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Google’s Changing EU VAT Payments, They’ll Pay It For Developers

December 2, 2014 - Written By David Steele

I don’t get to write about tax for Android Headlines all too often, but don’t worry, I’m not about to change that habit! There’s a change happening within the European Union regarding how value added tax, or VAT, is collected and it’s going to change how developers collect and pay for this tax. Presently, when an application is sold, Google skim off their 30% of the proceeds and send the net proceeds to the developer. It’s then up to the developer to inform and of course pay the duty owed on these sales. The change, which takes place starting December 1st, places the emphasis on Google to pay this tax for the developer, which means that the cash flow generated by a sale will be lower. It also means that developers don’t have to worry about paying VAT on money accrued through Google Play Store sales.

Is this a good thing? In theory, it should be neutral for developers. Their revenue will be the same, but they’ll receive lower cash flow. Of course, developers should be splitting the cash received from app sales into that allocated for the tax man and everything else. This avoids the penalty of having to find a lump sum as the end of the fiscal year approaches; it’s not always so straightforward for the smaller developers! There can be several months between collecting cash for an application sale and having to send it to the tax man, so there’s a little loss of interest here. Against this, smaller developers no longer need make the tax calculations or submit the VAT paperwork. Less tax calculations, less tax paperwork gets a big thumbs up from me, especially given how low interest rates are!

The change in EU tax laws won’t mean a juggling of application prices and developers won’t have to change anything; if you spot a change in an application price and the rationale given is because of the change in tax laws, let us know! The idea behind the change in law is partially to streamline and simplify tax administration, because as I’ve already alluded to, very few people enjoy completing their own tax assessment forms. Things get awfully complicated when we consider how an application developed in one country may be sold all over the world; each country has its own tax laws, meaning it’s own administration. It would, I’m sure, be frustrating to have to complete a VAT assessment because you sold three applications into that country! It’s also driven by Governments aware that it might be all too tempting to misplace, forget or simply not complete those VAT assessments and they will be losing tax revenue.

Do you complete your own tax forms? Are you an accountant and fill in lots of tax forms? Have you suffered from having to complete tax forms from half a dozen EU countries across the world and welcome this change? Let us know in the comments below.