Does VAT apply to Google AdWords?
Value added tax (VAT) will not apply to your AdWords charges until July the 1st 2003.In response to the emerging electronic business environment, European Union (EU) member states are modifying the rules for applying VAT to certain digital services, including web advertising. When such services are consumed within the EU, they will be subject to VAT. Therefore, all AdWords accounts with EU billing addresses will be subject to VAT after the new rules take effect on July the 1st 2003.
How are AdWords advertisers affected by VAT?
Starting July the 1st 2003, AdWords accounts with billing addresses within the European Union (EU) will be subject to VAT. If your account is affected, you will have the option of providing us with a valid VAT registration number and self-assessing your VAT. If you do not have a VAT registration number, or if you do not submit your VAT registration number to us by June the 30th 2003, your invoices will reflect the additional VAT charges at your EU member country rate which will have been determined by your account's billing address.What do I need to do as a result of the new VAT rules?
You do not need to worry about VAT if you have a valid AdWords billing address outside of the European Union (EU). If your AdWords billing address is in the EU, we'll automatically add VAT to your AdWords invoices, starting July the 1st 2003, unless you supply us with a valid VAT registration number.New advertisers are being asked to provide VAT information during the account set-up process. If you're a current advertiser, and already registered for VAT in an EU member state, please follow the steps below to enter your VAT registration number. This will enable you to self-assess VAT for AdWords. If you do not update this information, we'll start adding VAT to your AdWords invoices as of July the 1st 2003 in accordance with the new EU rules.
To provide Google with your valid VAT registration number, please follow these steps:
1. Log in to your AdWords account.
2. Select the appropriate VAT option at the top of the page.
3. Enter your VAT registration number in the VAT field.
4. Click Submit.
[adwords.google.com...]
Shak
(thanks to Jamie for this information, who I believe was at PubCon)
I don't think this info has come up before.
Thanks
Chris
What will a 10 cent click cost with vat included?
UK is 17.5% so a 10p click will cost 11.75p
however if you are VAT registered, you just claim it back.
in other words this is going to hit the small player quite hard. but as Webdiversity says "only to be expected" and everyone else been doing it for some time.
Shak
Dave
Time to consider registration ;)
Obviously this wouldn't affect their actual profits (17.5% is the same amount whether you pay it to Google or the VAT man) but as they will have to pay VAT anyway it could provide a nice feeling inside to be able to claim it back without actually having collected any to cover it.
So they can shove yet another Tax down the UK taxpayers throat
Gonna have to look into this.
As an Internet based business, you generally charge people in your own currency, and follow your own local taxation laws regarding weather you charge VAT at source or not.
As a UK based company, if I purchase digital goods from, say, Brazil, and consume them in the EU, then _I_ have to pay the VAT, it is not up to the Brazilian company to worry about my local taxation laws.
Look at it from Google's point of view. Do they now have to manage different taxation rules at THEIR billing system to account for EU, Asian, Australian TAX laws?
It might be to do with them having financial operation in the UK/EU, in which case they can start billing me in GBP.
Confused? You should be.
I am not clear why Google need to ask for your Vat number. If I buy widgets online ( or a cooker, or a computer or...), then I have to pay Vat, but I am not asked, nor do I expect to be asked my Vat number
It is only if the vendor is charging people Vat, as in this case Google is the seller, that the purchaser needs to know Googles Vat number (the purchaser needs it for their accounts in case Vat inspector needs it)
I sell widgets every day, I have no need or right to demand customers Vat number, so why does Google need to know yours, they are the seller, not the buyer!
For us it will make life slightly easier. We've not been charging VAT on traffic, but charging for our service, now it will be on everything, unless it's a US company. I suppose the complexity is that Google are using our billing address as to whether to charge VAT or not. I'm no tax expert, but if we work with a US client, my understanding is we don't charge VAT on the traffic, but still do on the service, because we are undertaking the service in the UK but providing it overseas. But if our billing address is UK, how will that work?
How exactly is that supposed to work?
I can sell through my website to ANYBODY that has a CREDIT CARD in ANY COUNTRY at ANY TIME.
:(
However for the non-registered, you gonna have to cough up an extra 17.5% VAT, the gravy train just stopped.
Someone definately telling Google all the little tricks of the trade these days, I hold part responsibility for going on about premium listings so much that they decide to cancel the bloody thing.
Shak
I just logged into one of our accounts for the 3rd time, and input the VAT number for the 3rd time......
1) Will this affect US account customers? (I would rather be charged in UK Sterling, but there seems to be no option for changing over).
2) Does this mean we will get an email confirmation when they charge your card? - Legally they must as you need a VAT invoice to claim the VAT back.
Google now have to register with an EU collection office in order to sell online into the EU.
If this kind of legislation spreads it is going to make life very difficult for Internet companies with a worldwide marketplace.
No more "Buy Now" i'm afraid - you have to consider the taxation laws of your customer before you can sell to them - you might need to register for sales TAX in _their_ country.
This law has been brought in by the EU with no consideration for the speed or mechanics of trade on the Internet.
I just don't see why they can't consider the place of supply to be the suppliers country and be done with it (as it is now in the EU).
Google now have to register with an EU collection office in order to sell online into the EU.If this kind of legislation spreads it is going to make life very difficult for Internet companies with a worldwide marketplace.
No more "Buy Now" i'm afraid - you have to consider the taxation laws of your customer before you can sell to them - you might need to register for sales TAX in _their_ country.
This law has been brought in by the EU with no consideration for the speed or mechanics of trade on the Internet.
personally I think you are making a meal out of it, but thats just my opinion.
My company lawyers had previously commented a number of times, that Google better sort things out quick before they get taken to court. They were on thin ice before by NOT charging VAT and having offices in the UK dealing with UK companies.
Obviously they have been growing at a rapid rate, and with the planned HQ in Dublin, it makes sense to keep ALL tax authorities happy.
Shak
Thats not the case.
Google have made the right choice, they can always blame AOL anyhow [news.bbc.co.uk...]
Thats not the case.
It is at the moment - this is what changes on July 1st.
The AOL case is based on a different argument - that of telecommunications provision - not digital services.
I think you are getting confused. The place of supply has no bearing on VAT, its where the supplies end up. For example supplies made by a UK company to a company/person in the Channel Islands are not subject to VAT.
>The AOL case is based on a different argument
The point is this - should a non-UK company have a competitive advantadge over a UK company merely because of where they locate their servers?
I'm hopeful that the contacts I've made in the UK over the past 2 years will finally opt to sell goods and services from the USA to the USA.
We already do that and this is the area where I will be struggling with the implications. We have a US$ Google account, the "partnership" is based in the States, but because we are based in the UK and supplying a service in the UK (the management of the campaign), does the money we spend on Google (or Find What or whoever) have to be VATable because we are a UK based company. Admittedly for us it's a no brainer because we are VAT registered, but I don't know if HMCE is prepared for the onslaught of enquiries on this or not.
I spoke to HMCE a few weeks ago, specifically about Google and the correct way to charge, and this is definately a different approach than the one I was told about.
Anyone without a vat registration needs to seriously look into this with urgency if they expect to be out of pocket and reclaiming substantial sums
This whole post seem to be time warped to me. I assumed VAT was already being charged (evidently wrong!), I also assumed that almost all Google Adwords users in the EU would be VAT registered already (also seems to be a bad assumption).
I seem to remember VAT in the EU ranges from 15% to 23% depending upon location. If this is in fact a new tax levy then it is certainly going to make a difference to those that are not VAT registered. But having said that how many does that really apply to?
We spend hundreds of dollars a month on advertising via Google Adwords. Our account payments are currently made in US dollars.
Is there no way we can be exempt from the additional 17.5% surcharge? We are not VAT registered in the UK: it was hithertoo not worth the admin. headache because we are not focussed on the UK market.
What if we changed the address from our account in London to our subsiduary office in California? Could we pay with our UK credit card, yet, having a US office, not be liable for VAT?
If we used our US office instead, is there a similar charge to VAT in the United States? If not, do you know if there are any plans to introduce one in the near future?
I think it is totally unfair that we have to pay this tax, as we have no relation with the UK market and use Adwords for a US-targetted site. We are just being punished for having an office in rip-off Britain. We have already suffered huge tax increases in the UK with National Insurance, Council Tax, Congestion Charging etc. in the last few months :(
If we are forced to pay this additonal tax to Google, we will be forced to close down our account or slash our expenditure on Adwords substantially.
