Sep 4, 2015
Since September 10 Albania, Norway, and Morocco are treated differently by Google Play due to new digital tax rules.
A recent email from Google Play stated that due to a VAT [value added tax] law in the three countries Google will now be “responsible for determining, charging, and remitting VAT for Google Play paid apps and in-app sales to customers in Albania, Norway, and Morocco.”
The September 3 email from the Google Play Team to Google Play developers also included details on how the VAT is to be remitted to the appropriate tax jurisdiction:
Google will send VAT to the appropriate authority for paid apps and in-app sales made to customers in these countries. You won’t need to calculate and send VAT separately for customers in these countries, and no action is required on your part.
This change applies to all paid apps and in-app sales made to customers in Albania, Norway, and Morocco, even if your business is not located there.
App stores and new digital tax rules
In general an app developer selling to an app store (such as Google Play or Apple’s App Store) does not have to worry about collecting and declaring VAT as the app store is responsible for taking care of the VAT liability on the app developer’s behalf.
This is due to the fact that this sale is deemed to be business-to-business (B2B), from app developer to app store. The app marketplace – in this case Google Play – operates the B2C sales with the end customer. It is crucial to remember that only B2C sales of digital services are affected by new international digital tax rules.
Google Play will now collect and declare VAT on behalf of app developers who have customers in Albania, Norway, and Morocco. However, app developers should take a close look at their existing contracts. Contact your tax advisor to clarify all the relevant points of your contract.
Taxation of the digital economy
The last eight words in the last paragraph are crucial “even if your business is not located there.” The international consensus towards the taxation of the digital economy has been to tax consumption of digital services. This requires a destination-based approach to digital taxation.
The EU introduced new rules in January 2015 designed around this principle. Now, EU VAT on the cross-border supply of digital services is applied based on where the customer is located not where the digital service merchant is located. The location of the customer now determines what VAT rate to apply.
Taxamo content is created for guidance only, please consult your local tax advisor.