VAT rules on global sales

[woodss]

Hi,

Okay - so in the last few months I have been selling software which has been purchased by users globally. It is not business software, it is in a "hobby" niche so is sold to consumers, not businesses (as far as I can tell!). It is an addon for a game.

I am confused as to where the sales fall within VAT rules and would appreciate some guidance before things get out of hand.

The figures are not massive at the moment - approximately 13k gross in 6 months.

I am not registered as a company, but I am registered as self-employed (I am a software developer). This is a "side income" at the moment and has happened completely by accident if I'm honest, I have done no marketing. I am NOT currently VAT registered.

Here is the entire purchasing process:

1) User comes onto my website to view the product details. They decide to purchase.
2) They click "Buy Now"
3) They are taken to a Stripe payment page
4) Upon successful payment, my system creates an account for them and a serial number
5) The account details and serial number are e-mailed to the customer automatically
6) The customer logs onto my website
7) The customer downloads the software and installs it
8) The software runs, and asks for a serial number
9) The customer enters the serial number
10) Happy days

My questions are three-fold:
1) do I need to charge VAT?
2) if so, do I need to charge VAT to non-EU customers (such as Brazil, China etc)?
3) what else do I really need to be aware of?

I plan on getting an appointment with an accountant to discuss the nuances in detail with a view to going forward but it would be nice to have some sort of idea on what I'm doing and what I should expect to hear.

Thank you.

 

[Mr D]

1. Only after you register for VAT. Which you are far from the threshold on in the UK. Elsewhere is more open to question.
2. No.
3. Register the business if not already.

 

[woodss]

Thank you for the reply.

When you say "Elsewhere is more open to question" - what do you mean?

 

[Scalloway]

"Elsewhere is more open to question" - what do you mean?

Some countries may require you to register for sales tax for local sales.

 

[woodss]

Do they apply if I am not VAT registered myself?

I am not currently charging VAT, the fee paid online is simply X pounds.

It's fairly confusing to say the least - I literally just want to sell my software and earn a living.

I'm starting to feel like I'm going to end up shafting myself because I can't control who, in the world, makes a purchase... and all of a sudden I'm on the hook for some sort of sales tax in Outer Mongolia.

 

[Scalloway]

Do they apply if I am not VAT registered myself?

Your VAT status in the UK is irrelevant. The rules for VAT on the supply of digital services in the EU are here. Other countries will need to be dealt with on an individual basis.

https://www.gov.uk/government/collections/vat-moss-vat-on-sales-of-digital-services-in-the-eu

 

[woodss]

Well this is the thing. Is it a digital SERVICE, or a digital PRODUCT? I feel like it is the latter.

There is no automation here - the payment gives access to an online account whereby you then need to retrieve a download, download the file, install the software then enter a license key.

That, to me, is not "minimal interaction" - so is not a service, it is a product. It is not something that runs in the browser like Basecamp or an app on a phone which installs automatically. Nor something which requires online access, like Spotify. It is a tangible product which could, if I offered it, be delivered on a CD and used without internet access.

So therein lies my issue - I find myself in a grey area. Do I simply acknowledge VAT once I reach the UK VAT threshold of £85,000, or do I need to adhere to VATMOSS even though I am not offering a digital service?

 

[V Narayan]

would be great to know the details as well