Google Adwords Handling of VAT, Confusion....

MrDarcy

OK, I've a new start up business, it is not VAT registered yet. I'm fairly confused as to how Google in Ireland are processing VAT on Adwords campaigns I have to say...

Firstly:

Google seem to distinguish between Personal Adwords campaigns and Business Adword Campaigns for the purposes of deciding who get's charged VAT. The legal position from a Revenue perspective is that everyone, regardless of their use for their particular campaign, should be getting charged VAT.

Obviously if you have a VAT number, you can claim back the VAT. Google are stripping my VAT out of the transaction and reducing by Google Adword campaign credit's by the value of the VAT which to me is entirely wrong because I cannot claim the VAT back.

Just wondering has anyone run into this problem before??? As always when dealing with Google, it is impossible to talk to someone or mail someone about your issue, I'm stuck yet again in an endless cycle of automated responses and automated help cycle. :mad::mad::mad:

Basically what has happened here is that I have lodged 100 Euro into a Google Adwords campaign just to get it kicked off and running and today I see the lodged funds turning up in my Google campaign and the VAT being immediately taken out of the payment and set aside, thereby reducing my available Google Credits from 100 Euro to 82.65 Euro...

dormant_co_acc

Hi Mr Darcy

I don't see anything wrong with what Google have done. you have quite rightly pointed out that you should be charged Vat on your advertising.

So, if the total is €100, then the amount net of Vat is (€100 divided by 1.21) €82.65 plus Vat. At the end of the month, you will see an invoice available for print for this amount.

If you were Vat registered, you could claim the €17.35 back. As you are not, you just claim the full €100 as a deduction against your taxable profit.

I hope this helps. Let me know if you need further clarification.

MrDarcy

dormant_co_acc wrote: »

Hi Mr Darcy

I don't see anything wrong with what Google have done. you have quite rightly pointed out that you should be charged Vat on your advertising.

So, if the total is €100, then the amount net of Vat is (€100 divided by 1.21) €82.65 plus Vat. At the end of the month, you will see an invoice available for print for this amount.

If you were Vat registered, you could claim the €17.35 back. As you are not, you just claim the full €100 as a deduction against your taxable profit.

I hope this helps. Let me know if you need further clarification.

I hear ya! But if I were to tick the box that says I'm using the campaign for personal use and not for business, my 100 Euro I deposit goes straight towards my Google Adword credit's so I've 100 Euro credit instead of 82.65 Euro credit?!?!?

It seems to me that Google are incorrectly affording someone who might tick the "personal use" box, tax exempt status or giving them a zero VAT rate in any event, when 100 Euro deposited is converted into 100 Euro Google Adword credits???

dormant_co_acc

I wasn't aware of the Vat implications of clicking "personal use". You're right, I can't see any good reason why they wouldn't charge Vat to a personal who places AdWords for personal use.

MrDarcy

dormant_co_acc wrote: »

I wasn't aware of the Vat implications of clicking "personal use". You're right, I can't see any good reason why they wouldn't charge Vat to a personal who places AdWords for personal use.

When I set up a Google Adwords account a year or two ago, there wasn't an option for "personal", as distinct from "business" users. You just lodged say 100 Euro to kick off your campaign and you had 100 Euro credit in respect of that campaign. Your funds depreciated as normal, I just assumed that the "Cost per Click", was in fact inclusive of VAT.

That remains the case for "personal" Adword users, so if you register as a "personal" user, your 100 Euro payment = 100 Euro credit. But if you are a "business" user, 100 Euro payment = 82.60 Euro credit...

dormant_co_acc

If you don't get another reply here, get onto the AdWords forum. It can be accessed from the help menu in your AdWords account. People in there can be quite helpful.

91011

If you're a personal user the "click" rate you are bidding will be inclusive of VAT.

If you are a business user it will be exclusive of vat and vat is added to the invoice at the end of the month.

If I as a vat registered user bid €1 on a click and you bid €1.20, I'd get priority as your click bid is 99c+vat.

MrDarcy

91011 wrote: »

If you're a personal user the "click" rate you are bidding will be inclusive of VAT.

If you are a business user it will be exclusive of vat and vat is added to the invoice at the end of the month.

If I as a vat registered user bid €1 on a click and you bid €1.20, I'd get priority as your click bid is 99c+vat.

Is this not hugely confusing though??? If I'm a VAT registered business and I'm setting up my CPC bids, I've to manually add in my VAT to arrive at my bid amount??? How do I know if the person I'm bidding for is making a VAT inclusive or VAT exclusive bid???

TheCostumeShop.ie: Ronan

MrDarcy wrote: »

Is this not hugely confusing though??? If I'm a VAT registered business and I'm setting up my CPC bids, I've to manually add in my VAT to arrive at my bid amount??? How do I know if the person I'm bidding for is making a VAT inclusive or VAT exclusive bid???

Not at all, you don't include the vat in your calculations because you claim it all back from revenue so it shouldn't factor into your CPA. That way it doesn't matter if the competitor is bidding with a personal or business account.

Adwords does actually work on the simplified basis 91011 mentioned for his example to emphasize his point. Like people no two campaigns are ever the same. It works on, in simplistic terms, a triangle system of Bid x Click through Rate x Quality Score (of website the ad points to). In other words one of my sites might out rank a competitors site even though they are bidding at ten times my bid, because Google has decided that the user experience is more valuable than the short term win of disappointing customers who use the sponsored links.