Tax when selling online to private individuals

caddy2

Could someone tell me, if we set up a facebook page or website selling framed pictures and we sell them to private individuals from any country around the world, do we have to pay taxes and custom charges for these products to the countries involved and are the rates different for different countries?
We have a business and are vat registered, will we also pay the vat here?
Does anyone know of good postal / courier companies which are not so expensive who deliver worldwide. We have seen very expensive prices to send parcels abroad?
Thanks in advance

LiamACA

What you propose is called distance selling ie selling to non VAT registered customers. You will charge Irish VAT on items you send to customers either in Ireland or within the EU. Exports are in fact selling to customers outside the EU and are not liable to VAT. If your business really starts to take off you may be obliged to register for VAT in the EU countries you are selling the product. For example the limit of distance sales you may make into the UK before being obliged to register for UK VAT is £70k which is far higher than many other countries (We are €35k along with Greece Portugal Belgium Poland Spain and a couple of others).

Your customers will be obliged to account for any customs charges that accrue and VAT is calculated on the combined cost of the product and the customs charge. You should remind them of this. Have a look at below

http://www.dutycalculator.com/help_center/Import-duty-taxes-when-importing-into-ireland/

caddy2

Hi LiamACA,

thank you for that very helpful answer.

You mentioned that 'Your customers will be obliged to account for any customs charges that accrue and VAT is calculated on the combined cost of the product and the customs charge.' - is it normal practice that customers pay the customs or do the sellers pay it? Surely it is the seller that pays the vat?

LiamACA

caddy2 wrote: »

Hi LiamACA,

thank you for that very helpful answer.

You mentioned that 'Your customers will be obliged to account for any customs charges that accrue and VAT is calculated on the combined cost of the product and the customs charge.' - is it normal practice that customers pay the customs or do the sellers pay it? Surely it is the seller that pays the vat?

You're welcome.

No the seller charges the VAT on the sale and returns the VAT to Revenue. The customer gets caught for the gross amount.

I purchased a golf club on ebay from US in the past and I was caught at customs. I was advised by the seller that any import duties suffered would be my liability.

In fairness that is standard procedure but to protect yourself from getting negative comments in forums such as ebay or facebook all potential costs must be communicated to the buyer.

Liam

caddy2

Hi again LiamACA,
thank you for clarifying that information, I was confused because I saw some sample documentation which one particular courier needs to have filled out with each parcel which has to be declared to customs, it looks for a description of the goods and name of seller, vat number etc. I had assumed when they were looking for that information that customs would be reverting back to the seller to pay the charges if the charges hadnt already been paid?

LiamACA

caddy2 wrote: »

Hi again LiamACA,
thank you for clarifying that information, I was confused because I saw some sample documentation which one particular courier needs to have filled out with each parcel which has to be declared to customs, it looks for a description of the goods and name of seller, vat number etc. I had assumed when they were looking for that information that customs would be reverting back to the seller to pay the charges if the charges hadnt already been paid?

No they aren't doing that. They want to know what the good is as it could be valuable or not and they want their cut if it is valuable. With respect to the VAT number they will be able to see if you have paid the VAT over to Revenue. You don't want to do a Mick Wallace!!!

caddy2

That has been so helpful, and great to finally understand it. It had turned us off the whole idea before.
Just to clarify, if we sell a product to an individual outside the EU -as we wouldnt be charging vat on it, I am presuming there is no vat to be paid to revenue here for that product?
I am also presuming that all vat is to be paid to the Irish government?
If a business was to buy a framed picture - do the same rules apply as a private customer?

caddy2

As well as the previous questions, my very last question - what charges apply should we send the photos in a digital format i.e. via email?

LiamACA

caddy2 wrote: »

That has been so helpful, and great to finally understand it. It had turned us off the whole idea before.
Just to clarify, if we sell a product to an individual outside the EU -as we wouldnt be charging vat on it, I am presuming there is no vat to be paid to revenue here for that product?
I am also presuming that all vat is to be paid to the Irish government?
If a business was to buy a framed picture - do the same rules apply as a private customer?

You're welcome- no trouble at all. I love VAT!!

Yes you are correct, there is no VAT to be charged to sales outside the EU. The thinking behind it is that we are trying to make our exports attractive to the rest of the world.

The rules are totally different when you sell to a business. Previously you were selling what is called B2C- business to customer

Now you are talking about B2B - Business to Business

ie VAT registered to VAT registered. In this instance you charge VAT at 0% so on the invoice you stamp 'VAT charged on the Reverse Charge Basis'

Essentially what this means is that the purchaser has the responsibility to account for the VAT in his own jurisdiction so he will account for the VAT on the Purchase by himself and the VAT on the sale by you which is an 'in and an out'.

So you sell €100 of a picture to him. you charge VAT at 0% having stamped 'VAT Charged on the Reverse Charge Basis' on the invoice and on his VAT return in say Germany he will account for the VAT at 19% ie €19 both the Sales section and the purchase section meaning he has no liability.

The work you have to do though and this is very important as it lets the European Union establish the amount of goods that are transferred in the EU between nations and to ensure that there are no crooks operating within the EU - You must ask him for his VAT number before you send the goods. You can check out if he is legitimate here

http://ec.europa.eu/taxation_customs/vies/

If he doesn't give you a VAT number you are obliged to charge Irish VAT on the sale then and return this to our Revenue.

Secondly you have to fill in at VIES Statement. Any VAT registered person who dispatches goods to VAT reg persons in EU is obliged to file a periodic VIES Statement. There is a nil threshold so any sales must be recorded. In this statement you will include your name and VAT number and the VAT number of the purchaser and value of sales to the customer. These statements are files on a quarterly basis but if sales are 50k you must do it monthly. The reason for this is to combat fraud and to verify correctness fo VAT reg supplies by traders between member states.

The VIES is not complicated and should not concern you.

There is another document you have to fill in. It's called an Intrastat document. The threshold for having to fill this in is €635k and below that you just include the information in you VAT3 return in the boxes E1 & E2, just the value of the Sales and Purchases in their respective boxes.

I hope this helps! If you need an accountant let me know!

Liam

caddy2

Liam,
the amount of information you have given me is so much and so useful and you explained it so well. I hardly know it myself, but I 'kind of' actually have an accountant, the original accountant touched base with me once or twice and since then, the practice was taken over by someone else - I have never met the new accountant, only the receptionist and book keeper when I drop in the vat invoices etc, I have been thinking about getting some one new for a long time, just havent made the move yet. I dont have a relationship with the company itself and have some other reservations as well.
What is your opinion on the digital side of things i.e. sending the photos electronically or dogitally, from my knowledge, delivering photos on a CD attracts a 23% vat rate, but would there be more charges to think of, if emailing it or sending it on a CD to someone international?

LiamACA

caddy2 wrote: »

Liam,
the amount of information you have given me is so much and so useful and you explained it so well. I hardly know it myself, but I 'kind of' actually have an accountant, the original accountant touched base with me once or twice and since then, the practice was taken over by someone else - I have never met the new accountant, only the receptionist and book keeper when I drop in the vat invoices etc, I have been thinking about getting some one new for a long time, just havent made the move yet. I dont have a relationship with the company itself and have some other reservations as well.
What is your opinion on the digital side of things i.e. sending the photos electronically or dogitally, from my knowledge, delivering photos on a CD attracts a 23% vat rate, but would there be more charges to think of, if emailing it or sending it on a CD to someone international?

Hi ya,

Yes the digital age has coughed up a few items that are considered unfair. For example if you sell a book, you are selling a good which exempt from VAT, how if you sell a book on a kindle it is not considered supply of goods rather a supply of a service which is charged at the standard rate of VAT, 23%. It's ridiculous that we are being charged for a download of a book but no VAT on the hard copy!
Therefore what you are supplying digitally would be liable to VAT at 23% but the cross border supply of goods rules would still exist as would distance selling.
Hope that helps

Liam

caddy2

Hi Liam,
I finally got back here.
So you are saying that 'the cross border supply of goods rules would still exist as would distance selling' - so I take it this means customs charges still apply on a digital download. But how does this work, If I advise the customer that customs charges are their responsibility, and I pay the vat on the value of the product and value of the customs on the product - how then do cutoms get their money from my customers?
With all this talk of customs, I had got the brainwave of keeping the cost of the product down by going for digital download as I had thought that customs charges wouldnt be an issue. The customer would have the download, so how does the customs retrieve that money.
The 23% side of things is unchanged for me so, it doesnt make any difference which way we deliver the goods. From my knowledge, if we only provide a printed picture - the vat rate is 13.5% but if we put a frame on it or deliver it digitally it bumps up to 23%

LiamACA

caddy2 wrote: »

Hi Liam,
I finally got back here.
So you are saying that 'the cross border supply of goods rules would still exist as would distance selling' - so I take it this means customs charges still apply on a digital download. But how does this work, If I advise the customer that customs charges are their responsibility, and I pay the vat on the value of the product and value of the customs on the product - how then do cutoms get their money from my customers?
With all this talk of customs, I had got the brainwave of keeping the cost of the product down by going for digital download as I had thought that customs charges wouldnt be an issue. The customer would have the download, so how does the customs retrieve that money.
The 23% side of things is unchanged for me so, it doesnt make any difference which way we deliver the goods. From my knowledge, if we only provide a printed picture - the vat rate is 13.5% but if we put a frame on it or deliver it digitally it bumps up to 23%

With downloads there won't be any customs to worry about. I guess the only issue is whether you will be able to sell prints in this manner. Would I buy a print online? Would I have the ability to print it on the correct paper with the correct ink? Is it an awful lot of hassle?

The VAT rate on prints is generally at the standard rate ie 23%

The lower VAT rate would be on Photographic Prints, slides or negatives that have been produced from goods provided by that person, which would include cinematographic and video film that record particular persons, objects or events such as a wedding video but not John McClane in Die Hard!

Digitally you are providing a service and not a sale of a good so it would be at the standard rate

Liam

Dryone

Hi guys, I read this topic and I am still confuse.. (excuse my English, please)
I tried to find some information to r e v e n u e . i e and g o o g l e engine and I was unable to find the right information.
Can someone to provide me an answer or some links for my documentation?

I want to create a website to sell images created by me. [everything is virtual: I post Images -> Client download images for a fee]

Do I need a license/licence for this activity online ? [to be everything all right from point of taxes]

It's a hobby and I don't know what to do, should I transform into a business webpage . com [commercial] ?

Dryone

Hi guys, I read this topic and I am still confuse.. (excuse my English, please)
I tried to find some information to r e v e n u e . i e and g o o g l e engine and I was unable to find the right information.
Can someone to provide me an answer or some links for my documentation?

I want to create a website to sell images created by me. [everything is virtual: I post Images -> Client download images for a fee]

Do I need a license/licence for this activity online ? [to be everything all right from point of taxes]

It's a hobby and I don't know what to do, should I transform into a business webpage . com [commercial] ?


Thank you !