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bigduckontax
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 897
Experience:  FCCA FCMA CGMA ACIS
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Hi, I am an app developer based in the UK. I will be looking

Customer Question

Hi,


 


I am an app developer based in the UK. I will be looking to sell my app on both Apple and Android markets. The android market structure is such that, I as the app developer am the seller of the app, to the purchasers of the app who may live abroad (both Europe and globally). As a UK resident and a business incorporated in the UK, do I have an obligation to pay VAT/Sales tax to the tax collection authority of the country, in which my app is sold?


 


 


For more detail please see below links:


 


http://www.taxtrends.org/2012/09/mobile-apps-developement-and-vat.html


(Does this link imply that, no VAT has to be paid for sales through the Apple store?)


 


 


https://support.google.com/googleplay/android-developer/answer/138000?hl=en


 


Many thanks for your help in advance.

Submitted: 10 months ago.
Category: UK Tax
Expert:  bigduckontax replied 10 months ago.
Hello, I'm Keith and happy to help you with your question.

Your business situation is simple. If you sell outside the UK it is an export, a zero rated supply in VAT language. You should, if you have not done already, register your business for VAT. This may be difficult if your turnover is under the annual VAT level, but if you explain that you are in an exporting business the need to register is obvious to the VATman! You then raise invoices against payers with the VAT at zero rate to support your own accounts. You can reclaim any VAT charged on items for your business in the normal manner through your VAT return. You can even backdate transactions before your registration for a period too. There may be a good reclaim there!

There is no obligation for a UK based business to be involved in any other country's tax regimes. That's a problem for the purchaser.
Expert:  bigduckontax replied 10 months ago.
Just a small point which may or may not be relevant; the Channel Islands and the Isle of Man are not part of the UK for VAT purposes.
Customer: replied 10 months ago.

Hi Keith,


 


Please see the below link.


 


http://audible-uk.custhelp.com/app/answers/detail/a_id/4093


 


 


It is of a company that provides a similar service (Electronic services) has made a distinction, between:


- Selling in UK (20% VAT)


- Selling in Europe (20% VAT)


- Selling in the rest of the world (0% VAT)


- Selling in Norway/Iceland (Local VAT rates)


 


Could you please confirm that the tax rates in the bracket are correct for each region in the above?


 


Anything else I need to consider?


 


Many thanks for your help


 


Usman

Expert:  bigduckontax replied 10 months ago.
I know that sales to the EU seem complicated, but actually they are not. As far as selling from the UK, where your company is based, is concerned your company should raise invoices at a standard rated (20%). All the others are zero rated supplies and invoiced at 0% VAT.
Expert:  bigduckontax replied 10 months ago.
Just noticed a tiny error in my last answer. It should read:

I know that sales to the EU seem complicated, but actually they are not. As far as selling from the UK, where your company is based, is concerned your company should raise invoices at a standard rated (20%) for sales to UK customers. All the others are zero rated supplies and invoiced at 0% VAT.
Expert:  bigduckontax replied 10 months ago.
HMRC advise that, in respect of electronically supplied services,:

Under the rules in force until 1 July 2003, most electronically supplied services, including digitised products, and all radio and TV broadcasting services, were subject to VAT in the country where the supplier belongs. That meant UK businesses were required to charge UK VAT on those services to all their customers, irrespective of their customer’s location. Similarly, businesses in other Member States were required to charge VAT at their local rate. However, non-EU businesses were not required to charge EU VAT on supplies to EU customers. The changes removed this distortion of competition so that EU and non-EU businesses are taxed in a similar way. audible.co.uk would appear to either be in error or, more likely, have failed to update their website.
Customer: replied 10 months ago.
Okay thanks - so in summary just to confirm, 20% VAT should be charged on all app sales irrespective of where the customer is located and the VAT collected will be paid to HMRC?

Many thanks

Usman
Expert:  bigduckontax replied 10 months ago.
No! I fear my last post is causing some confusion as it actually gives the original position and the changes following an international agreement.

VAT should be charged at 20% on app sales to UK based customers.

Sales of apps to customers outside the UK, that includes the Channel Islands and the isle of Man, are zero rated for VAT.

All VAT collected should be paid over to HMRC quarterly less the VAT on inputs used in the business (eg stationery, phone calls etc).
Customer: replied 10 months ago.

Okay thanks for the guidance on this. It is upon this advice, I will charge 20% VAT on app sold in UK, but no where else.

 

However, I am not sure if you received the previous message, but is it possible for you to comment on the below E&Y document on VAT rates, which on page 330, speaks of Iceland's rules on electronic services?

 

http://www.ey.com/Publication/vwLUAssets/2013-worldwide-VAT-GST-and-sales-tax-guide/$FILE/2013-worldwide-VAT-GST-and-sales-tax-guide.pdf

 

I just want to be 100% sure that the above position (in the case of Iceland) does not affect me at all.

 

Many thanks

Expert:  bigduckontax replied 10 months ago.

With respect, what Iceland does is an irrelevance. Iceland is outside the EU and thus supplies to that area are zero rated. Were it in the EU it would still be zero rated as I explained earlier. You are not affected at all.

bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 897
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other UK Tax Specialists are ready to help you
Customer: replied 10 months ago.

Okay thanks very much Keith

Expert:  bigduckontax replied 10 months ago.
Glad to help!

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