Why Does The Payment Processors Charge VAT From Other Countries?

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Hi! I have noticed that Clickbank and all the other payment processors are charging VAT on my purchases.

For example: If I buy something from ClickBank, I have to pay a VAT on 25%. But how on earth can ClickBank do that? I live in Norway and ClickBank is based and registered in USA, right? So how can they then charge me a VAT on my purchases?

I thought it was ilegal to charge VAT from other countries, or have the laws been changed?


This doesn't just apply to ClickBank, but also with other payment processors like Click2Sell.



I'm really confused.:confused:
#charge #countries #payment #processors #vat
  • Profile picture of the author Alexa Smith
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    Originally Posted by taskemann View Post

    Hi! I have noticed that Clickbank and all the other payment processors are charging VAT on my purchases.
    ClickBank is not a "payment processor", Jimmy. It's a retailer.

    The difference is very significant.

    When "your" customer buys your product there, he's actually buying it not from yourself, but from ClickBank, who buy it from you at the wholesale price of 92.5% of retail, and then charge the customer (in addition to the retail price) VAT according to the rate they must pay in their own country.

    Originally Posted by taskemann View Post

    I thought it was ilegal to charge VAT from other countries
    You were mistaken.

    If - for example - you sold your products directly to your customers, using PayPal, which (unlike ClickBank) is a payment processor, VAT would not be added to the price by them (though you could choose to add it, yourself, I suppose), but you yourself would have to pay to the Norwegian tax authorities the 25% component representing VAT (once your turnover is enough to register for VAT, and so on). It's much easier for you this way: ClickBank is the retailer instead of you, and it's effectively acting as the "tax collector" on your behalf, so you're not involved in it.
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    • Profile picture of the author canada94
      Thanks for that advice Alexa, i wondered the same thing, now you've cleared that up, sorry for hijacking your post in the first place Jimmy.lol great question.


      kevin
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    • Profile picture of the author taskemann
      Thank you Alexa! Finally I understand!


      But as you mentioned in the "PayPal example", I only have to pay VAT to the Norwegian state if the customer lives in norway (due to digital products) or / if the product / service will be used in Norway. I know this because I asked my accountant about this when I started my business. (It's required by law for every business to have a accountant here).

      Originally Posted by Alexa Smith View Post

      ClickBank is not a "payment processor", Jimmy. It's a retailer.

      The difference is very significant.

      When "your" customer buys your product there, he's actually buying it not from yourself, but from ClickBank, who buy it from you at the wholesale price of 92.5% of retail, and then charge the customer (in addition to the retail price) VAT according to the rate they must pay in their own country.



      You were mistaken.

      If - for example - you sold your products directly to your customers, using PayPal, which (unlike ClickBank) is a payment processor, VAT would not be added to the price by them (though you could choose to add it, yourself, I suppose), but you yourself would have to pay to the Norwegian tax authorities the 25% component representing VAT (once your turnover is enough to register for VAT, and so on). It's much easier for you this way: ClickBank is the retailer instead of you, and it's effectively acting as the "tax collector" on your behalf, so you're not involved in it.
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      • Profile picture of the author Alexa Smith
        Banned
        Originally Posted by taskemann View Post

        But as you mentioned in the "PayPal example", I only have to pay VAT to the Norwegian state if the customer lives in norway (due to digital products) or / if the product / service will be used in Norway.
        Ah, I see ... fair enough. I can't even understand all the niceties of the UK's VAT rules, so I certainly can't offer too many statements about the Norwegian ones! :p

        Good luck with your product, Jimmy ...
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      • Profile picture of the author John Coutts
        Originally Posted by taskemann View Post

        Thank you Alexa! Finally I understand!


        But as you mentioned in the "PayPal example", I only have to pay VAT to the Norwegian state if the customer lives in norway (due to digital products) or / if the product / service will be used in Norway. I know this because I asked my accountant about this when I started my business. (It's required by law for every business to have a accountant here).
        Are you sure?

        I live in Spain, and it's not that simple here. I *think* Norway comes under the same rules as the EU countries. It's complicated ... I may be wrong ...

        In a nutshell (if that's possible), I have to charge IVA, the Spanish VAT tax equivalent, if I sell my services to an individual consumer. If I sell to a VAT registered business, I don't have to charge the tax.

        This is because of a "reverse charge" system whereby the business purchasing my services is obliged to pay tax in their own country at their own rate.

        Of course, if I stated that my charges were $x amount, plus 18% VAT / IVA, no one would go for that, so I have to add it to my charges as a hidden amount. Naturally, I don't really like doing business with individual consumers any more, as they cost me an extra 18% in tax.

        That's my understanding, but I could be wrong ...

        John.
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        • Profile picture of the author taskemann
          I don't know anything about the EU rules, but Norway isn't a member of the European Union.

          If I as a VAT registered business sell products or services to private customers or non VAT business's within the norwegian border, I HAVE to collect VAT on the products / services. But not if I sell to an VAT registered business.

          If I sell my products or services outside the Norwegian border, it's illegal for me to collect VAT. That's why I'm so confused when the USA based retailers charge VAT on my purchases. Because VAT is an tax that's bound to a product or service within the country where the product are or where the service is done. So in the reality, the USA based retailers shouldn't charge VAT on the products I buy, I should instead pay VAT to the Norwegian state because it's "here" where the product are.

          Originally Posted by John Coutts View Post

          Are you sure?

          I live in Spain, and it's not that simple here. I *think* Norway comes under the same rules as the EU countries. It's complicated ... I may be wrong ...

          In a nutshell (if that's possible), I have to charge IVA, the Spanish VAT tax equivalent, if I sell my services to an individual consumer. If I sell to a VAT registered business, I don't have to charge the tax.

          This is because of a "reverse charge" system whereby the business purchasing my services is obliged to pay tax in their own country at their own rate.

          Of course, if I stated that my charges were amount, plus 18% VAT / IVA, no one would go for that, so I have to add it to my charges as a hidden amount. Naturally, I don't really like doing business with individual consumers any more, as they cost me an extra 18% in tax.

          That's my understanding, but I could be wrong ...

          John.
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          • Profile picture of the author John Coutts
            Originally Posted by taskemann View Post

            I don't know anything about the EU rules, but Norway isn't a member of the European Union.

            If I as a VAT registered business sell products or services to private customers or non VAT business's within the norwegian border, I HAVE to collect VAT on the products / services. But not if I sell to an VAT registered business.

            If I sell my products or services outside the Norwegian border, it's illegal for me to collect VAT. That's why I'm so confused when the USA based retailers charge VAT on my purchases. Because VAT is an tax that's bound to a product or service within the country where the product are or where the service is done. So in the reality, the USA based retailers shouldn't charge VAT on the products I buy, I should instead pay VAT to the Norwegian state because it's "here" where the product are.
            You are right that Norway isn't a member of the EU, but it is in the Eurozone, as far as I know, and I *think* that means it has to abide by EU rules on VAT in cross-border trade.

            All I'm saying really, is check up on this, and get more than one opinion. The rules changed a lot on January 1st 2010, and they changed again on January 1st 2011 and 2012. Changes will continue to take place up until 2015, according to what I have read.

            If you are right, then great - no problems! But if you are not right, you could get into trouble. I'd check the situation very carefully if I were you.

            Just saying ...

            John.
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          • Profile picture of the author Alexa Smith
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            Originally Posted by taskemann View Post

            Norway isn't a member of the European Union.
            It is, effectively, for these purposes, surely, Jimmy?! :confused:

            You're in the European Economic Area and (together with Iceland and Liechtenstein) are therefore obliged to adopt and enforce all "European single market" legislation (apart from maybe the fishing laws, which are a specific exception?), so that surely includes VAT?

            I'm neither an accountant nor a lawyer, so don't take my word for it, whatever you do, but I'll be surprised if this isn't so ... :confused:
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  • Profile picture of the author taskemann
    I have read about the different countries VAT systems on WikiPedia now: Value added tax - Wikipedia, the free encyclopedia And it look like the system varies a lot from country to country.

    But thanks anyway!


    -Jimmy
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  • Profile picture of the author ezmystic
    I think Norway falls under the same eu rules as its in the eea so meaning no import taxes etc between the countries in the area, but the vat will be charged by clickbank to everyone in the area based on where their European operation is based. Was much better when we just bought from and sold from clickbank USA, but eu has to stick its nose in as tax is being lost. Maybe try another vendor who doesn't play the eu games and is basically US operation, and sales outside USA are just bonus to it so don't care about these rules
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  • Profile picture of the author taskemann
    "It shall not be paid output tax on the sale of goods out of the VAT area, see the Value Added Tax Act § 6-21. With the tax area means the Norwegian mainland and all the area within the territorial limit, but not Svalbard, Jan Mayen and the Norwegian dependencies. The exemption also covers sales of goods from the mainland to the continental shelf.

    The exemption applies only when the seller sends the goods to the recipient's address abroad, Svalbard, Jan Mayen, or on the continental shelf. Buyer may in principle not even collect the item directly from the seller's storage and expense to take it out of the country. (With the exception of indirect export, see text below).

    It is the exports resulting in the exemption, and not know who the customer is or who is receiving the invoice. Buyer's place of residence is basically irrelevant. What matters is that the conditions of the sale means that the goods is delivered to the buyer abroad.
    "

    Source (translated from): Merverdiavgift ved eksport av varer > Sticos nettsted
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    • Profile picture of the author John Coutts
      Originally Posted by taskemann View Post

      "It shall not be paid output tax on the sale of goods out of the VAT area, see the Value Added Tax Act § 6-21. With the tax area means the Norwegian mainland and all the area within the territorial limit, but not Svalbard, Jan Mayen and the Norwegian dependencies. The exemption also covers sales of goods from the mainland to the continental shelf.

      The exemption applies only when the seller sends the goods to the recipient's address abroad, Svalbard, Jan Mayen, or on the continental shelf. Buyer may in principle not even collect the item directly from the seller's storage and expense to take it out of the country. (With the exception of indirect export, see text below).

      It is the exports resulting in the exemption, and not know who the customer is or who is receiving the invoice. Buyer's place of residence is basically irrelevant. What matters is that the conditions of the sale means that the goods is delivered to the buyer abroad.
      "

      Source (translated from): Merverdiavgift ved eksport av varer > Sticos nettsted
      OK. I stand corrected, but I am surprised.

      Good luck in any case!

      John.
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