ClickBank have produced the following FAQ on VAT.
Beginning July 1, 2003 all sellers of digitally-delivered products and services are required by law (known as E-Commerce Directive 2002/38/EC or the "Directive") to collect VAT taxes if the buyer resides in one of the European Community (EC) countries. ClickBank, like all sellers, must comply with the law.
VAT (Value-Added Tax) is similar to a national sales tax. European consumers are used to paying VAT on nearly everything they purchase. The new Directive extends VAT taxation to goods and services sold to Europeans over the Internet.
Yes. The law states that VAT must be collected from any BUYER residing in the EC regardless of the location of the seller. EC sellers have been collecting VAT from EC buyers now for some time. The new law extends the collection obligation to non-EC sellers, and is intended to level the playing field between EC and non-EC sellers.
The tax rate may change from time to time and varies from approximately 15% to 25%, depending on the country. As of July 1, 2003, the VAT rates are:
AT Austria 20.0%
BE Belgium 21.0%
DK Denmark 25.0%
FI Finland 22.0%
FR France 19.6%
DE Germany 16.0%
GR Greece 18.0%
IE Ireland 21.0%
IT Italy 20.0%
LU Luxembourg 15.0%
NL Netherlands 19.0%
PT Portugal 19.0%
ES Spain 16.0%
SE Sweden 25.0%
GB Great Britain 17.5%
In order that a seller can properly account for the calculation, collection, and remittance of the VAT, the following operational tasks must be undertaken:
1. Determine in real-time the residency of all consumers to
determine if the transaction is taxable and at what rate.
2. Maintain rate tables for each country and region where VAT applies.
3. Run tests to validate the consumer-entered and system-collected data and confirm the VAT liability.
4. Present the buyer with the full amount of the transaction, including any applicable VAT.
5. Store transaction level details sufficient to file a quarterly VAT return and remit the amount due.
6. Retain these records for up to ten years for audit purposes.
Vendors are not required to file any returns with the EC for sales made through ClickBank. ClickBank, acting as the retailer of your product or service, must comply with the Directive. We handle all compliance requirements. We determine if VAT applies, and at what rate. We then collect the tax, file a return with each of the 15 countries in the EC, pay the tax, and handle any foreign currency exchange issues.
At least ten new countries are scheduled to join the EC in 2004. They will likely also require VAT to be collected on sales to their residents. Additionally, a majority of U.S. states are planning to require sales tax on digital goods and services in the near future. ClickBank has already made plans to comply with these requirements if and when these state's plans become law.
Third-party processors like PayPal, iBill, and 2CheckOut may not offer VAT collection services at this time (July 1, 2003). If you choose to use them for some of your sales, you may be responsible for collecting, remitting, and filing returns yourself.
There is no separate charge for our VAT collection services; however, our existing rate structure applies to the grand total of the order (suggested retail plus VAT tax).
Refunds and chargebacks are handled exactly as they are today. The customer will be refunded the full amount that was charged to their credit card including any VAT tax that was charged at the time of the purchase. ClickBank, of course, refunds the VAT tax portion of the sale to the buyer.
Taxable transactions will be identified with a "T" next to the "CTRY" field. You will also notice that the profit on a taxable sale will be a few pennies less, since the ClickBank fees apply to the total amount of the sale including the tax. For example, the following two sales are for a product with a $29.95 retail price and a 40% affiliate commission:
date time order# link profit referral ctry customer info ==== ==== ======= ==== ====== ======== ==== ============== 07-08 10:01 X7CE0002 01 $15.79 by stever T GB JACKSON, C 07-08 10:00 XB370001 01 $16.02 by stever US/IL GROTEFELD,
The profit difference of $0.23 is due to the fact that the ClickBank fee is charged on the total sale amount plus VAT tax (in this case $29.95 + $5.24). Here is the detailed profit calculation:
|VAT Tax||No VAT Tax|
|Less: ClickBank Discount (7.5% +$1)||-3.64||-3.25|
|Less: VAT Tax||-5.24||0.00|
|Affiliate Commission (40%)||-10.52||-10.68|
Listed below are some links to more information:
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