Most people don't really under VAT, especially cross-border VAT. I'll answer the questions here and also explain how it works and link to relevant legislation or government guidelines where appropriate.
It helps if you specify the country you are in btw.
For this it's simple. Who pays you? The affiliate network/company. What company/address have they told you to invoice them to.
For their part, they actually need nothing from you in this case.
An affiliate payment is by very definition ONLY b2b. It is NOT a consumer purchase, because you have done business to get paid.
They don't even need your VAT number. Everything is on you.
The revere charge mechanism applies. This means 1 of 2 things. (You said you're VAT registered, so 1 applies to you)
1) You are VAT registered, so you charge yourself VAT and claim it back at the same time. You're charging output VAT to yourself, and claiming back input VAT. It's zero-rated. Nothing to pay. You're only recording on your VAT return, which is going to be adding to the box for vat-able sales and adding to the box for vat-able purchases at your country's main rate.
2) You are NOT VAT registered. So you do nothing. Nada. Place of supply rules. You are a business, but not VAT registered, which means you are responsible for dealing with the VAT in your country. However, you are not VAT registered, so you cannot charge anyone VAT, including yourself.
BUT, here's the big but. This increases your sales for the VAT registration threshold!
Also worth noting, and most don't realise this. EVERY service you purchase online from a non-EU country needs to be accounted for under reverse charge and it goes towards your VAT registration threshold.
This means, if you buy some SEO services from Jim over in NYC from his LLC registered in Delaware for $5000, then you account for this in your company books as VAT-able at 20% under the reverse charge expenses mechanism. Ie, it either increases your sales towards the threshold by $5k, because you are selling the service to yourself for $5k, paying VAT, and claiming back VAT at the same time.
Yes, B2C, but that's impossible with affiliate marketing. By very definition you are acting as a business.
Charge you VAT for what? They're paying you. You aren't paying them.
No this is wrong. You don't have to charge VAT to them. This is where the mis-understanding comes in from many.
Please see the following document:
https://ec.europa.eu/taxation_custo...t_works/telecom/explanatory_notes_2015_en.pdf
Section 5: STATUS OF CUSTOMER NOT COMMUNICATING HIS VAT IDENTIFICATION NUMBER (ARTICLE 18)
This is what it says: It says that it's at the supplier's discretion to regard the customer as a business if they don't provide a VAT number. This means that if they do provide one, the supplier MUST consider them a business, however, if they do not, the supplier can STILL at his or her discretion consider them a business.
First, definition of taxable person according to ec.europa.eu
The definition of a taxable person in the
VAT Directive is any person or body “
who, independently, carries out in any place any economic activity, whatever the purpose or results”.
It's not defined as someone who is VAT registered, or who pays VAT. There are businesses that don't have VAT numbers, because they only make VAT exempt supplies.
Now let's look at what the explanatory notes of the VAT implementation regulation states.
"Paragraph 1 tells the supplier when he can regard an EU customer as a taxable person. That is the case when the customer communicates his VAT identification number, or shows that he is in the process of registering for VAT."
You can absolutely without recourse consider the person(in law a person means either an individual or company) taxable, provided you have verified their VAT number with VIES and have given your own VAT number so you can receive a consultation number back, which is your proof you did the check.
Then it goes on to say
"Where no VAT identification number has been communicated, the first subparagraph of paragraph 2 tells the supplier that the customer can be regarded as a non-taxable person but only if there is no information to the contrary."
So, you can consider them non-taxable, ie, not a business, BUT ONLY IF there is no information to the contrary that shows they are a business.
Then it goes on to say
"Article 18 helps the supplier to identify the status of the customer but the provision does not change it. It is important to remember that
any person who independently carries out in any place any economic activity, whatever the purpose or results of that activity, must be regarded as a taxable person. To be a taxable person,
registration is not required. In other words
the fact that a taxable person does not have a VAT identification number does not change his status."
Aha. This is from the ACTUAL EU VAT legislation.
Here's an example of a company who do this in practice. No other than Google.
When you sign up for Google Suite and say you are a business customer, then they will NOT charge you VAT. They will send you an invoice with 0% VAT being added and a note saying "Services subject to the reverse charge - VAT to be accounted for by the recipient as per Article 196 of Council Directive 2006/112/EC"
See:
https://support.google.com/a/answer/1231283?hl=en
They state it here too and say you are responsible for self-assessing your own VAT and paying yourself in your own local member state.
This all seems simple enough, right? Why aren't every company doing this?
Because the liability lies with the supplier if the customer doesn't provide a VAT number or proof of a pending registration.
There's various things here beyond tax too, like, different rights for consumers than businesses. Some companies won't sell to consumers.
If you accept customer X is a business, send him a reverse charge invoice and he turns out to be a consumer, then you're liable.
But come on. Let's get real. Let's look at case law. Can someone find me a single case where the EU has taken anyone to court over VAT? No. I can't even find any cases of tax authorities in member states going after businesses in other member states for unclaimed tax.
If you think your customer is a business, then don't charge them VAT. If you charge your French customer $5000 for a service under reverse charge and he doesn't declare this at all anywhere, this isn't your problem. He's a business, but a business doing tax evasion.
Also, note that, if a VAT number isn't provided to you, then you don't add them to your EC sales list. It's only for VAT registered businesses. Place of supply is France in my example. If the person is not VAT registered, then all they have to do is comply with the tax law by declaring that $5k, and having it added to their threshold for VAT registration. If they don't do that, they are tax evading. Their problem, again.
You will just file your company accounts and add the $5k(in GBP of course) to box 6 and 8 of your VAT return. If your company gets investigated by the HMRC, they would see the invoice to the French client. Great. What is the tax inspector going to do? Personally contact the French government to investigate that French client? Then if they do, somehow it's going to end up with the French tax authorities taking you to court with the assistance of the HMRC for classifying your French client as a business, when really he was just a consumer trying to avoid VAT? lol.
So here's the summary:-
If you are providing a digital product or service that is for businesses. You can just ask the person, either via email or on the checkout page "Are you a business or an individual?" If you're selling SEO services, you can safely assume someone's a business if they tell you. Why is a consumer going to buy SEO services? If you're selling any sort of product that's business related, this is fine.
If on the other hand you are selling t-shirts, then you cannot do this. 99.99% of your customers will be individuals who would say they are a business to avoid tax, and if you get huge and are selling 10's of millions worth of t-shirts, then you might, at some point, find yourself in trouble with the EU, but even then, I doubt it. They aren't a central organisation with any man-power to enforce their laws. Each member state would have to come after you individually. It's just not going to happen unless you are in the BILLIONS and are creating massive attention.
But, I personally wouldn't do it for a business that's selling products like t-shirts. It's a bit dodgy and I prefer to stay above board myself.
In this case, you're providing services to a non-EU entity, so it's outside the scope of VAT. But the above will help you in cases where it's an EU company. The biggest problem arises when you and the company you invoice are in the same country and you are VAT registered. You will need to charge them VAT and issue a VAT invoice for them to reclaim.
Why are the HMRC saying you owe £20k VAT from ClickBank payments?
They are owned by Click Sale Inc. A US corporation.
Payments from them are outside the scope of UK VAT. Your only requirement as a VAT registered business is to add the ClickBank sales to Box 6 of your VAT return.
