Selling on digital marketplaces - invoicing and VAT

[tombbb]

Hey everyone,

I'm having a bit unclear view of several VAT issues related to online marketplaces when the following applies:

• we are UK registered Ltd.
• using digital marketplace (registered in Australia) to sell software
• they issue invoices in our company's name directly to the customer, collect their fee and VAT depending on customer's residence
• when customer is EU based, they act as our Intermediary supplier for VAT purposes, so they collect and report VAT to HMRC

I have a few questions about this:

1. How is the VAT threshold calculated (total turnover from all countries where they sold our software package to? Or only sales to UK customers?)
2. They are registered for VAT MOSS, and they claim there is nothing else we have to do, as they will report this sale to HMRC under their name. Does this mean we issue an invoice for this sale (our company -> customer) just like every other invoice, or is there anything we need to add or report to HMRC (for example to let them know this digital marketplace will be collecting and reporting VAT on this sale?)

I would appreciate if anyone can shed a bit of light on this, as I keep hearing different point of views (e.g. issue one invoice per month directly to the marketplace). Thanks!

 

[TheCyclingProgrammer]

If they are acting as an intermediary in the EU and dealing with VATMOSS then they are acting as the principle for the sale to the customer. If you need to raise any invoice at all, it should be to the intermediary.

The best way to think of it is instead of selling on your behalf and billing you for their fees, it's more like they bought the digital goods from you for £x and then sold it to the customer for £x plus their fee (so their fee is effectively a markup).

As the virtual transaction between you and the intermediary is a B2B one and they are not based in the U.K. then there is no VAT to account for on the earnings you receive from the intermediary (outside the scope of U.K. VAT).

For other transactions to customers outside the EU, where you are the principle and invoicing the customer directly, you should account for VAT under normal place of supply rules.

 

[faradaykeynes]

Important factor is who is controlling the price, software customer support etc if you are then above is not B2B sale as such. Is it not the same case as selling on amazon?

 

[tombbb]

Thanks for clarifying some points guys. I think they are trying to avoid being perceived as the seller of the item as:

• they put "Thank you for buying from XXX Company (my company) on YYY market"
• in their VAT collection help document they say: "For EU VAT purposes only, YYY market steps into the supply chain as the supplier on record."
• they issue a monthly invoice for their "service" which is a percentage of every sale we/they made on the marketplace. This gives an impression that they are just "renting" their marketplace space to us.
• they issue invoices under our company's name, their name is not on the invoice at all.

From my point of view, they are should be perceived as the seller of the item as:

• they set rules who can sell on their markets
• they set the price
• they collect the money from customers
• they can authorise and refuse refund requests from customers
• they pay us our share once a month
• they don't share any contact information of customers with us (apart from the invoice details)

Even from the simple invoicing point of view, who should we invoice?

• Customers directly? - Meaning that we have to import all invoices from their marketplace into Xero as they happen and then mark them as paid when we receive payment from the marketplace. How would this affect our VAT threshold calculation (as these customers are scattered worldwide)
• Marketplace? - Create a single invoice once a month (for the total amount of sales minus their fee). In the books, this will look like we issue a single invoice to a company in Australia, rather than to XYZ customers who actually bought the product.

I'm getting frustrated with trying to get some clear answer from them, so any help from you guys would be great. Thanks!

Tom

 

[faradaykeynes]

Who looks after after sale matters? Its strange that they control and set the price but still mention your company name to end customer

 

[tombbb]

We do take care of the customer after sale (providing customer support with the product), but that's pretty much it. If customer wants a refund for example, they have to contact the marketplace directly and we cannot approve/refuse this request.

 

[faradaykeynes]

I would say they are still your customers regardless how payments and refunds are handled, its same as selling on ebay or amazon.
For vat threshold i would say count all turnover leaving outside the scope of vat i.e UK and EU sales only would count towards vat registration threshold

 

[tombbb]

Make sense. Thanks for your help!