EU developers and market(place)
Posted by Chainfire on 07-02-2011 at 17:35:00 - Comments: 57 - Views: 19421
Tags: Android Windows Mobile Windows Phone 7 Series Marketplace
Tags: Android Windows Mobile Windows Phone 7 Series Marketplace
Introduction and disclaimer
First off, I am not a lawyer, nor am I an accountant. Do not take anything I write here at face value, but check, double check, and consult your own accountants and lawyers about how all this might apply to you. Do not treat this article as legal or administrative advise.
I (and companies I own) have been publishing mobile applications on various markets for years now. This includes the Windows Mobile 6.x market, the Windows Phone 7 market, and the Android market.
What precious few (including Google, but excluding Microsoft) seem to be aware of is tax and business regulations regarding these sales. I can only speak from my own experience and much consulting with accountants and lawyers, but the following might apply to you. Take note that the situation I'm writing about is a registered company in the EU, not a natural person. The rules may be different for natural persons, and for businesses they may also differ somewhat between EU countries. However, you should definitely check this out and see if and how it applies to you, as it may save you a lot of headache, backpayments, and fines later on. Better safe than sorry!
Also, this article focuses on selling to consumers. If selling to businesses, you may not have to charge VAT if you know the other business' VAT number and have checked its validity (using something like the VIES webservice, for example). However, we can treat all these market sales as sales to consumers, as we simply have no way to know. Also note that what I'm writing only applies to software sales over the internet without transferral of physical goods.
Taxes
As with most normal sales, you have to charge VAT (Value Added Taxes) on sales. Technically you have to charge VAT worldwide, but you are generally excused from charging VAT outside of the EU unless we are talking about millions of Euros per year. The what / how / when / why / where of charging VAT worldwide depends on the target country and the tax treaties between the EU and said country.
Generally, you have to charge VAT to all buyers inside EU. Generally the VAT percentage used is the VAT in your own country. For example, we are based in the Netherlands, the VAT here is 19%, so we would charge 19% VAT on all sales where the buyer is from the EU.
It is sometimes possible to charge the VAT in the buyer's country instead of the seller's, but this gets complicated fast and requires a lot more administrative work.
Sales
In many circumstances you are required to track and store all sales records for an X amount of years (differs per country). These records generally include some way of identifying the sale, the sales amount, the VAT charged, and transaction costs, for every sale. It is common to administer the 30% cut the markets take as transaction cost, beware that the taxes are computed over the sales price (100%), not just your cut (70%).
Windows Marketplace for Mobile
If you're dealing with Microsoft, all this is actually quite well arranged on their end, if you have everything setup correctly. Assuming Microsoft knows and has processed your ITIN and thus no US-based extra taxes apply.
It seems that Microsoft automatically charges VAT to EU buyers if you are an EU seller, and you never actually see this money. The payout (in my experience) will come through Luxembourg, with 15% VAT charged to EU buyers. In other words, the VAT is already taken into account by Microsoft - and one assumes - given to the tax authorities in Luxembourg.
So, you don't really have to worry about the money itself. You still have to worry about administering it, though. This requires some report manipulation, as Microsoft does not seem to provide the reports exactly as you need them. They do however offer sales reports with a lot of data. A decent programmer should be able to convert this input to usable data.
As every sale has an AppID listed, and the AppID is different for each country you sell your app in, you can deduce if a sale was made inside the EU or not. You also know the price for each AppID, as you set this yourself. If the sale is in the EU, applying some mathematics should give you all the figures needed. You don't actually have to give any money to the taxman, as it appears Microsoft already did this for you.
It is a bit of a bummer that Microsoft doesn't provide the reports exactly as we need them, but at least it's possible to make those reports yourself, and store them for the X amount of years you are legally required to. It does require some work on your part, although I have seen apps posted that can do the bulk of the work for you.
Google's Android Market
The situation for Google's Android Market is a bit more complex. Google does not automatically charge the VAT for you, nor give the money to the relevant tax authorities.
It also does not provide any useful reports (at the time of this writing) you can use to calculate what you need to know. The exception to this is if you are from the UK, in which case you can get a full-blown Checkout account instead of the limited account the rest of the EU is stuck with. The full-blown Checkout account does provide ways to get you all the info you need (like IPN, or the history API, etc).
Luckily it is possible in your (limited) Checkout account to set a VAT rate for the entire EU, and it will be charged in market. That's the first thing you should do.
Now that the VAT has been set, buyers from the EU will be charged this VAT when they purchase your app, and you will actually get this charged VAT in your account. For example, let assume you have an app that costs 3.00 Euro excluding VAT, you have set the VAT for the EU to 19%, and someone from the EU buys the app:
Base: 3.00
VAT: 19% of Base = 3.00 * 0.19 = 0.57
List price / charged: Base + VAT = 3.57
Google's cut: 30% of Base = 3.00 * 0.30 = 0.90
Deposited in your account: Base - Google's cut + VAT = 3.00 - 0.90 + 0.57 = 2.67
Of this 2.67 you will receive in your account, in turn you should give 0.57 to the tax authorities.
Unfortunately it is at the time of this writing nigh impossible to reliably extract the needed information from Market reports so you actually know how much money you need to give to the tax authorities, or save and store your sales records. If you pre-calculate all the amounts you can interpolate it from a normal report, but this doesn't work if you have many different apps at pricepoints close to eachother. The advanced report gives you a lot more information which you can use, but the advanced report is limited to 500 results. Obviously it isn't very helpful if you sell a lot of apps and do your taxes once every 3 months.
Again, if you're from the UK there are other possibilities open to you (like IPN and the history API) to extract this information from Checkout because you have (or can get) a full Checkout account.
I have been talking with the Checkout team, and they have custom built a report for me including all the needed information. I can only hope this report will make into the developer portal, but for now it seems all you can do is request such a report by contacting Checkout support.
In conclusion
I hope this is a helpful article to someone. Again, do not take this as advise on exactly how to do this. You must consult your own accountants and lawyers to see if and how this all applies to you. The important bit you should take home about this article is that you need to check out what your responsibilities are regarding taxes and sales of your apps, and handle them!
First off, I am not a lawyer, nor am I an accountant. Do not take anything I write here at face value, but check, double check, and consult your own accountants and lawyers about how all this might apply to you. Do not treat this article as legal or administrative advise.
I (and companies I own) have been publishing mobile applications on various markets for years now. This includes the Windows Mobile 6.x market, the Windows Phone 7 market, and the Android market.
What precious few (including Google, but excluding Microsoft) seem to be aware of is tax and business regulations regarding these sales. I can only speak from my own experience and much consulting with accountants and lawyers, but the following might apply to you. Take note that the situation I'm writing about is a registered company in the EU, not a natural person. The rules may be different for natural persons, and for businesses they may also differ somewhat between EU countries. However, you should definitely check this out and see if and how it applies to you, as it may save you a lot of headache, backpayments, and fines later on. Better safe than sorry!
Also, this article focuses on selling to consumers. If selling to businesses, you may not have to charge VAT if you know the other business' VAT number and have checked its validity (using something like the VIES webservice, for example). However, we can treat all these market sales as sales to consumers, as we simply have no way to know. Also note that what I'm writing only applies to software sales over the internet without transferral of physical goods.
Taxes
As with most normal sales, you have to charge VAT (Value Added Taxes) on sales. Technically you have to charge VAT worldwide, but you are generally excused from charging VAT outside of the EU unless we are talking about millions of Euros per year. The what / how / when / why / where of charging VAT worldwide depends on the target country and the tax treaties between the EU and said country.
Generally, you have to charge VAT to all buyers inside EU. Generally the VAT percentage used is the VAT in your own country. For example, we are based in the Netherlands, the VAT here is 19%, so we would charge 19% VAT on all sales where the buyer is from the EU.
It is sometimes possible to charge the VAT in the buyer's country instead of the seller's, but this gets complicated fast and requires a lot more administrative work.
Sales
In many circumstances you are required to track and store all sales records for an X amount of years (differs per country). These records generally include some way of identifying the sale, the sales amount, the VAT charged, and transaction costs, for every sale. It is common to administer the 30% cut the markets take as transaction cost, beware that the taxes are computed over the sales price (100%), not just your cut (70%).
Windows Marketplace for Mobile
If you're dealing with Microsoft, all this is actually quite well arranged on their end, if you have everything setup correctly. Assuming Microsoft knows and has processed your ITIN and thus no US-based extra taxes apply.
It seems that Microsoft automatically charges VAT to EU buyers if you are an EU seller, and you never actually see this money. The payout (in my experience) will come through Luxembourg, with 15% VAT charged to EU buyers. In other words, the VAT is already taken into account by Microsoft - and one assumes - given to the tax authorities in Luxembourg.
So, you don't really have to worry about the money itself. You still have to worry about administering it, though. This requires some report manipulation, as Microsoft does not seem to provide the reports exactly as you need them. They do however offer sales reports with a lot of data. A decent programmer should be able to convert this input to usable data.
As every sale has an AppID listed, and the AppID is different for each country you sell your app in, you can deduce if a sale was made inside the EU or not. You also know the price for each AppID, as you set this yourself. If the sale is in the EU, applying some mathematics should give you all the figures needed. You don't actually have to give any money to the taxman, as it appears Microsoft already did this for you.
It is a bit of a bummer that Microsoft doesn't provide the reports exactly as we need them, but at least it's possible to make those reports yourself, and store them for the X amount of years you are legally required to. It does require some work on your part, although I have seen apps posted that can do the bulk of the work for you.
Google's Android Market
The situation for Google's Android Market is a bit more complex. Google does not automatically charge the VAT for you, nor give the money to the relevant tax authorities.
It also does not provide any useful reports (at the time of this writing) you can use to calculate what you need to know. The exception to this is if you are from the UK, in which case you can get a full-blown Checkout account instead of the limited account the rest of the EU is stuck with. The full-blown Checkout account does provide ways to get you all the info you need (like IPN, or the history API, etc).
Luckily it is possible in your (limited) Checkout account to set a VAT rate for the entire EU, and it will be charged in market. That's the first thing you should do.
Now that the VAT has been set, buyers from the EU will be charged this VAT when they purchase your app, and you will actually get this charged VAT in your account. For example, let assume you have an app that costs 3.00 Euro excluding VAT, you have set the VAT for the EU to 19%, and someone from the EU buys the app:
Base: 3.00
VAT: 19% of Base = 3.00 * 0.19 = 0.57
List price / charged: Base + VAT = 3.57
Google's cut: 30% of Base = 3.00 * 0.30 = 0.90
Deposited in your account: Base - Google's cut + VAT = 3.00 - 0.90 + 0.57 = 2.67
Of this 2.67 you will receive in your account, in turn you should give 0.57 to the tax authorities.
Unfortunately it is at the time of this writing nigh impossible to reliably extract the needed information from Market reports so you actually know how much money you need to give to the tax authorities, or save and store your sales records. If you pre-calculate all the amounts you can interpolate it from a normal report, but this doesn't work if you have many different apps at pricepoints close to eachother. The advanced report gives you a lot more information which you can use, but the advanced report is limited to 500 results. Obviously it isn't very helpful if you sell a lot of apps and do your taxes once every 3 months.
Again, if you're from the UK there are other possibilities open to you (like IPN and the history API) to extract this information from Checkout because you have (or can get) a full Checkout account.
I have been talking with the Checkout team, and they have custom built a report for me including all the needed information. I can only hope this report will make into the developer portal, but for now it seems all you can do is request such a report by contacting Checkout support.
In conclusion
I hope this is a helpful article to someone. Again, do not take this as advise on exactly how to do this. You must consult your own accountants and lawyers to see if and how this all applies to you. The important bit you should take home about this article is that you need to check out what your responsibilities are regarding taxes and sales of your apps, and handle them!
