App Store revenue and taxation

coffeehound

Would anyone happen to know how revenue from Apple's App Store would be calculated, pls?

After searching their site, apparently:
1.  They charge 15% commission to small businesses / individuals on App Store sales
2.  They collect UK tax (presumably VAT?) at 20%
3.  They collect 2% UK Digital Services Tax

In what order would this be deducted?  For a solid example. suppose an app is sold for £2.99 -- how much of that would the originator receive?  

Also, how would it best be handled as a modest income?  Is it best to create a Ltd Co / Sole Trader?  Can any of the tax be recovered / reclaimed?  Apparently the Digital Services Tax was intended for fat cats like Amazon, so why they are levying it on small businesses is unclear . . .  Thanks for any info.

csgohan4

I think a good start would be some research on the difference on the two:
https://www.axa.co.uk/business-insurance/business-guardian-angel/sole-trader-or-limited-company/

Digital tax would apply to all services delivered digitally, why would they tax big companies and ignore small ventures? 

coffeehound

Thanks will have a read of your link.

csgohan4 said:

Digital tax would apply to all services delivered digitally, why would they tax big companies and ignore small ventures? 

Well from the horse's mouth

Who is likely to be affected

Large multi-national enterprises with revenue derived from the provision of a social media service, a search engine or an online marketplace to UK users.

coffeehound

Oh no has G_M passed away?

csgohan4

Digital sales tax applies to ventures above 500 mil, so it won't affect you, wouldn't that be good then? Sadly corporation tax is applied to all

MattMattMattUK

coffeehound said:

Would anyone happen to know how revenue from Apple's App Store would be calculated, pls?

After searching their site, apparently:
1.  They charge 15% commission to small businesses / individuals on App Store sales
2.  They collect UK tax (presumably VAT?) at 20%
3.  They collect 2% UK Digital Services Tax

In what order would this be deducted?  For a solid example. suppose an app is sold for £2.99 -- how much of that would the originator receive?  

The VAT is taken off of the sale price, so £2.99 becomes £2.49.
The Digital Sales Tax of 2% is deducted, so £2.49 becomes £2.44.
Apple's commission is 15%* so the payment to the developer would be £2.07.

coffeehound

csgohan4 said:

Digital sales tax applies to ventures above 500 mil, so it won't affect you, wouldn't that be good then? 

Unfortunately it is being applied to sales by all developers from the App Store:

In addition, your proceeds will also be adjusted in Germany, France, Italy, and the United Kingdom, and will be calculated based on the tax-exclusive price. However, prices on the App Store will not change.

• Germany: Reduced value-added tax rate from 19% to 16% (effective July 2020)

• France: New digital services tax of 3% (in addition to the existing value-added tax of 20%)

• Italy: New digital services tax of 3% (in addition to the existing value-added tax of 22%)

• United Kingdom: New digital services tax of 2% (in addition to the existing value-added tax of 20%)

 
https://developer.apple.com/news/?id=oyy56t2r

Frustratingly they do not quote the actual pricing changes for the UK locale there in the linked document.  What I'm unable to find is how to calculate the bottom line of what the revenue is for a given App Store price.  If anyone knows the order in which deductions are made for VAT, DST and Apple commission, I'd be grateful.

coffeehound

MattMattMattUK said:

The VAT is taken off of the sale price, so £2.99 becomes £2.49.
The Digital Sales Tax of 2% is deducted, so £2.49 becomes £2.44.
Apple's commission is 15%* so the payment to the developer would be £2.07.

Ah thanks, that's great