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Right now I pay 20% CIT and 35% of national insurance. So as I understand I have to pay VAT (25%) too?
You PAY VAT anytime you purchase anything from your local market according to your local legal system.
No you don’t need to pay VAT on earnings unless:
- You’re earnings reach in the last 12 months have been at the VAT limit for your country (£77k in the UK) - You are registered for VAT (voluntarily) which can be beneficial if you buy a lot of goods (not applicable to web designers IMHO).
You need to talk to a tax professional in your country but unless you can say yes to the 2 above then you don’t need to worry.
I think you need to pay VAT only if you’re receiving money from EU. Since you receive money from Envato, Australia, I don’t think you’ll need to pay VAT even if you’ll reach that limit and be registered for VAT
If Envato is an Australian-based company then they should add 10% VAT to all prices – http://world.tax-rates.org/australia/sales-tax Who should collect VAT here? Envato (10% VAT) or authors/sellers?
You pay VAT when you are supplied goods or services by another company, Envato wouldn’t collect VAT unless they are supplying goods / services to someone else.
It’s up the receiptant of the VAT to pay it in their country of residence, mine being the UK
FD is right though, you will only pay VAT on income from a EU source, so it wouldn’t be needed in the op’s case.
Do still speak to a tax professional as they will be able to advise much better than someone on the internet (as they will know your countries laws).
I think VAT policy is the same all over EU so I think the same rules apply as here in Slovenia.
Actually having an VAT ID and have to charge VAT is not entirely voluntary. In Slovenia the limit of having to “enroll” into the VAT system was raised from 25.000 € to 50.000 € of annual revenue. So if during a calendar year you exceed this limit you HAVE to start charging VAT.
But you have to charge VAT only when you invoice in your country, if you invoice to another country (even within the EU) you do not add VAT to the invoice.
So being in the VAT system is actually beneficial if you for example make most of your money from Envato, because you essentially get any VAT you pay for services or products in your own country back.
Fo example if in slovenia I buy stuff or pay services for 500,00 € + 20% VAT = 600,00 €, and would make all my income from Envato, I would get those 100,00 € of VAT back from the government.
Furthermore if you have a valid VAT ID, even if you buy stuff from an other EU member country, where you pay their VAT, with the proper documents, you can even get that VAT back. Usually web stores and such require you to send some sort of documents to prove that you have a valid VAT ID.
But you have to check the rates and limits in your own country. I don’t know how it is in other EU countries but here if I would exceed the limit before voluntary enroll for an VAT ID there would all sorts of complications with the TAX monsters.
I know how VAT system works The point is if you are buying a theme on Themeforest, then who is a seller? Envato or me?
envato. that is written on invoices. also, when you withdraw the money, the sender is envato.
Envato is invoicing the buyers so I guess that makes Envato the seller, right?
When I was working with oDesk (which is the same base financial flow) I’ve spoken with the tax office and I was told to “invoice” oDesk (basically just in invoice for my archive) and that’s it.
So in this case you “invoice” Envato, and because Envato is in Australia, you don’t include VAT.
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