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16 May2001, UK
Dear Dr. Ecommerce
I am trying to find case studies of example on VAT. I am specifically looking for examples on double taxation, non-EU member countries and EU-member countries,. mainly to do with the case if a company has been charged the wrong VAT rate (i.e. a consumer or a business). How does the VAT rate operate for non-member countries buying from non-member countries. Is this a case of the place of consumption VAT rate applies.
Also in your book, Don't Panic Do E-commerce, within your table of VAT and goods and VAT and Services p59 and p60. You mention your rate is this to mean the country where the goods have originated from or been supplied from.
I would like to know if there is anyway you could direct me to this information, as having scanned the press, journals and your book it is hard to find any.
I would sincerely welcome any help.
Many Thanks
Sarah
Dear Sarah:
Double taxation is only likely to occur on small purchases. Firstly, goods purchased by overseas (ie. non-EU) customers - whether business or consumer - are zero-rated for VAT (ie. VAT is 0%). Services have no VAT.
However, customers in countries which have VAT are normally obliged to pay VAT on products imported into the country. For example, if a Thai consumer purchases a handbag from a European shop, she will have to pay 7% VAT + customs duties on the handbag when it enters Thailand. Of course it is possible that the Thai customer buys a handbag from a small on-line shop not used to doing international business and ends up paying European VAT on the purchase and Thai VAT when the handbag comes to Thailand. But these cases are relatively rare.
On the B2B front, consider a Thai company that imports 100 European handbags to resell in their Bangkok shops. The handbags will be zero rated for VAT. The company will have to pay Thai VAT and import duties when the handbags arrive in Thailand. They will eventually mark up the handbags (based on the price without VAT), sell them and collect VAT from their customers. At the end of the month, they will submit their VAT claim to the tax office and pay VAT collected minus VAT paid. In the end, VAT is actually paid only once by the end user.
If someone pays the wrong VAT rate, it will have to be resolved when the error is discovered. There may be some penalties for the error, particularly if the payee has paid insufficient VAT. Attempting to cheat on VAT is illegal, so attempting to cheat could lead to fines or possibly a prison sentence if the fraud is substantial.
If non-member countries buy from non member countries, VAT issues are subject to the laws of the two countries involved in the transaction. In general, however...
- exported products are either zero-rated or have no VAT
- imported goods are subject to VAT at port of entry
Good luck,
Dr. Ecommerce