Questions about value added tax
March 2, 2013 | 200,00 EUR | answered by Dipl.-Kfm. Frank-Olaf Illiges
Dear Sir or Madam,
I am currently a small business owner and have not opted for VAT registration. At the moment, we only offer digital goods - our own products as well as acting as a reseller for third-party products. We handle the invoicing, meaning we issue a corresponding credit note (reverse invoice) and also take into account whether the author of the third-party product needs to or is allowed to charge VAT. Therefore, we are the contracting party for the end customer.
As I have been delving into VAT in the past few days, I would like to prepare my system so that I can immediately charge VAT later on (basic functions are already in place, but the details are currently missing). This has raised some questions for me, and I would appreciate it if you could answer them. If there are any missing background information, I am happy to provide it.
Here are my questions (I refer to the manufacturers of third-party products as "authors"):
- In which cases (also considering international authors) can I claim input tax on credit notes issued by us for sales of an author?
- In which cases am I allowed to claim input tax on the services of a payment service provider (we use payment service providers from Germany, Austria, and PayPal)?
- Should VAT be calculated on the sales commission we charge?
Regarding the last question, the calculation of the credit amount has been as follows (in this order): "Net sales price" + "VAT for the author" (if they are allowed to charge it; calculated from the net sales price) - "Net sales commission" - "Gross fees for the payment service provider" (in relation to my second question: If we are allowed to claim input tax, the net fees are deducted).
I have left the determination of the "VAT for the author" entirely to the author, meaning they have to determine whether they need to charge VAT on the sales made through us. If we are not allowed to claim input tax, we include the VAT to be paid to the author in our sales price.
Dear inquirer,
Thank you for your inquiry, which I am happy to answer taking into account your input and the rules of this platform.
Please note that my explanation is based on the facts presented, and that adding, omitting, changing information, or the ambiguity of the information can change the tax result.
As I understand from your description, you are commissioned by the authors to provide a miscellaneous service electronically (digital products) on their behalf but in your own name to end users (entrepreneurs, private individuals). This constitutes a so-called commission sale of services (§ 3 para. 11 German VAT Act (UStG), section 3.15 para. 1 sentence 6 VAT Application Decree (UstAE)). In this case, the authors and you simultaneously provide the miscellaneous service for the end consumers. Therefore, you are both the recipient and provider of the service.
The possibility of deducting input tax on the VAT charged by the authors depends fundamentally on the nature of your output supplies. If you provide the miscellaneous service to entrepreneurs or private individuals residing in Germany, this service is subject to VAT at the standard rate of 19%.
If, on the other hand, you provide the miscellaneous services to entrepreneurs residing in the EU or a third country, the service is deemed to be performed at the business premises of these entrepreneurs abroad and is therefore not subject to VAT in Germany (§ 3 a para. 2 UStG). Furthermore, the liability for VAT shifts to these entrepreneurs as recipients of the service (§ 13 b para. 1, para. 2 No. 1 and para. 5 UStG).
If you provide the miscellaneous services to private individuals residing in a third country, the service is deemed to be performed at the residence of these individuals abroad and is therefore not subject to VAT in Germany (§ 3 a para. 4 No. 13 UStG).
If you provide the miscellaneous services to private individuals residing in an EU country, the service is deemed to be performed at the business premises of your company in Germany and is therefore subject to VAT in Germany at the standard rate of 19% (§ 3 a para. 1 and para. 5 UStG).
Since the miscellaneous services performed abroad would be subject to VAT in Germany, you can claim the input tax on these services, as well as on the services that are actually subject to VAT in Germany and are charged by the authors, as input tax (§ 15 para. 1 No. 1 and No. 4, para. 2 No. 2 UStG).
For the input services received from companies based abroad, it should be noted that the liability for VAT for these services shifts to you as the recipient of the service. Therefore, you must determine and pay the VAT for these services in Germany, but can also claim it as input tax.
The miscellaneous services provided by the payment service providers are generally VAT exempt in Germany (§ 4 No. 8 UStG). Therefore, an input tax deduction is not possible. However, the payment service providers may opt to waive the VAT exemption (§ 9 para. 1 UStG). In this case, the payment service providers must show VAT in their invoices, which you can claim as input tax.
Your commission ultimately results from the difference between the selling price of the service to the end customer and the purchase price of the service from the authors. Since you already pay VAT for the service to the end customer (if the sales are subject to VAT) and claim input tax for the input services, you do not need to separately calculate and pay VAT for the sales commission.
Kind regards,
Dipl.-Kfm. Frank-Olaf Illiges
Tax consultant
Am Wieksbach 55
33378 Rheda-Wiedenbrück
Phone: 05242/4055666
Fax: 05242/4055677
e-mail: office@illiges-steuerberatung.de
Website: www.illiges-steuerberatung.de
