and specific exceptions for advertisement services. IIRC, the exception for advertisement services makes the US the "place of service" ("location of service"?) and some other rule says you're not required to charge VAT for services rendered in the US.

Most tax handbooks don't even cover this, and I got some help from my local tax office, that pointed me to the specific exception for advertisement services in the VAT law.

Again, I can't speak for other EU countries, so check with your accountant or tax office. But do insist they check deep down into the exceptions on exceptions on exceptions.

And if all of this is different in your case, and you are required to charge VAT, you should charge it and Google should pay it and get it reimbursed. That's how VAT works.

4:26 pm on Jul 22, 2005 (gmt 0)

WebmasterWorld Senior Member vincevincevince is a WebmasterWorld Top Contributor of All Time 10+ Year Member



So, the tax office takes 16% as VAT (IVA), and requires you to issue an invoice.

Although I can't speak for other EU countries, I don't think this is correct.

What I understand, and please check for yourself, from the Inland Revenue is that there is no VAT on Adsense, there's nothing you can reclaim, or deduct etc.

And what I believe from my understanding of VAT is that if VAT were due Google would have to pay you your Adsense with VAT on top, and you'd then be paying that VAT portion to the tax office. (The VAT is or would be in addition to your Adsense earnings, not a part of it). This is the way Tradedoubler works, as I remember.

8:41 pm on Jul 22, 2005 (gmt 0)

10+ Year Member



I'm in Malta. I create the invoice and send them to the rubbish bin. :)
But I think it is quite important to use personal account otherwise, the tax will be charged.
9:46 pm on Jul 23, 2005 (gmt 0)

10+ Year Member



I'm in Malta. [...] use personal account otherwise, the tax will be charged.

Hey, what's the weather like in Malta?

9:52 pm on Jul 23, 2005 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



Although I can't speak for other EU countries, I don't think this is correct. There's a whole bunch of rules about which services are and are not subject to VAT, and this is based on common EU directives these days.

While I admit that I didn't pursue this too deeply (I have always had to pay VAT, so getting some back was useful) thats the way my Spanish accountants advised me to handle it after checking with Hacienda.

10:13 am on Jul 24, 2005 (gmt 0)

WebmasterWorld Senior Member 10+ Year Member



so sananet what are you doing in spain,

i am based in la coruņa, spain.

1:11 am on Jul 25, 2005 (gmt 0)

10+ Year Member



I create an invoice in my accounting software (QuickBooks), but I don't actually send it to them.

I do the same, but use a sales receipt instead of an invoice. A sales receipt is used where you receive full payment at the time of the sale. It's not much different to an invoice but it's one 'step' instead of two i.e. an invoice needs to be generated and then you need to enter the payment.

 

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