SEDO - How do I know if I've paid VAT?

[grantw]

I've been wondering about this for ages too. Surely at the moment you are taking 10% of the tax mans money and we are then having to top that back up out of our payment?

Grant

 

[anthony]

You will find this on the commision invoice:

This is a tax-free extra service. Your VAT registration number: ########
The date of the service’s provision is the date of invoice.
The reversal of VAT liability referred to in § 13b UStG applies.

Just to give us some understanding of this, below is the English translation of 13b UStG from point 2.3:

2.2 Law in effect through 31 December 2001

The old withholding rules and zero withholding procedure were contained in old § 18 (8 ) UStG and old §§ 51 ff. UStDV. They applied to the following services taxable in Germany that were effected by entrepreneurs (businesses) not resident in Germany (non-resident entrepreneurs):

* Certain work involving the manufacture, construction, or processing of tangible objects including buildings where control over the finished product is transferred to the purchaser by the non-resident entrepreneur in Germany (so-called "work supplies");
* All services performed by non-resident entrepreneurs in Germany;
* Supplies of collateral to which the secured party receives title from the party providing security outside of insolvency proceedings;
* Supplies of real estate during an execution sale by public auction.

The withholding rules applied to the last two categories of supplies even if the performing entrepreneur was established in Germany instead of in another jurisdiction.

The following persons were required to withhold and remit VAT:

* entrepreneurs (as defined by VAT law); public law juridical persons; and
* small entrepreneurs (as defined by VAT law), a farmer or forester or entrepreneur subject to flat-rate VAT, and entrepreneurs effecting only tax-exempt (zero-rated) supplies.

It made no difference whether the recipient of the supply was established in Germany or not, or whether the supply related to the recipient's business or non-business activities.

The recipient of a supply subject to withholding was required to withhold the German VAT owing with respect to the supply and remit the proper amount to the appropriate German tax office.

Because of the recipient's input tax credit, the obligation to withhold was waived where the conditions of the so-called "zero withholding procedure" were met. The essential requirements were (i) that no VAT was shown on the invoice issued by the supplier and (ii) that, if VAT had been shown on the invoice, the recipient of the supply would have been entitled to deduct the full amount (full input tax credit).

The old withholding rules did not apply to barter or quasi-barter transactions.


2.3 Reverse charge system for years 2002 ff.

2.3.1 In General

The reverse charge system took effect on 1 January 2002. Under this system, the liability for VAT and the responsibility for paying tax on certain supplies is shifted from the supplier to the recipient. § 13b UStG makes the recipient liable for VAT on certain supplies effected by non-resident entrepreneurs (entrepreneurs established in foreign jurisdictions).

The types of supplies subject to the new reverse charge system are the same as those subject to the old withholding rules (see sec. 2.2 above).

The definition of non-resident entrepreneur is also unchanged. Non-resident entrepreneurs are entrepreneurs having neither their domicile, their legal seat (registered office), their principal place of management nor a registered branch establishment (Zweigniederlassung) in Germany, on the Island of Helgoland, or in a free trade port within the meaning of § 1 (3) UStG. Foreign resident entrepreneurs are treated as established in Germany if they own and let domestic real property, whether the rental is subject to VAT or VAT-exempt (cf. sec. 240 (2) UStR). Resident or non-resident status is determined at the time of performance of each supply.

2.3.2 New requirements for the supplier

Since the reverse charge system shifts VAT liability for certain supplies effected by foreign entrepreneurs from the supplier to the recipient, foreign suppliers are required to note on the invoice that their customer is liable for VAT on such supplies (new § 14 (1) sent. 1 UStG in conjunction with § 14a (4) UStG). The shift in tax liability is not contingent on this notation, and failure to include it does not affect the parties' substantive VAT liability. The recipient is still liable in such cases.

The invoice is not permitted to contain separately stated German VAT. A supplier who nevertheless shows VAT on its invoice is liable for the amount shown under the rule of § 14 (2) UStG. This liability is in addition to, not in lieu of, the recipient's VAT liability. However, it is possible to escape such liability by amending the invoice under certain circumstances.

2.3.3 New requirements for the recipient

There are changes as well for the recipient of a supply. The invoices received by the recipient will no longer show German VAT. While recipients need pay to the supplier only the invoice amount, which is net of VAT, they are required to calculate the VAT owing on the invoice, include the appropriate amount on their monthly or quarterly VAT returns, and remit the amount due. The tax authorities thus collect the VAT owing through the instrumentality of the recipient. However, recipients are also entitled to claim the relevant amounts as input tax on the same return to the extent they are entitled to an input tax credit under § 15 UStG.

The new reporting obligations incumbent on recipients are fulfilled by filing monthly and annual VAT returns. If it is unclear whether the supplier is a non-resident, the recipient of the supply has no VAT liability if its supplier furnishes certification of German residence from the tax office with jurisdiction over the supplier.

2.3.4 Accrual of tax

Under the old withholding rules, tax in principle accrued when the recipient of a supply paid the supplier's invoice. By contrast, the accrual of VAT under the new reverse charge system follows the standard VAT rules based on the agreed consideration. Except for partial payments or payments on account, the time of payment is irrelevant. Specifically:

* Tax accrues under § 13b (1) UStG when the invoice is issued or upon expiration of the calendar month following that in which the supply was effected, whichever is earlier.
* If the consideration is received in whole or part prior to performance of the supply or partial supply, VAT accrues pro rata under § 13b (1) sent. 3 UStG upon expiration of the reporting period in which payment was received.

2.3.5 Recipient's accounting obligations

The VAT owed by the German purchaser is calculated on the basis of the agreed consideration. This will generally be the amount shown on the invoice received. The applicable rate depends on the general rules: 16 % in most cases, 7 % for supplies subject to the reduced rate. Both the recipient and its foreign resident supplier are required to keep records showing above all the VAT tax base, the amount of tax owing for each of the two tax rates, and the time of receipt of consideration (§ 22 (2) sent. 1 no. 8 UStG).

2.3.6 Accounting system changes

The implementation of the new reverse charge system necessitates certain accounting system changes. Supplies for which VAT liability is shifted from the supplier to the recipient should be recorded on separate accounts (alternatively on collective accounts using a special code), just like intra-community acquisitions of goods under prior law. Information must also be recorded on the identity of the supplier, the nature of the supply, the VAT tax base, the amount of VAT owing thereon, and the time of receipt of consideration.

The recipient of a supply subject to new § 13b UStG may account for the transaction as follows:

1. Dr. Asset account (or expense account)
Cr. Cash account (or account payable)

2. Dr. Input VAT receivable (§ 13b UStG)
Cr. VAT payable (§ 13b UStG)

Use of the accounting codes previously used in recording transactions subject to the old withholding system or the zero withholding procedure must be discontinued. However, these codes must remain functional for evaluation purposes in case this is required during a future tax audit.

2.3.7 Barter transactions now covered

Although not subject to the old withholding rules, barter and quasi-barter transactions are covered by the new reverse charge system.

2.3.8 Supplies received by non-residents

Under the old withholding tax system, situations were common in which a non-resident entrepreneur effected supplies subject to German VAT, the recipients of which were likewise non-resident entrepreneurs. In such cases, it was sometimes possible to reach agreement with the German tax authorities for the foreign supplier to issue invoices that showed German VAT and remit the amounts owing to the tax authorities. This permitted the non-resident recipients to avoid registering for VAT purposes in Germany.

As recipients of supplies subject to the new reverse charge system, foreign businesses (entrepreneurs) are required to file monthly and annual VAT returns in Germany even if the only VAT they owe results from the reverse charge rules.

2.3.9 Entry into force of the new system (§ 27 (4) UStG)

Supplies by non-resident entrepreneurs effected prior to 1 January 2002 for which payment was not made until on or after 1 January 2002 are subject to the new system (VAT liability on the part of the purchaser = recipient of the supply).

Where payment or partial payment is received before 1 January 2002 for services carried out after this date and the withholding procedure or zero withholding procedure has been applied, the VAT liability of the recipient (Steuerschuldnerschaft) upon final settlement is reduced accordingly.

 

[sedo]

The commission invoice can be found by:

Logging into your account
My Sedo
Billing.

The invoice is on page 2 when you enter the pdf.

If you have not listed yourself as VAT registered in your Sedo account the message will not be shown regarding VAT.

 

[sedo]

I have confirmed the following with Gmbh finance:

It was a general decision to keep the commission from the gross price. This is communicated in our price list and also in our Terms of use and policies. This decision was taken to deal with all customers in the same way and to make it easier for everyone. Especially as we cannot deal with every single customers VAT regularities.

In the given example for zinger.co.uk both parties are based in the UK. Therefore the UK VAT regularities are valid between seller and buyer.

That's what the user described in the zinger.co.uk example.

As a German based company we cannot make sure we have knowledge of all VAT regularities around the world. But that is what we would have to do if we followed the suggestion of the user to ensure to deduct the commission from the correct net amount.

We therefore take the agreed sales price and deduct the 10% commission from it. While doing this we use the German VAT regularities to check if our commission invoice needs to be with or without tax.

regards

Joanna

 

[rob]

I have confirmed the following with Gmbh finance:

It was a general decision to keep the commission from the gross price. This is communicated in our price list and also in our Terms of use and policies. This decision was taken to deal with all customers in the same way and to make it easier for everyone. Especially as we cannot deal with every single customers VAT regularities.

In the given example for zinger.co.uk both parties are based in the UK. Therefore the UK VAT regularities are valid between seller and buyer.

That's what the user described in the zinger.co.uk example.

As a German based company we cannot make sure we have knowledge of all VAT regularities around the world. But that is what we would have to do if we followed the suggestion of the user to ensure to deduct the commission from the correct net amount.

We therefore take the agreed sales price and deduct the 10% commission from it. While doing this we use the German VAT regularities to check if our commission invoice needs to be with or without tax.

regards

Joanna

Just quoting the lot so it doesnt get edited.

"It was a general decision to keep the commission from the gross price. This is communicated in our price list and also in our Terms of use and policies."


http://www.sedo.com/uk/about-us/pricelist/

"10% of sales price, min. 50€ / 35£"

Where is gross prices mentioned?

The 'sales price' to me is just that, VAT is tax on top.

Please can I have a refund of all the comission you have wrongly charged on VAT, based on your price list information.

It could be worth updating your pricelist to reflect your internally decided 'rules', and make it clear to sellers that Sedo is 17.5% more expensive to sell on for UK VAT regged sellers.

 

[retired_member12]

Please can I have a refund of all the comission you have wrongly charged on VAT, based on your price list information...

You can simply call the VAT man and ask them to look into this, back it up with a written complaint to them and Trading Standards, they have no option but to look into it, although in my experience someone will speak to you by telephone first to clarify the problem. The complaint must come from someone who has been involved in the transaction for them to look into it, that is all.

 

[rob]

Just quoting the lot so it doesnt get edited.

"It was a general decision to keep the commission from the gross price. This is communicated in our price list and also in our Terms of use and policies."


http://www.sedo.com/uk/about-us/pricelist/

"10% of sales price, min. 50€ / 35£"

Where is gross prices mentioned?

The 'sales price' to me is just that, VAT is tax on top.

Please can I have a refund of all the comission you have wrongly charged on VAT, based on your price list information.

It could be worth updating your pricelist to reflect your internally decided 'rules', and make it clear to sellers that Sedo is 17.5% more expensive to sell on for UK VAT regged sellers.

Any update on this?

 

[sedo]

The price list will be updated.

regards

Joanna

 

[rob]

The price list will be updated.

regards

Joanna

Nice one - now you are admitting the price list quoted and actual charges were different, will you be refunding the difference?

 

[pmdpmd]

I'm sure it has been discussed before, but how crazy is it that Sedo auctions are conducted "inclusive of VAT (if applicable)". This means I can have 2 bidders, one from the UK and one from the USA bidding the same amount for my domain and one is really going to pay (and I am really going to receive) 17.5% less than the other. Here is an example bidding sequence listing the amount they are bidding and the amount they will actually have to pay and I will actually receive:

US-guy bid 1000 actual 1000
UK-guy bid 1100 actual 936
US-guy bid 1200 actual 1200
UK-guy bid 1300 actual 1106

Nothing I can do but root for the US guy.

This is the only auction I have ever come across in any line of business where this applies. Every other auction you simply add on the appropriate VAT on top of the bid price. Why don't they just include the seller's VAT status on the auction offer page so the bidder can work out whether he needs to pay VAT (it is already available in the sellers profile presumably for exactly this reason).

There is an even worse scenario when selling to EU buyers: If they realise the situation and don't reveal their VAT registration number to you, you have to charge VAT on the transaction and hand it over to HMRC. There is no way (according to my VAT office) of finding out if a company is VAT registered, you can only check if a VAT reg number they have given you is valid. Any VAT-registered EU buyer buying from another VAT registered seller in a different EU country can therefore save themselves the VAT amount by just not revealing that they are VAT registered. This is not a made up scenario, I have had this. The buyer (of a $,$$$ domain) was marked in Sedo as VAT "not applicable" so I assumed I would be losing the VAT, but an email direct to him (as I had dealt with him previously) resulted in a Romanian VAT number and meant it was VAT free under the reversal rules.

Has anyone else had a go at Sedo on this?

Paul

PS Incidentally, someone mentioned the "tax-free extra service" on Sedo's invoice. When I quizzed them about this, they told me to refer to my accountant - mine!. In fact it turned out they had accidentally sent the invoice to my Ltd company Sedo account, rather than a non-VAT reg'd partnership account I also had. When they reissued the invoice the message was gone and the VAT was charged (at 19%!). So its just a misleading message auto-generated if you have entered a VAT number - the service is not tax-free, it is just they don't need to charge VAT if the reversal rules apply.

 

[rob]

i think the equation Sedo use is:

Sedo + Vat = Utter confusion and nonsense



ps. good to see the price list has been updated as promised. Oh wait... it hasnt.