iTunes Revenue and VAT

[Paul Reilly]

Does the price of an app include sales tax, VAT ?
I'm wondering if I need to pay VAT returns on my iTunes revenue.

My understanding is that if an Irish person (or anyone in the EU) buys a product from an Irish company, VAT must be included. Which the company must then pay the Revenue. However users are buying the app from Apple, not directly from me. So it would appear Apple is my customer, not the end user.

I get my payments from two or more different legal entities. There's Apple Inc USA, and Apple S.A.R.L for Europe payments. If I selll 1000 euro worth of apps to Apple USA, this isn't liable for VAT, as I am selling outside the EU. However if I sell 1000 euro worth of apps to Apple S.A.R.L (a European company) then I'm thinking those sales are liable for VAT at 21.5 %

Does anyone have a clear understanding of this?
Is anyone paying VAT on their iTunes Revenue already?

[Mike Butler]

Interesting question. I was going to say no based on my dealings with app payments from eSellerate and from talking to Revenue about that. But as you point out, eSellerate is a non-EU company whereas iTunes S.A.R.L is European....

Bloomin scary idea that you've just brought up!

Mike.

[Daniel Heffernan]

I contacted Apple before to ask why it'sa 70/30 split outside the EU but 60/40 within the EU and they said it was because of VAT. They're paying the VAT so all you have to pay is income tax.

[David Huntrods]

I've heard similar things to Daniel when I asked a tax consultant to look into it for me. The takeaway was that Apple is collecting VAT (or any other regional sales taxes due) on the sale, and what's paid to the developer is a post-tax sales commission.

[Denis Hennessy]

As I understand it, the answer is NO. You are selling your product (wholesale) to Apple SARL. Since they're a VAT-registered company in a different EU country, you don't need to charge them VAT (and likewise, you don't need to pay the Revenue the VAT you didn't collect).

[Paul Reilly]

Great - thanks to everyone for clarifying that for me.

[Matt Johnston]

Are YOU VAT registered?

[Paul Reilly]

Yep - I have a company iTunes account, and put everything through my company which is VAT registered.

[Joe Byrne]

A company registered in Ireland does not charge Irish VAT on products exported to the USA or any Country outside of Europe. However be aware that many countries will require you to return Sales Tax. In fact if your business were outside the EU selling electronic services into Ireland you'd have to register for and return VAT in Ireland even if you had no company here.

I have no experience of selling Apple apps and do not have an understanding of the technical nature of the relationship with Apple S.A.R.L but if someone sends me the documentation that passes between Apple and app developer I'll give an assessment.

A company registered for VAT in Ireland does NOT charge VAT to a company registered for VAT in another EU country. However VAT is charged to non registered persons, typically consumers.

So it's down to the relationship with Apple. If Apple S.A.R.L. are buying the goods from you effectively and they are registered for VAT in Europe, then you will not need to return the VAT. I think this is unlikely as Apple would then have to return VAT on their sales of your product. As I understand it they only take a 30% margin. However it would need to be checked.

If Apple S.A.R.L are just passing the payments to you, then you will need to return VAT on EU sales. However you have a cost of sale of 30% and if this is on the total amount including VAT, then by right you should be entitled to 30% of the VAT portion back. Do Apple give you an Invoice for the 30% commission. I'd need to see this to determine further. You could also pose this question to Apple. I'd be interested to see the response.

A company not registered for VAT in Ireland, does not charge VAT and therefore does not need to return VAT. If annual sales of your products are less than 75,000 (of the top of my head - check) you can option not to register for VAT. However you will not be able to claim VAT back on purchases. This just might suit small developers as there are no material purchases required to make your product.

If you are developing an app for a customer, then this may be deemed a Service, not a Product and is treated differently for VAT purposes. However it is then likely you are dealing with a VAT registered company and VAT will not apply in any case.

Note: I am not an accountant but my company have being developing Accounting solutions for almost 30 years, so we have had some exposure!

Here's the link to the Revenue's VAT Guides, the definitive source of information on VAT regulations. in Ireland.

If you have questions on VAT you can save the cost of consulting an Accountant by ringing the revenue, they are usually very helpful.

http://www.revenue.ie/en/tax/vat/leaflets/index.html

Hope this is helpful.

[Joe Byrne]

Further to my last post, I have read about six new posts which I had not seen at the time I wrote.
I was not aware Apple SARL charged a higher commission in Europe and it is therefore more likely that Apple are treating you as a supplier in which case you would not need to return VAT. I'd suggest seeking clarification from Apple in writing on this.