What are the tax liabilities for an international transaction?
I have website for which I have set up a sponsorship scheme for (see my profile if you're interested). With this scheme, some individual or company can choose to sponsor X or Y amount and that gives them an advertising block on my website for Z months.
I have had an inquiry for sponsorship of the site, which is nice. However the question came up over the tax implications for the transaction, so I thought I'd ask it here.
Goods and services sold in the UK are currently subject to 15% VAT. If the purchaser is based outside the UK (in this case Canada), how does it work?
Do I still charge the VAT and the customer claims it back from their local tax office?
Do I charge without VAT and the customer is liable?
Some other option?
Does the situation change depending on the countries involved, or is it covered by some international law?
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After a bit of rooting around the HMRC sites, I found this page which says this:
One key difference is that digitised products are classed as electronically-supplied services for VAT and customs duties. These services are:
downloaded software
downloaded images, text or information
electronic publications
downloaded music, films and games
electronic auctions
supply of websites or web-hosting services
For VAT purposes, the place of supply of these services is the country in which the customer lives.
If you supply electronic services to a business customer in another European Union (EU) country, the customer accounts for any VAT due in that country. You should not charge UK VAT.
If you supply electronic services to a consumer, charity or government body in another EU country, you have to account for UK VAT.
If you supply electronic services to anyone in a country outside the EU, you don't pay any VAT.
If, as a UK business, you buy electronic services from a company outside the UK, you have to account for VAT.
If I read this correctly, I as the supplier of the website need to account for VAT only if the sponsor is a consumer, charity or government body in another EU country.
It is not covered in this site, but I assume I must also account for VAT for a customer based in the UK.
So in answer to the original question, a customer from Canada (which is currently outside the EU) would account for the VAT themselves, and I would simply charge the gross amount.
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