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Dr Ecommerce,

If a company is based in a non-European country and is delivering a Web site to a customer located in Belgium, on the invoice send from the company, does the company needs to add VAT ? If VAT needs to be added , is that the VAT of Belgium ? Does it make a difference if the customer is a company (one person or limited company) / business which has to pay VAT in Belgium ?

Please note that the Website will be hosted outside of Europe. Analysis and delivery have been done remotely.

If a company is based in a non-European country and it starts up an
e-commerce business for customers in Europe (Belgium for example), should it add VAT on the price listed for the goods ? Does it make a difference if the customers are private persons or companies which also have to pay VAT in Belgium ?

Thanks

DN

Dear DN:

For the time being, if your company is legally registered outside of the European Community, then you do not need to add VAT to the invoice. However, it is the purchaser's responsibility to pay any taxes once the product is imported into Belgium. In the case of a large business to business purchase, such as a container load of goods, this is normally paid at the port of entry before the goods can be released from customs.

In the case of small purchases, this is usually payable at the post office or via the courier company which delivers the product. In practice, some countries don't bother to tax on small purchases delivered via post or courier,

In the case of products delivered over the net, the purchaser is liable to tax at the time of purchase. Consumers, of course, seldom bother. Companies, on the other hand, can claim the cost as an expense on their taxes, so it is worth their while to claim the cost. But again, this is the purchaser's responsibility.

The way this works can be a bit confusing. Assume your customer is a Belgian company registered for VAT, let's call them eBelgico. eBelgico, when submitting invoices to the tax office for VAT, calculates the amount of VAT they should pay on the product. This amount is entered into their VAT calculation and is theoretically payable to the government. However, if the product is 100% deductible, eBelgico can deduct this "paid" VAT against VAT they have collected from their customers. So, in the end, they don't actually pay any VAT, although the VAT has been used in calculating their VAT bill (or compensation) to the tax office. On the other hand, if the product is only 50% deductible as a business expense, then eBeglico would still have to pay the remaining 50% of the VAT to the government.

Finally, there are changes afoot in the way VAT works for digital products. Take a look at the first story of June's ePolicy News .

Dr. Ecommerce