Not sure if should be paying VAT

[pezza3434]

Hi all,

I'm not currently VAT registered but will need to be very soon.

I'm a developer and sell my app on the Shopify app store. They take payment for my app (invoice their customers for it) and send me 80% as a revenue share.

Shopify is a Canadian company. They told me that they charge VAT on their invoices to Europeans but at 0% (this made no sense. I thought they just wouldn't charge VAT because they are outside of the EU). However for some strange reason they do charge VAT to customers from Ireland at 23%.

Does anyone know if I should be paying VAT on any of this?

In my research a lot of information came up about the Apple app store. For that it seems that you just don't pay VAT because Apple handles it all.

However, the difference is that Apple has a HQ in Europe I believe and when you buy an app you specifically pay a specified amount of VAT on it. Shopify seem to be just based in Canada.

Can anyone shed any light on this? Thanks, really appreciated.

 

[Mr D]

If you aren't being charged VAT then you don't pay it.
Once you do register for VAT then your business will charge relevant customers the VAT rate applicable. You collect the VAT and hand it over to HMRC or hand over what you are supposed to hand over. More than one system - flat rate or standard rate. Speak to your accountant before choosing.

 

[spidersong]

Until you know whether your turnover is within the UK or not you can't know whether you'll need to be registered or not. And to work out what's your taxable turnover you'll need to look at your contracts and work out whether you're selling your app to a Canadian company who just give you a variable return on it, or whether you're selling it to thousands of people all around the world and therefore may need to register for tax in lots of places around the world (or through what's know as MOSS), or whether the platform in Canada will deal with the VAT implications through their accounting.

For digitally delivered services and international trade you will definitely benefit from talking to an experienced accountant.

 

[STDFR33]

Depending on the nature of your sales, you may be better off registering for Vat and backdating the registration.

Youd benefit from professional, paid for advice.

 

[gpietersz]

Shopify International Limited through which all EU sales go is an Irish company, which is probably why they treat Irish companies differently.

With apps VATMOSS applies so on sales to EU consumers the rate in their home country (and the threshold for doing this is much lower than the UK VAT threshold: https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers

I think Shopify are talking about sales to VAT registered EU businesses in which case I think the buyer makes a reverse charge of VAT at their country's rate.

 

[TheCyclingProgrammer]

Hard to be sure without seeing the terms but I would imagine that Shopify handle app sales in the same way Apple and many other App Store platforms do, as an undisclosed agent. If this is the case then:

This means Shopify are acting as the principal in the sale to the end customer and are responsible for charging VAT to consumers according to wherever they are based (under VAT on digital services rules this would be wherever the customer is based) or if they support B2B sales, obtaining the customers VAT number and informing the customer that the reverse charge applies.

If we are only talking about B2B sales then that would explain why Shopify charge business customers in other EU countries no VAT (it wouldn’t be zero rated technically) as it would be outside the scope of Irish VAT (as the poster above says the company that handles EU supplies is based in Ireland) but do charge Irish businesses the standard Irish VAT rate.

Consequently for VAT purposes there’s a second supply between you and Shopify for 80% of the end sale price. The additional 20% is a markup that Spotify charge the end customer rather than a commission they charge you for.

This supply between you and Spotify would be a B2B transaction and as Spotify are based outside the U.K. it would be outside the scope of U.K. VAT.

 

[pezza3434]

Thank you all for your replies. Very very helpful.

Me and my accountant agree that it looks like Shopify are the ones for charging VAT.

I really appreciate the answers, massively helpful.