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VAT treatment for purchase of "SaaS" products

If I access a US operated website/app, am I purchasing goods or services?

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I have many subscriptions to online services, the vast majority of which are operated by US based entities. I'm not clear if these subscriptions should be treated as goods or services for VAT purposes. I've seen guidance relating to the supply of digital goods to EU consumers but in this case I am a UK VAT registered business buying a "service" from outside the UK.

Logically it seems like I'm buying a product, but there's no question of deferred vs upfront VAT as nothing is physically entering the UK.

Is there any guidance regarding VAT treatment of digital services for businesses? 

Thanks

Replies (11)

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Jason Croke
By Jason Croke
02nd Aug 2021 18:11

You are buying digital services. Goods are things you can touch. I'm curious as to what guidance you've read relating to "digital goods".
Answer to your question is here, section 5 of this link
https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a#...

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Replying to Jason Croke:
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By rmillaree
02nd Aug 2021 18:19

Jason Croke
"I'm curious as to what guidance you've read relating to "digital goods"

Perhaps its Alvara trying to muddy the waters !! if anyone should know better ......

https://www.avalara.com/vatlive/en/vat-news/brexit---selling-digital-goo...

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Replying to rmillaree:
Jason Croke
By Jason Croke
02nd Aug 2021 20:23

That's a confusing headline, the article is about MOSS which is for digital services, but yes, can now see how the OP is getting confused.

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By thobson
02nd Aug 2021 18:25

Thanks for the link Jason. I've seen the phrases "digital goods" and "digital services" mentioned on the internet. Shopify (e-commerce platform) refers to digital goods for example: https://help.shopify.com/en/manual/taxes/tax-on-digital-products.

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Replying to thobson:
Jason Croke
By Jason Croke
02nd Aug 2021 20:27

Thanks, the Spotify link first mentions digital goods, then says view the EU klnk for digital services! In the same sentence.

It may be a language thing, maybe aimed at overseas traders where goods is an easier way to get your attention, but downloads and streaming are not goods, they are services, as are online subscriptions like quickbooks, etc.

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By Leywood
03rd Aug 2021 12:04

Moral of the story never take VAT advice Shopify.

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By I'msorryIhaven'taclue
03rd Aug 2021 13:00

I'm looking at a monthly subscription invoice from a US company Flaticon (a digital service), but originating from their Spanish office, invoiced to a UK company, in US dollars but carrying a 20% VAT element itemised and clearly marked "UK VAT".

I assume the UK company is doing the correct thing by claiming the input VAT, with no reverse-charge involved. The invoice is for June, so maybe all that will change with the next (post 1st July) invoice. (We'll see!)

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Replying to I'msorryIhaven'taclue:
Jason Croke
By Jason Croke
04th Aug 2021 10:47

If the supplier has charged UK VAT, then I think you will find the invoice is either addressed to a person (rather than a business) or it was not made clear the purchase was being made by a business.

Digital services to consumers (B2C) are charged with UK VAT, digital services to businesses (B2B) are treated as reverse charge (no VAT on invoice, recipient accounts for VAT on VAT return).

Technically, if the supply is to a business, it should be reverse charge, so go back and get supplier to reissue as a business supply/no VAT. If they can't do that, then you could reclaim the VAT but the (small) risk is that HMRC take a view that the VAT is not recoverable because it shouldn't have been charged in the first place...you cannot reclaim VAT where it is incorrectly applied by the supplier.

If its like £3 of VAT then HMRC unlikely to get upset but if it is a large sum, every month, then best to get it right. This issue arises often because a business owner will subscribe to something under their own personal name (LinkedIn or Spotify) and then try and reclaim the VAT through the Ltd, when in reality, the supply is to a person, not the business and business can only reclaim VAT if invoice addressed to the business, etc.

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Replying to Jason Croke:
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By I'msorryIhaven'taclue
04th Aug 2021 14:48

Thanks Jason,

I see you've addressed a similar issue in another thread today.

Mine doesn't appear to follow any of the rules:

Freepik Company S.L. (registered in Malaga, Spain) invoice is addressed directly to UK Limited Company (on line 1; And there's no director's name whatsoever) and carries the client's "UK VAT Registration Number XXXX".

Small amount $1.66 USD VAT per month - the parent is evidently a US company (stated on invoice as "TAX EUR 1.37 EUR").

In the smallprint at the foot of the invoice it states:
*EU VAT Directive 2008/8/EC amending directive 2006/112/EC as regards the place of supply of services. **United Kingdom VAT Rate Included.
* is referenced to invoice net total $8.33 USD lineage
** is referenced to TAX RATE 20% lineage

That's the June 2021 invoice, and I wonder whether pre 1st July the company might perhaps have been operating on interim rules. We'll see, I guess, when July's invoice turns up.

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Replying to I'msorryIhaven'taclue:
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By rmillaree
04th Aug 2021 22:10

I think this company must have a uk vat number - that should show up on the invoice somewhere. That being the case it’s the same as any other standard rated supply.
If the go vat number isn’t shown supplier should be quizzed to confirm.

I have slightly cheated here as vat search confirms a company with that name does have a uk vat number.

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Replying to rmillaree:
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By I'msorryIhaven'taclue
05th Aug 2021 09:41

Nice try!

From foot of the invoice:

FREEPIK COMPANY, S.L.
13 Molina Lario Street, 5th Floor 29015 - Málaga, SPAIN with VAT Number ESB93183366. Commercial Registry of
Málaga, volume 4994, sheet 217, page number MA-113059

They're invoicing a monthly subscription to "Flaticon", a picture and graphics resource (so certainly digital services, I would have thought).

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