VAT payable on downloaded software from USA?

usignuolo

Hi guys

I belong to a US games site for which I pay a subscription in dollars. From time to time I download a game from the USA, and pay in dollars. The invoice includes US sales tax applicable.

Now they have changed the system and subdivided users into countries, although they continue to operate solely out of the USA. As a result they now add VAT each time I buy a game plus a surcharge because I am overseas as well.

I and others in the same position have objected to the VAT on the grounds that the value of the downloaded games - between £6 and £12 each, is well below the £18 VATable threshold agreed by the Inland Revenue for imported goods from outside the EU.

We have also objected to the surcharge which means the games cost overseas customers more than US customers. The games are downloaded for C

---

s sake.

The games company says in return that

1. Downloaded software does not have any VAT exemptions, unlike goods purchased on line.

So then it would be cheaper to buy the games on CD/DVD which would qualify for the £18 exemption? (It costs a lot less to post the CD than it does to pay the VAT.)

2. No, the firm say their annual sales to the UK exceed the overall gross threshhold according to which they must charge VAT to customers in the UK, and this overrides the £18 limit per item VAT exemption for individual customers. So we get no exemption.

3. Re the surcharge, we are told that it is to standardise prices and to cover fluctuating currency rates. This was never an issue in the past. I do not have any currency conversion issues because I buy the software with my paypal account which I keep in credit.

I should add the firm is not based in the UK and has no UK office. The software is downloaded direct from the states.

Anyone got any experience of these issues and can advise?

Giant_Space_Lizard

i cant advise re the tax issue, but honestly if they are in your opinion overcharging you then vote with your wallet and just use steam/gog etc.. steam christmas sales are comign soon and they will be insane (i just bought just cause 2 for 4.99 get your cc ready XD

davetrousers

Does the company have a VAT number?

Blackjack_Davy

usignuolo wrote: »

I and others in the same position have objected to the VAT on the grounds that the value of the downloaded games - between £6 and £12 each, is well below the £18 VATable threshold agreed by the Inland Revenue for imported goods from outside the EU.

Thats import duty, not VAT. Sometimes you have to pay that on top of VAT.

Unfortunately theres no way around it if they have to pay VAT. Games bought via Steam are the same. Blame the UK government.

JasonLVC

The £18 threshold is for goods only. A download, is not a supply of goods, it is a supply of services (electronic services). This has long been established in UK and EU law.

To give an example, if you buy a book or magazine in the UK, they are zero rated (ie, no VAT) as they fall under the "printed matter" concession. An ebook is not 'printed matter' therefore if you download a book it will be subject to VAT, whereas the paper copy will not be.

So it actually may be cheaper to buy the physical version of the software than the electronic version.

The distance selling rules basically state that the place of supplying your service will be where your customer (ie, you) is based, thus if the supplier in the US makes sales in excess of £70k into the UK (which is the UK VAT registration threshold), then regardless of where the supplier is based in the world, it has an obligation to register for VAT in the UK once it sells more than £70k of services in the UK.

This is why you are being charged VAT, the US business is making a supply of services in the UK (as if you downloaded the content from the PC World or Curry's website) and is subject to UK VAT - it is not being 'imported' from the US as you cannot 'import' services, only goods.

We have these rules so as to stop any distortion of competition (ie, if people could buy stuff outside of the EU VAT free then they would, so these rules prevent foreign suppliers selling into the EU VAT free in most cases).

Cannot comment on the surcharge but sounds like a way to cover any losses of currencies to me.

spud17

davetrousers wrote: »

Does the company have a VAT number?

Yes and is there anybody checking that the VAT collected is being paid to the Treasury?

aerostar

Put the vat number in here

http://ec.europa.eu/taxation_customs/vies/vieshome.do

will check if it is valid, on this I think you would have to put in GB as the state.

What is the name of the company.

paddyrg

If they're charging VAT there should be no problem they providing you the VAT number, and you can always advise HMRC if you don't trust the company are passing the VAT on - but very likely they are. I paid VAT on US hosting as the company was supplying more than £70k/yr business in the UK, that's just life.