Is this not just a scam to give a further 17 per cent to the US company? Or how does the tax wander back to HM Treasury? I suspect it does not, but stays in the US to the benefit of the company's shareholders.
MM
When has it ever gone to the US?
The same way that the VAT you pay to a UK company finds it way to Revenue and Customs. They fill in their VAT return and pay by cheque or EFT.
By the same token how do you know that VAT you pay in the UK goes to Revenue and Customs? In many cases it does not.
I pay for software online. It is delivered online. The company delivering it is in the US (or Australia, or Outer Mongolia, or wherever). At what point is the VAT component that I have paid to the US company transferred to HM Treasury? If it is not so transferred, then the "tax" is merely a way of increasing the price of the goods for the benefit of the foreign business.
MM
There are apparently new regulations in place, as of fairly recently, which oblige[*] foreign (non-EU) regular importers of goods into the EU to charge VAT to EU customers and register with the relevant national VAT authority. This is supposed to simplify the procedure whereby VAT would otherwise be charged when the goods come into the country, not to mention to close the loophole in the case of intangible goods and services.
Does that mean when I order things eg off ebay from HK that I /won't/ get charge VAT, just duty? How would they know whether the sender is registered/charging VAT or not?
The sender will, if registered, be able to supply you with a VAT invoice which will prove to customs that VAT has already been paid.
Do you not detect a certain whiff of ordure around this issue? I certainly do! Supposing, for example, that the software company is only a small outfit and is VAT exempt (or whatever the equivalent is of that status). The extra few quid I pay them supposedly to cover VAT as a European purchaser goes where, exactly? Plus, there is also the question that not all EU VAT rates are harmonised. Germany is due to raise its VAT to 19% soon. What rate are companies in the States liable to levy on European sales? I sense a potential scam gathering steam...
MM
Then they will not charge VAT.
If they don't charge VAT, this question does not arise. Are you suggesting they would *pretend* they were registered, and would purport to charge you VAT unnecessarily, to go straight into their profits? In that case why would they not simply charge you a higher price straight up?
The rate applicable in the country to which the goods are being sent. If intangible, i.e. if they're not sent on a physical medium such as CD, but transmitted online, then it's presumably the country from which the stuff is being ordered. You would have to tell them your address, which is no doubt verified against your credit card. Otherwise you could tell them anything, e.g. that you live in Portugal, or whatever country has the lowest VAT rate.
One VERY big US tech firm I worked for a few years ago had some very bizarre accounting rules with regards sold in the UK. They convinced themselves they were on some kind of deal with HM Government - am more convinced that they were just incredibly arrogant - and their price list for internal customers was something to believe - i.e. what the stuff was made for against what you and I paid for it. To this day I am not sure what was going on other than I became convinced that the UK taxman was not getting all he/we should. I suspect this is common with US tech companies over here?
If they are VAT exempt, they shouldn't charge you VAT. If you are concerned, ask for their VAT number and check with HMRC.
The rate in the country they are selling to.
Luxembourg has the lowest rate.
Alternatively, you could say you live outside the EU and pay nothing. But that is tax evasion, and you could suffer very severe penalties if caught.
So any US-based business has to apply to HM Inland Revenue and Customs for VAT registration before it may sell to UK customers, yes?
MM
No. Obviously low-volume traders would not. I presume that this would only be necessary if they supplied more than £60k worth of stuff to the UK/EU per year, or some such similar threshold.
Is it actually not really the case that no US business has a blessed clue what would be meant by "VAT registration"?
MM
They have to apply to a VAT office in an EU country of their choice. That registration will cover sales to all EU countries. They tell that VAT office how much of the VAT relates to each country and they pass it on to the appropriate VAT offices.
So I should, in fact, be able to request confirmation of their VAT registration? I do not mind paying VAT as long as it wanders back to HM treasury somehow. What I would object to is some foreign scrotes using it as an excuse to cream off more profit. Given the shambles that is the current British government I very much doubt whether any checks are being made. Ergo there is a strong likelihood that UK customers are vulnerable to being ripped off.
MM
IMHO unlikely, since by raising their prices by 17.5% they are becoming less competitive compared to other cos that arent charging that. AIUI, what is happening is that for v large cos, or cos with a substantial UK or Euro presence, C&E are putting the frightneners on. If its just, say a US only co, or a HK only co, they have no leverage to force the company to charge VAT. Dont forget the expense to the company of having to change its software to cope with this, esp if it didnt do any tax collection before, I'm sure the vast majority dont want to do it.
entirely hypothetically of course, there are two ways of not being asked for the tax, depending upon how the company distinguishes you at being of UK origin. If its looking at your address, then if you change it to a US address, it wont charge you (address doesnt matter for downloading software!). OTOH if they distinguish on whether your credit card is deemed to be a UK one, then you are probably stuffed unless you ahvea US one.
Not sure about PayPal and whether that might be a way round that, my mate hasnt tried , (yet), for example, registering with a US address with a UK credit card, to be charged in dollars, with a 'US' paypal account,he doesn't even know if thats possible.
Yes. Ask them what their VAT number is, and which country they are registered in, and then check with the VAT office in that country to see if that registration is valid and belongs to that supplier.
I suspect an American company will most often chose to register in either the UK or Ireland so that they can deal with people who speak English.
They register for VAT with an EU country of their choice. Lets suppose they chose Ireland.
Every three months, they send a return to the Irish Revenue Commissioners. This gives the total sales to each of the 25 EU countries, and the VAT collected on them. They also send them a payment for the total VAT due.
The Irish Revenue Commissioners then keep the Irish bit of the payment for themselves and pass the rest of the money to the countries concerned. Presumably there is some sort of arrangement whereby if they owe HMRC some money and HMRC owe them money collected from another trader, they net them off and pay the balance over.
Presumably the Irish Revenue Commissioners also get to keep a bit of the money they collect on behalf of other countries to cover their expenses in collecting it.
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