Swedish app developers to pay VAT twice
Published: 1 Oct 11 10:11 CET | Print version
Online: http://www.thelocal.se/36472/20111001/
In a potentially huge blow to Swedish high tech companies, those selling mobile and tablet apps within the EU are set to face a double VAT (moms) hit.
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The VAT burden could end up being as much as 25 percent, making it very hard for Swedish companies to be competitive, according to developers, especially as these rules do not apply to those in other EU countries.
As a result of the charges there is a danger that uncompetitive Swedish operators will be forced either to move abroad or close down altogether, according to Tommy Palm, CEO of Fabrication Games, while Per Strömbäck who is spokesperson for the computer games association believes it is time for the government to step in and help.
”EU rules say that anyone who sells the goods are liable to pay tax, but who is the seller? Is it the Swedish company, or is the App store? Tax Authorities in Europe say it's App store while the Swedish Tax Agency say it is the app company,” he told SR.
”We want Anders Borg (minister for finance) to put his foot down and decide that this should be an exception and that no Swedish VAT will be charged until the matter is investigated at EU level. Why should Swedish companies get hit?”,he added.
As things stand, Swedish games developers who sell via the App Store will have to pay EU VAT on the revenue from each app, then a commission to Apple of 30 percent and then an extra VAT payment to the Swedish government, making them much less competitive than others in the EU, not forced to pay VAT locally.
With the global industry said to be worth some 190 billion kronor ($28 billion) the EU is planning new directives on how electronic services are taxed in 2015.
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The tax should only be payed in the country of purchase. This is really not an industry Sweden wants to miss out on. It's not like physical products get charged VAT twice when sold through a distributor.
First, the commission payment has nothing to do with it, unless you interpret the commission payment as an action made to a 'retail outlet', in which case it is the retail outlet that pays the final VAT. The App Co pays VAT on it's net receipt from the sale of the product to the App Store. In any interpretation of VAT rules it is clearly incorrect for the App Co to pay VAT on the 30% commission it pays the App Store, the App Store pays (or should pay) the VAT on it's re-sale of the product.
The seller is the App Store - and the proof of this is that they receive a commission for their marketing of the product. What else would you pay them for????
In UK VAT legislation in the 70's there was a special clause allowing for such a scenario as the VAT calculation on the discounted price (including after commission/sales payments) that is to say the actual net receipt price.
VAT is paid at point of sale, once and once only.
That is the law right across Europe.
Totally agree with your second and third lines.
I think, however, the issue concerns "what is the point of sale" when organised by an
online store who maybe do not collect payment directly.
VAT, No matter where the sales are made, are legally collected from the customer by Apple. Who then pay the VAT because thats part of the income of their sales. Apple make very little money if any at all (I believe on the 30% they take its something like 1-2% they actually make.)
If the Tax Office say you should pay VAT on your 70%, all you need to do is Give them the Tax Number for Apple for Different Territory. Example:
My company is NRD Studios, Based in Sweden. We sell FAMIGE at the Tier 1 Rate on the App Store at 7 SEK.
All sales through apple in the EU Are made by Apple S.a.r.l who charge VAT in the different countries. All are different amounts. After the payment of 70% to us, you only pay income tax or corporate tax depending on your legal setup.
All sales for example in the USA etc, are charged VAT or GST depending on state etc. Which apple collect again, and forward the remaining 70% to you.
Its important to note that while you sell on the App Store. and charge 7 SEK For example, you are only setting that as the price customers should see, really you are giving it to apple for less then 7 SEK, to make sales on your behalf.
If the Tax Office give you a hard time, you need to state that Customers are legally obliged to pay the VAT at point of Sale. Which Apple is the Seller. The fact it says your name on the receipt is irrelevant as all the payments, processes and point of purchase is through Apple. Apples agreement states they collect VAT at point of sale. Hope this helps people.
Beautifully clear.
So your argument is that neither do you. if the tax office don't know the rules its impossible for you to as well.
Either way, they are not gona make me slap 50% (2 x 25%) VAT sales on people in Sweden or any country for that matter.
Apple keeps all 30% of the sale as tax is applied on the value of the item at which point Apple takes its 30% share.
Apple then pay taxes as any normal company would based on their income over the year including hardware, iTunes, AppStore etc.
errrm, can you run that first sentence by me again please. It reads likes it's from The Hitchhikers Guide to Galactic VAT.
Apple do collect 30% of the net sales. But it also states that "Where ever there is a need to apply any sales, vat, value, state/country sales tax on the sale of the application, apple will apply that amount and withhold it and pay it to the relevant authorities"
Bahamas or Norfolk island would be a good place!
make your apps in sweden then ftp them to your subsidiary office who then has them marketed from the remote office and then funnels the money back !
Applause to your initiative :)
But the issue is not with Income Tax. It is VAT, which is irregardless of location sadly.
Certainly setting up in the Bahamas or a place like that would mean you pay less income tax or corporate tax. But VAT is tax issued and collected at the point of sale.
All my sales in Sweden through Apple incur the 25% VAT Charge. The ones in the UK 17.5 Etc. Really the whole situation is Tax Office thinking you should pay twice which is nothing short of ridiculous and a con. No matter what they say, they won't be getting any VAT from my company on any sales through any agent, reseller or commissioner. I have written this issue to few authorities about this.
The end of the story is. that they can't ask for second rounds of VAT from you. You have paid it "effectively" through Apple. If they don't like it, then they have to take the issue up with Apple. And we all know who would win that battle.
Through my experience with the tax office here and in the uk. They hardly know even the most basic rules, let alone about the whole developer rules with Apple.
If anyone has any questions or needs help just drop me a email at robertmizen@me.com
Actually the current general rate of VAT in the UK is 20%. Unless you're selling children's car seats or sanitary wear in which case it is 5% or food, books/magazines, children's clothes in which case it is 0%. There are other things that the UK has deemed exempt from VAT but as software isn't one such it doesn't matter. There's a full list over at the relevant web site for HM Revenue and Customs.
This is not about what is exempt or not. this is about paying it twice.