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I am a small time indie developer selling Android Apps. I do this as a hobby in my spare time.

Currently I am not VAT registered as the earnings are well below the £81k threshold. I usually "run at a loss" thus not needing to pay tax.

Recently Google introduced measures where they automatically take VAT out of the sell price. In effect giving the government "free money" as my sales are so low they are VAT free.

Without becoming VAT registered and having to submit quarterly returns what options do I have?

  • i think it's almost impossible to avoid this hassle. for bigger operators, you just open a company in a better jurisdiction, and use that company on playstore; but it would cost you the odd one or two thousand a year to achieve that. (of course, obviously you then just have to pay ordinary tax once you pay yourself, from, that company - there's no saving.) – Fattie Oct 18 '16 at 13:23
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You can't currently avoid it. The reason the legislation was introduced was to prevent the big-name developers from setting up shop in a low-VAT country and selling apps to citizens of EU countries that would normally be paying a much higher VAT.

You need to register for VAT and file quarterly nil-returns so that you get that money back. It's a hassle, but probably worth it just to recoup those funds.

From an article in Kotaku from late 2014:

You see, in the UK we have a rather sensible exemption on VAT for businesses that earn under £81,000 a year. This allows people to run small businesses - like making and selling games in your spare time, for instance - without the administrative nightmare of registering as a business and paying VAT on sales. Unfortunately, none of the other EU member states had an exemption like this, so when the new legislation was being put together, there was no exemption factored in. That means that if someone makes even £1 from selling something digital to another person in another EU country, they now have to be VAT registered in the UK AND they have to pay tax on that sale at whatever rate the buyer’s country of residence has set. That could be 25% in Sweden, 21% in the Netherlands, and so on.

[...]

There’s one piece of good news: even though anyone who sells digital stuff now has to be VAT-registered in the UK, they don’t actually have to pay VAT on sales to people in the UK if they earn less than £81,000 from it. (This concession was achieved earlier this month after extensive lobbying.) But they’ll still have to submit what’s called a “nil-return”, which is essentially a tax return with nothing on it, every quarter in order to use the VAT MOSS service. That’s a lot of paperwork.

Obviously Brexit may have a significant impact on all this, so the rules might change.

This is the official Google Link to how they've implemented this and for which countries it affects:

https://support.google.com/googleplay/android-developer/answer/138000?hl=en

Due to VAT laws in the European Union (EU), Google is responsible for determining, charging, and remitting VAT for all Google Play Store digital content purchases by EU customers. Google will send VAT for EU customers' digital content purchases to the appropriate authority.

You don't need to calculate and send VAT separately for EU customers. Even if you're not located in the EU, this change in VAT laws will still apply.

  • So US companies now have to charge VAT for digital sales to Europeans? And then waste tens of hours in order to report and forward it to European authorities? What a horrible law. – JonathanReez Jan 24 '17 at 21:28

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