And for five points, Google Ireland is in which European country?

Erhmm... England? *evil grin*

Erhmm... England? *evil grin*

Let's hope Google's VAT geography is better. :) The Irish VAT rate is a few percentage points higher than the UK one I think (VAT on goods is 21.5% here). If Google starts charging UK VAT rates then things could get very messy.

Regards...jmcc

Before I forget. Thank you for everything ASA. It would appear Google is really doing its best to listen to us publishers :)

So what about Adsense stats in Analytics? They're still displayed in USD.

It is still unclear for me what for consequences eventually changing to local currency will have for income.
If it means pay VAT and then again pay local taxes then it is not acceptable.
Right now individual need to pay only local taxes for their Adsense income without VAT.

swa66 has summed it up quite well, I believe.

Core question is whether Google will

a) Not pay VAT to you as they are one of the exceptions, i.e. no VAT applies, or
b) Pay VAT to you, included in the current unchanged CPC, i.e. your EPC does not increase, but contains now local VAT, effectively reducing your income, or
c) Pay VAT to you, included in a changed CPC, i.e. your EPC will increase by the VAT they pay to you, effectively being neutral to your income.

And, yes, accepting the new terms will change your contract partner from Google Inc. (located in the U.S.A.) to Google Ireland Ltd. (located in Ireland/EU).

Another fine mess.

I think (and hope) a will apply. B seems very unlikely and possibly even illegal, since G will then directly profit off the tax system (i.e. they get to redeem part of your income!).

Well said zett.

Praying for A, fearing for B (and the inevitable (legal) fight), C would be tolerable/okay (the same earnings, but more paperwork for accountant, who would charge more).

Should all this VAT-talk be moved to a new thread with a proper name (and with a good summary)?

If Misja's point is correct (Change doesn't apply to publishers in Ireland) then I think there are no VAT changes for anyone.

Advertisers in US - Still with Google Inc and paying local tax
Advertisers in Ireland - Still with Google Inc and you sort out your own income tax
Non Irish but EU Advertisers - Paid in Euros from Google Ireland so no tax applies but pay your own income tax.

If Misja's point is correct (Change doesn't apply to publishers in Ireland) then I think there are no VAT changes for anyone.

No. Irish publishers are not affected yet because Google Ireland doesn't offer this to Irish publishers. VAT will have to be included on Google Ireland payments to publishers unless the publisher provides an EU VAT number to Google Ireland. (VAT will still have to be accounted for locally). EU publishers who are not VAT registered or are below the threshold for VAT registration will see payments increase due to VAT being included. VAT and Income Tax are two different things.

The VAT refund may apply retrospectively to the point at which the agreement switched from being with Google Inc to Google Ireland. Though I'd really like ASA to explain the implications of all this.

Regards...jmcc

One of my affiliate partners in the Netherlands (I'm in Germany) adds their VAT number to any payment report plus the sentence:

'VAT Reversed charge according to the VAT Directive (2006/112/EG) Article 56.1.1.' (The link swa66 supplied)

The send me the plain payment without any VAT added or deducted and I don't deduct VAT - simply no VAT involved. My tax office is fine with that and their's obviously also.

This should be possible for payments from Google Ireland, too.

I just wished Google was more clear on this. About communication! They suggest 'click here' and your reports shows Euros. In fact you have to agree to a new TOS, are dealing with a different company and nobody knows how the VAT is 'arranged'.

ASA, it's cool to announce reports in Euros, as it *is* a common heard request. But please be clear on the consequences too.

I'm working on getting answers to your questions, so I hope you'll all be patient with me.

Since I live in California, questions about VAT are not my specialty. I want to make sure I check with the experts before I start talking about subjects that are pretty new to me.

ASA

Can we poor Americans be paid in Euros too? ;)

I'm working on getting answers to your questions, so I hope you'll all be patient with me.

I'm cool with that. In the mean while maybe you can 'suspend' the message in our accounts about changing $ to € reporting. It's obviously more than that. And until it's perfectly clear what the consequences are I think it's a bad idea to push this on the publishers.

As a publisher you sell a service to Google Ireland. Google Ireland is inside EU.
If Google Ireland can provide you a valid VAT number like: IE123455678 you do not need to collect VAT or pay anything from the amount you receive from Google.
However, if Google Ireland can not provide you a valid VAT number, you need to collect and pay VAT from what you receive from Google.

So, the question is: can Google Ireland provide you a valid VAT number?

What happens if you are not VAT registered in another EU country? Would the amount count towards the VAT registration limit?

@zoltan: spot-on. Selling ad space on web sites is considered to be an "electronically supplied service". That means that the service is taxable at the place where the customer is established. Google Ireland will as the customer have to pay Irish VAT on the payment using the reverse charge mechanism (self-assessment). (VAT on Services [ec.europa.eu], EU web site).

So I think that publishers will need to send an invoice with the line 'VAT Reversed charge' to Google Ireland at (this [google.com]) address. Or just create one for your archive.

[edited by: RonPK at 9:20 pm (utc) on Mar. 4, 2009]

ASA, are there any plans for GBP?

However, if Google Ireland can not provide you a valid VAT number, you need to collect and pay VAT from what you receive from Google.

Not necessarily. I live in the EU, and here in my country we'd have to pay VAT only if our gross revenues for the previous 12 consecutive months were above a certain threshold.

Also, as has been already mentioned, some kinds of services are exempted.

(IANAL)

I can answer two of the three biggest questions on this thread. The third is more complicated, but we're going to try to get an answer to you as soon as possible.

1. How is AdSense dealing with exchange rates?
If an advertiser pays in Euros and the publisher is being paid in Euros, there's no conversion necessary. If an advertiser pays in British Pounds or USD (or another currency) we'll convert that currency directly to Euros. In other words, we're not converting local payments to USD and back again.

2. Why these 5 countries? When will my country be eligible?
I can't speculate on the future. I can tell you that we selected these 5 countries because we wanted to impact as many publishers as possible. Big markets = big impact for AdSense publishers.

3. What's the deal with this announcement and VAT? How will this affect my taxes?
This is the question I'm not ready to answer. I'm working on getting you a clear answer, but I don't want to say anything before I'm completely sure what's going on. If that happens when California is asleep, I may ask the former ASA (based in Dublin) to post something here.

ASA

OK, and now for the answer to question number 3:

3. What's the deal with this announcement and VAT? How will this affect my taxes?
"While you may receive your payments in your local currency, all payments are being made by Google Ireland, a company incorporated under the laws of Ireland, in accordance with the terms of your agreement with Google. Unless your business is in Ireland, you should not have an obligation to charge Google VAT or treat any of our payment to you as VAT that needs to be paid to any VAT authorities. If your billing address is located in Ireland, you may have an obligation to charge Google Irish VAT. Please speak to your local tax adviser if you have further questions."

I've put that in quotes because I didn't write it. Much as I'd like to take credit, this answer was clearly written by someone much more knowledgeable about the subject than I am. So if you have additional VAT or tax questions, please bring them to your tax advisor instead of your AdSense Advisor. :)

ASA

Thanks ASA, I bet that is quite a relieve for many EU publishers.

(Word to the wise - should the happy day arise where the currency choice is available for Australian AUD too, the same tax issues will arise, although we call it GST rather than VAT. Just a heads up to let you get your answers prepared in advance next time :))

I had a quick look at the new TOS. Noticed two things:

* it mentions an Irish Google VAT ID. Might be relevant for your tax administration.

* it is dated March 27, 2008. Someone forgot to change that?

Another change is that per the new TOS the agreement is governed by Dutch law (at least for me, as I'm in .nl). So neither English nor Irish law (phew ;)).

3. What's the deal with this announcement and VAT? How will this affect my taxes?
"While you may receive your payments in your local currency, all payments are being made by Google Ireland, a company incorporated under the laws of Ireland, in accordance with the terms of your agreement with Google. Unless your business is in Ireland, you should not have an obligation to charge Google VAT or treat any of our payment to you as VAT that needs to be paid to any VAT authorities.

I think that this may be flawed interpretation of VAT regulations.

A publisher who is VAT registered in the EU has to charge VAT both within their local country and when exporting. When a VAT registered publisher is outside Ireland Google Ireland's VAT number will suffice and Google Ireland may not have to add VAT to the payment to that publisher. The amount of VAT would have to be declared by the VAT registered publisher in their returns.

Any publisher who has questions should remember that their local VAT authorities make the rules.

It does create an interesting situation for VAT registered Irish publishers. They can continue with the current Google Inc and not have a VAT liability or can, when Google Ireland gets around to implementing it, opt for an agreement with Google Ireland and thus incur a VAT liability on each payment from Google Ireland. If an Irish publisher is not VAT registered then the issue of VAT does not arise for the publisher.

Regards...jmcc

(I live in the EU, IANAL, and this is my layman analysis)

Google is a publisher's customer. The publisher sells (exports) his services to Google in the US or Ireland (the services are renting of ad space or distribution of ads).

Unless Google explicitly agrees with the publisher (in the online agreement) that Google will add VAT to each payment issued to the publisher, then no VAT will be included in any payments.

Depending on your local laws, you may be obligated to pay VAT derived from your revenues (which include the payments you receive from Google) and that is regardless of whether you sell your services to the US Google or to the Irish subsidiary (here in my country we have to pay VAT when our gross revenues for the previous 12 consecutive months cross a certain threshold). Google plays no role here.

And now when I'm looking back at my analysis, I think it agrees with ASA's post.

[edited by: true_INFP at 11:16 am (utc) on Mar. 5, 2009]

Unless Google explicitly agrees with the publisher (in the online agreement) that Google will add VAT to each payment issued to the publisher, then no VAT will be included in any payments.

The key element is whether the publisher is VAT registered. If the publisher is VAT registered then Google Ireland would have to provide a VAT breakdown on the payment as the publisher (and Google Ireland) has to account for VAT. If the publisher is not VAT registered then no VAT issue arises for the publisher. A non-VAT registered publisher cannot charge VAT except in special circumstances. The VAT issue will affect VAT registered publishers only.

Regards...jmcc

then Google Ireland would have to provide a VAT breakdown on the payment

I disagree. Google is in the same position as a person buying a car from a merchandiser. The person buying the car does not care about VAT, unless the merchandiser tells him/her to pay a price increased by VAT (and even then, the person wouldn't have to know that he/she's paying VAT as part of the price).

Google is just hiring your services and they pay you (the merchandiser) some money for it. The components of the price is subject to agreement between them and you. Unless the agreement expressly says that Google, as a favour, increases each payment to you by the amount you locally need to pay as VAT, then no VAT is added by Google and calculating and paying VAT is solely the publisher's responsibility (whether he/she is obligated to pay VAT depends on local laws).

Note: The situation might be somewhat different for publishers who live in Ireland.

(IANAL)

[edited by: true_INFP at 12:05 pm (utc) on Mar. 5, 2009]