So, what does this mean for me? A provider of digital services making sales as principal will need to check the VAT and other indirect taxes requirements for each country to which they sell. Subject to any thresholds which may be present in legislation, the business may have to register in multiple countries across the globe. There are likely to be slightly different classifications of what constitutes a digital service (such as the level of human intervention involved in the process) from country to country and different requirements for how to identify customer’s status – e.g. are they B2B or B2C? The way in which a customer’s location is determined, especially for businesses using payment service providers such as Stripe to collect payments will also be key in identifying where potential VAT liabilities may arise. If prices have been set without considering overseas VAT, an increase may have to be made, or future plans that are dependent on forecasted income may need to be pushed back.
The general approach by most providers is to keep the price charged the same to all customers regardless of location. Applicable indirect tax rates vary considerably (for example, 27% VAT in Hungary, 18% GST in India, 10% Consumption Tax in Japan, 7.7% VAT in Switzerland, etc.) so the view that the rates smooth themselves over in the long run is taken. Unfortunately, when selling to customers that cannot recover indirect taxes they are charged, it can be difficult to increase prices for this reason alone. What can Scrutton Bland do to help? As part of the Nexia Group, we have a proven record of ensuring clients are registered where needed and compliant with local indirect tax rules. Our dedicated VAT team would be happy to review your registration obligations on a country-by-country basis and assist with ongoing compliance and penalty mitigation, if appropriate.
UK VAT registrations and compliance are our main specialty, but we are also well versed in assisting with One-Stop-Shop registrations which may be of use for sales made in the European Union (‘EU’). Taking the Irish example from earlier, if the same supplier made sales to other EU Member States, it could create a One-Stop-Shop registration to declare VAT in each of the 27 Member States to which sales are made, rather than register individually in each one. To get in touch with our dedicated VAT team, please contact Daniel by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk *Please note, the VAT liability of e-books was changed in the UK from the 20% standard rate to the zero rate with effect from 1st May 2020
E-COMMERCE | SCRUTTON BLAND | 1 5
Made with FlippingBook Learn more on our blog