[Previous] [Next] - [Index] [Thread Index] - [Previous in Thread] [Next in Thread]

Subject: Re: UKNM: VAT and trading locations
From: Craig Pickup
Date: Fri, 18 Dec 1998 14:49:30 GMT

Steve Johnston/IMRG wrote:

> The point of sale is actually the desktop of the customer. If a UK company
> is selling to a UK customer, it has to charge VAT (If the product is
> vatable). Period.

I must apologies for I was somewhat wrong in my earlier post. The point of contract
for sale of goods is either the location at which acceptance was made or as
determined by conditions of the contract itself. In terms of electronic
communication that, in the absence of any contract terms to the contrary, is the
location where the acceptance is received - which is indeed the customer's desktop.

On VAT however, it is the place of supply that is the determining factor not the
point of sale. The place of supply of goods is deemed to be "the location of the
goods when you allocate them to a customer's order." This means that if your goods
are electronic, eg software or information, and are available for download or online
consumption, then the place of supply, and hence whether VATable or not, is where
they are stored and delivered from. The stored location will presumably be the web
server and so the location of the web server is important for these types of goods.

> Look at CDnow, previously they left the problem with the consumer, so on
> occasion, having bought your super-cheap VAT-free CD from the US a nasty
> surprise would arrive in the shape of a DHL bill for VAT on behalf of UK
> Customs & Excise and a small(ish) handling charge for DHL's trouble. This
> didn't happen too often, and the volumes were such that it wasn't causing
> any meaningful customer problems.

This is due to the fact that VAT is chargeable when goods are imported. The consumer
was being deemed to be importing the goods and so suffered the VAT. Personally I
think that this was an incorrect application of VAT - which may well be why it was
only intermidently applied.

> You go to CDnow now and buy from their European centre, you will get UK VAT
> added to your bill prior to shipping. So you are buying from a US firm with
> a base in Holland and yet are paying UK VAT.

The VAT rules states that if you sell goods from the UK to another EC country then
you do not need to charge VAT. However if those sales are to private individuals
then you must charge UK VAT. You will find that the rates of VAT being charged by

CDNow are the same which ever European country you register as being in. Some how I
can not see it being UK VAT if I am entering my details as being in Germany. I
therefore would assume that the VAT rate charged is that applying in the Netherlands
if that is where they are located, which also happens to be 17.5%. If they were
located in Austria, they would be charging VAT at 20% on CDs, in Portugal 17%.

Craig Pickup
Digitrade Ltd

UKNM is sponsored by Excite UK, visit us at http://www.excite.co.uk.
Email Khalil Ibrahimi khalilatexcitecorp [dot] com (mailto:khalilatexcitecorp [dot] com) to advertise on Excite.
Change your UKNM subscription use http://www.chinwag.com/uknm.html

  UKNM: VAT and trading locations - RE: UK, Steve Johnston/IMRG

[Previous] [Next] - [Index] [Thread Index] - [Next in Thread] [Previous in Thread]