Google Adsense changes: VAT hit for publishers?
by Brian Turner
Google have just announced to UK publishers some dramatic changes to Adsense TOU.
The first is that UK publishers will soon have all reporting done in GBP. While at present this is a voluntary process, Google have made it clear that in future all reporting will be in GBP, and to save USD versions of income history now.
The second, and potentially most significant change, is that the contract will not longer be with Google Inc – the main US corporation – but instead, with Google Ireland Ltd.
This sets off a whole potential VAT issue, and Google seem to expect this – but at present are disclaiming any liability.
According to Google:
- Publishers are responsible for paying any local taxes in their jurisdiction.
Google will only issue VAT refunds to publishers with an address in Ireland.
- The governing law changes from California law to either English or local law.
This could be very big – and very significant. In dealing with Google Ireland Ltd, it means UK publishers are now dealing with an EU corporation. And that means potential liability for VAT.
However, Google seems to be disclaiming any VAT liability outside of Ireland.
The tax rules on European VAT can get awfully complicated, and Google may be interpreting them correctly in believing that there is no VAT liability – in other words, that UK publishers will not be expected to charge VAT to Google.
This could turn out to be a big can of worms, though, and no doubt HMRC will eventually get around to looking at the issue more closely.
In the meantime, reports for Adsense publishers in France, Germany, and Italy are already offered in Euros, and so far we’ve heard little about the VAT issue arising from that.
We’ll keep you up to date on any further developments on this issue, but in the meantime, hopefully the move towards local currency – GBP for UK publishers will be a welcome and smooth transition, and not result in any ugly confrontations with HMRC.
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Hi
Re VAT:
As Adsense are advertising commissions, for UK businesses they will be out of the scope for UK VAT ie are not included in your VAT return nor in the VAT registration calculation. This was also the case when they were in US.
The reason is that , under current VAT law, advertising services are deemed to be supplied where the customer belongs ie outside UK and to quote HMRC …
If you are in the UK and the place of supply is in another EU country, the supply is outside the scope of UK VAT if your customer is in business.
[ Link is http://www.hmrc.gov.uk/vat/managing/international/exports/services.htm#4 ]
Regards
Keith [HRBS.biz]
I think it would be significant for publishers who stand to gain & save in future. But what kinda implications it would have on other countries?