vat and portal deals

Discussion in 'Indie Business' started by Robert Cummings, Oct 16, 2005.

  1. Robert Cummings

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    Am I to believe that the portals actually pay the VAT? For example my game is sold through real, and a customer buys from them.

    Can you confirm if I would need to still pay the VAT myself as I would not want pay VAT twice!
     
  2. Yarlen

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    I think you'd need to pay the VAT. I know we don't pay it here.
     
  3. Steve Ince

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    I'm no expert, but I think that the way VAT works is that it's the customer who pays the VAT (if he/she is elligible) and the vendor is the collector of that tax. The difficulty arises when there is a middle man, in this case the portal. You probably need to call up the Inland Revenue and have a chat.
     
  4. MrCranky

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    I think, given the way it was explained to me, that its easier to look at it from the other way round - not as a sale, but as a charge. Any sequence of transactions, with an intermediary or not, can be seen the same (NB: this is for a UK company, I don't know about other places).

    You invoice the portal for (Sale Price * VAT)
    You pay taxman (VAT1)
    You receive (Sale Price)

    Portal invoices the customer for [(Sale Price + Charge) * VAT]
    Portal pays taxman (VAT2)
    Portal claims back (VAT1) from taxman
    Portal pays You (Sale Price)
    Portal receives (Charge + (VAT1 - VAT2))

    Customer pays Portal (Sale Price + VAT2)

    The portal gets back the majority of the VAT on the sale, effectively only having to pay VAT on the Charge they levy. They claim back input VAT, but have to pay output VAT.

    If your invoice to the portal includes a VAT portion (you'd have to give your VAT registration number and an exact figure as to how much you are charging as VAT), then they can claim all of that VAT figure back as 'input VAT'. Then they add VAT back on again when they pass the charge onto the customer.

    The question is, if you don't charge the portal VAT (perhaps because you're not VAT registered), then they can't get input VAT back; but they have to charge VAT on the full (Sale Price + Charge), does that inflate the sale price of your game by a big chunk?
     
  5. Steve Ince

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    I've read that through three times and think I understand it. :)

    This assumes that the developer has to invoice the portal. Is that the way the portals work?
     
  6. MrCranky

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    Well, in theory, anytime there's a transaction of money for goods between two companies, there is an invoice and a payment; it doesn't have to be a simple 'developer issues invoice, portal issues payment'. The portal could send the developer a note saying 'we sold 10 units of your game, here's the invoice you would have sent us to receive payment for those 10 units, and here's the money for those 10 units'.

    However, I have no experience with portal sales and or payment, and am strictly speaking from experience invoicing others the 'old fashioned' way.
     
  7. Steve Ince

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    Okay, thanks, that makes sense.
     
  8. Robert Cummings

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    Anyone else dealing with portals have light to shed? I think it's an interesting subject and it's possible we are missing a bit of money through this/taxman.
     
  9. mahlzeit

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    I would assume the portal is the party that sells to the customer. So handling VAT is the portal's business. Your only business is with the portal, not with the customers. Whether you have to pay VAT on your dealings with the portal depends on a whole bunch of things, such as the physical location of both parties (you and the portal) and whether you're VAT-registered or not.
     

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