Forum Moderators: martinibuster
I have emailed Google about whether or not Adsense money was subject to VAT now that it was coming from an Ireland bank account. I am dutch, so part of the EU, that's why I wondered. Here's the relevevant part of the email G sent me:
[qoute]... AdSense payments made by Electronic Funds Transfer generally will not be subject to a Value Added Tax (VAT) in the European Union. Although EFT payments are processed through local bank accounts throughout the world and are managed in some instances by a third party payments processor, the paying entity from a VAT standpoint is Google Inc., a U.S. legal entity. ...[/quote]
So nothing to worry about then eh?
Does Adsense make a serious contribution to your bottom line? If so and you have significant other IT & related spend in the EU becoming VAT registered may be beneficial - especially if you have business clients.
Then it doesn't matter whether Google cash becomes subject to VAT or not. Either via EFT or FedEx cheque.
Inevitably it will become a VAT item as most of the revenue you earn is probably from EU based advertisers. Brussels is unlikely to allow Google to become a distortion in the system in avoiding vat by laundering the (virtual) cash transfer via the US. When the cash pile gets high enough they will pounce...
The same was the reuslt of my tax auditing 2002 in Austria.
I was paid by an US call back company by their German representant. He transferred the money direct on my German bank account in DM.
But my work was for the US company, so no VAT problems.
The location of the advertizers is irrelevant, since you have no contractual relation with them. Your contract is with Google USA.
This means you provide advertizing services in the US, which are not subject to VAT in the EU.
Does Adsense make a serious contribution to your bottom line? If so and you have significant other IT & related spend in the EU becoming VAT registered may be beneficial - especially if you have business clients.
I am VAT registered, I was just wondering if the amount I get wired each month included VAT, but I guess it does not. That means I've got a win-win situation - I can get VAT return on Adwords, but I dont have to pay VAT on Adsense. Adsense is good for 50% of my income at the moment, and Adwords makes up 80% of my spendings, so yeah this is good news...
Inevitably it will become a VAT item as most of the revenue you earn is probably from EU based advertisers. Brussels is unlikely to allow Google to become a distortion in the system in avoiding vat by laundering the (virtual) cash transfer via the US. When the cash pile gets high enough they will pounce...
I suppose you are right, but we'll have to wait for that to happen... Right now the rules are the way they are.
Brussels is unlikely to allow Google to become a distortion in the system in avoiding vat by laundering the (virtual) cash transfer via the US. When the cash pile gets high enough they will pounce...
Google actually isn't avoiding VAT - as a US based company, there is no VAT payable. It makes no difference that the payments are being processed through local banks in the EU, the business contract is with a US company and as such, all Adsense payments are completely outside the scope of the EU VAT regulations....
whether or not Adsense money was subject to VAT now that it was coming from an Ireland bank account. I am dutch
I asked the Dutch "belastingtelefoon voor ondernemers" and got this answer: it's not subject to VAT in The Netherlands (BTW) because of article 6.2.d.2 in the Dutch VAT law ("Wet op de omzetbelasting" 1968). This is an exception for advertising services that moves the location of the service ("plaats van dienst") from the Netherlands to Google's country (now Ireland it seems).
I am VAT registered, I was just wondering if the amount I get wired each month included VAT, but I guess it does not. That means I've got a win-win situation - I can get VAT return on Adwords, but I dont have to pay VAT on Adsense.
This is nonsense. You only 'pay' VAT that you collected for your government, and you can only get VAT returned that you paid in the first place.
VAT is consumer taxes, it's always a zero sum game for a business.
I'm only this week going to open a local business account, because I just got my first check from a Canadian client. I was planning to ask for a Canadian currency check (not EFT, as so many people said theirs failed) but maybe I'll stay with US dollars.
I'm registered with Revenue Canada, but I don't have a GST account yet. I was going to apply for one soon.
This is nonsense. You only 'pay' VAT that you collected for your government, and you can only get VAT returned that you paid in the first place.
Oh really? And why did I have a positive figure sitting on my bankaccount coming from the tax office? I paid VAT in the first place, Adwords VAT. I am not 100% sure whether I can get that back, but the Adwords control panel asked me for a VAT#.
What use would they have for a VAT number if they didn't add VAT to it? And if they add it, I can ask it back, since I paid it.
I asked the Dutch "belastingtelefoon voor ondernemers" and got this answer: it's not subject to VAT in The Netherlands (BTW) because of article 6.2.d.2 in the Dutch VAT law ("Wet op de omzetbelasting" 1968). This is an exception for advertising services that moves the location of the service ("plaats van dienst") from the Netherlands to Google's country (now Ireland it seems).
Yep... That's what I thought as well... Good to hear someone else does the same thing back here in the low lands!
And why did I have a positive figure sitting on my bankaccount coming from the tax office?
If you have a positive VAT balance, you're committing fraud and you need to talk to an accountant.
Sometimes you pay VAT, and you can get it reimbursed. In some cases you're required to collect VAT, and you hand it over to the tax office. It's a zero sum game.
So what's this good for? It's a consumer tax. The consumer pays VAT and doesn't get it reimbursed. A business sometimes pays VAT for things that are considered consumption.
So who gets the positive balance? The government.
You seem to be slightly confused about the whole VAT business (granted, it's not trivial to grasp). I'd strongly recommend to consult with a competent tax advisor in your country.
If the "VAT#" Google asked you for was an european VAT-ID number, then you didn't pay any VAT to Google. The purpose of those VAT-IDs is exactly this, to short-circuit the zero-sum VAT circulation between businesses located in different EC countries. This would also mean that you signed your AdWords contract with some european Google office, not Google USA.
If that "VAT#" wasn't an european VAT-ID, then you probably selected the wrong option in the AdWords tax configuration, and ended up paying some non-EC VAT (california sales tax?). Asking your national tax office to reimburse that is clearly a futile experiment, and may result in heavy fines.
Google Adwords users in Europe are managed via Google Ireland. As such, EU Adwords users are charged VAT at the standard rate. However, if you are VAT registered, you can claim this VAT back (if you let Google know your VAT number, you won't be charged VAT in the first place - this is allowable under current law for VAT registered businesses).
All Google Adsense agreements are set up with Google in the US. Therefore regardless of where you are based or how you receive your payment, any monies earned are completely outside the scope of the EU VAT scheme.
For the record it is perfectly possible for a business to receive a payment back from the VAT office ie. to be in credit and it certainly doesn't mean the business is committing fraud. Example: if the business is selling products that are zero-rated for VAT then it won't be collecting any VAT on its sales but it can claim back all the VAT that it pays on its purchases (assuming that the business is VAT registered of course).
For the record it is perfectly possible for a business to receive a payment back from the VAT office ie. to be in credit and it certainly doesn't mean the business is committing fraud. Example: if the business is selling products that are zero-rated for VAT then it won't be collecting any VAT on its sales but it can claim back all the VAT that it pays on its purchases (assuming that the business is VAT registered of course).
Claim back the VAT that it pays: x + -x = 0.
Claim back the VAT that it pays: x + -x = 0.
I have no wish to turn this into a VAT lesson but I think you are missing the point here. Quick example, a company sells a product that is zero-rated for VAT - baby nappies for example. It collects no VAT on its sales but it pays VAT on purchases - not to buy the nappies but for other purchases in the course of the business - petrol, vehicle leasing, purchase of capital goods etc. All of this VAT can be claimed back and since it is not collecting VAT on sales, the business has no VAT to pay to the VAT man hence it receives a cheque from the VAT office each month/quarter.
The business may receive a cheque from the VAT office each month/quarter, but only for the amount it paid as VAT in the first place.
The net result is x + -x which equals 0. There is no money to be made this way.
I agree there is no money to be made from this situation - I wasn't claiming that there was. I was merely picking up on your original comment which stated that it was not possible for a business to have an account in credit with the VAT man without committing fraud.
When it comes to taxes/VAT there is never any money to be made unless you are the tax man :-)
In Dutch
Er is geen verschil tussen EU en non EU bij DIENSTEN. Ik kan je vertellen hoe ik het moest aangeven, na uitgebreid navraag gedaan bij mijn accountant.
So.. you can PM me.
"What Google say is irrelevant. The authority is your VAT collector!"
BUT... this view is usually only done by small businesses that have yet to understand that the whole VAT issue is not 'their' money. It belongs to the taxman, i.e. your government. You are just collecting it for them. So, as a business owner you always have to look at the NET prices (i.e. without VAT). This is what is important for you. The tool you are purchasing has a net price, and this is important for you, nothing else.
Hope this helps,
-- Mark
So what is the bottom line? Do EU based advertisers have to pay VAT or not?
On Adwords payments - yes (but if you are VAT registered you can claim this back).
On Adsense receipts - no - these payments are outside the scope of the VAT scheme (at least this is the case in the UK - if you are in another EU country you should check with your local VAT office but it should be the same). Just remember that it doesn't matter which bank Google pays you through, the key point is that the overall contract is with a US based company.
Do EU based advertisers have to pay VAT or not?
That's not the question. The question is: do they have to charge VAT?
The answer is: no.
