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Some European Countries Considering applying VAT to Online Earnings

Posted By Darren Rowse 30th of June 2006 Pro Blogging News 0 Comments

Jen posts some concerning news for European bloggers trying to make money online. The short of it is that some European countries are considering making publishers pay VAT (similar to sales tax) on AdSense and other online earnings and that this could see them paying up to 83% of their earnings in tax. That would cripple many online publishers. Here’s part of Jen’s post:

‘Normally, European countries only charge VAT on earnings where VAT is charged. However, some European countries are considering charging VAT to publishers on their AdSense earnings, meaning some publishers could be paying up to 83% tax on their AdSense earnings. The same would also apply to affiliate earnings as well. And from a business perspective, losing 83% of your AdSense income to tax would not make it worthwhile for many publishers to continue using the AdSense program. And especially those using PPC to promote their affiliate programs or AdSense earnings could discover that their break even point of aquiring traffic is suddenly much different than previously thought….’

There’s lots of confusion around this and it’ll be one to watch!

Read Jen’s post at Some EU countries may charge VAT on AdSense & affiliate earnings

About Darren Rowse
Darren Rowse is the founder and editor of ProBlogger Blog Tips and Digital Photography School. Learn more about him here and connect with him on Twitter, Facebook and LinkedIn.
  1. The VAT laws in different EU states is very different and it would be as well for each publisher to check their own applicable laws, and watch for any possible changes.

    Unfortunately, blanket articles like Jen’s with scaremongering percentages like 83% really don’t help.

    Currently in Britain, for example, if one is registered as self-employed (sole trader) there is only the requirement to pay income tax at the various bands, and a particular class of National Insurance.

    VAT is a whole different ball game but I don’t see it currently applying to this. In the UK, VAT is something that applies to services and goods bought, which AdSense revenue does not fall into. I could partly understand it applying to AdWords advertisers, though this is a service bought from a non-EU country.

    In any case, there are exemption rules and it’s already quite complicated. Check out with your local tax office what the best course of action is for you to stay within the law.

  2. A “six figure blogger” in a high income tax US state could expect to pay in excess of 50% of earnings in combined state income, federal income and federal self-employment taxes. Why would it surprise anyone that Europe, with its much more extensive welfare state, would have a lower tax burden?

  3. This is absolute tommy-rot. VAT is a flat tax not a progressive one. Nowhere is there an 83pc VAT rate. Jen is confusing this with the very high marginal rates of income tax charged in some socialist countries. The last time we saw that figure on the tax radar was under the previous Labour government here in Britain when successful authors routinely paid 83pc. They also routinely left the country and lived in Ireland where the crafty Irish had a zero rate for authors. VAT is currently 17.5pc in the UK, and applies only to those registered and with an income of >£60,000 ($110,000).

  4. The scaremongering comment by Andy knocks this one on the head. The original post (which as far as I can see is totally unsourced) on Jensense is well below the high standard I’d expect to read there — p’haps she started her July 4th celebrations early…

    The numbers simply do not add up — as some posters on the Jensense site have already pointed out. Drop the “83%” comments and you’re looking at a far more sensible story…

  5. holch says: 06/30/2006 at 6:21 pm

    I can see why some European Countries want to charge VAT on Adsense, as it is quite a lot of money they are loosing, because Adsense-Publishers are paid from abroad.

    However, with a little bit of Mathemathics those 83% can be easily reduced. Because simply adding the percentages of two taxes does not make sense. They are not applied at the same time, therefor minus 20% VAT and then minus 63% income tax is not the same as taking of 83% of tax once.

    Version 1 (20% and 63%): 1000 Euros are reduced to 296 after Tax.
    Version 2 (83%): 1000 Euros are reduced to 170 after Tax.

    Then Jen picked basically one of the highest VATs and the probably highest income tax in Europe to make it look more extreme. I expected a little bit more of Jen. AND: the 63% would have been paid before, too. So why bring them into this discussion. There is no doubt that it is a high tax rate, but it has nothing to do with VAT.

    Don’t get me wrong: this is of course a probleme for all that base a lot of earnings on Adsense and Co right now. It’s just that the article looks like “yellow press”-style to me. And as I’ve said: I expected more from Jen.

    Kind regards,

  6. I’m a VAT consultant by trade. Advertising services (such as are supplied by Adsense publishers to Google) are deemed to take place where the customer belongs. As Google is in the US, for VAT purposes the services take place outside of the EU and cannot be subject to EU VAT.

    The VAT laws in each individual EU Country have to reflect the rules set out by EU Law (The 6th EC Directive). Therefore it would not be possible for individual countries to change their law in such a way. It would require all 25 EU Nations to agree to a fundamental change to the way VAT works. This is highly unlikely.

    As the other commenters have posted, the highest rate of VAT in the EU is 20%. Further, if this was to happen, Google has branches and VAT registrations in most EU member states. Adsense advertisers would be able to add the VAT on top of the income and Google would claim it straight back on its VAT return. The advertisers would not be any worse off.

    This is scaremongering pure and simple.

  7. Nobody’s gonna tax my earnings… sickoes !
    What’s the conplete list of concerned countries ?

  8. European countries should change their policy about this matter as Europe is gradually falling behind USA in the tech world. Imposing new tax will only make matter worse. Some taleneted techies will go to countries with less tax.

  9. Thomas says: 07/01/2006 at 9:09 am

    The article over at JenSense reads like an April the first joke. It’s highly unlikely that EU countries will decide to ask publishers to pay VAT on their AdSense earnings

    “As the other commenters have posted, the highest rate of VAT in the EU is 20%.”

    No it isn’t. In Sweden it’s 25%.

  10. […] 83%? Hä? Meines Erachtens ist der Artikel sowohl rechnerisch als auch inhaltlich Käse. Einfach dazu die Kommentare beim ProBlogger lesen. […]

  11. “No it isn’t. In Sweden it’s 25%.”

    Sorry. I had a complete brain fade. That’s what comes of posting last thing on a Friday when I should be going home……

  12. […] While on the subject of VAT, since Google is a US company, Europeans don’t have to pay VAT on our Adsense earnings, yet. This article by Jennifer Slegg suggests that some EU countries may decide to charge VAT on online earnings. That’s a little crazy because Google doesn’t add VAT to the invoices of European publishers. If something like that happened in Ireland I’d be out of pocket by an extra 21% plus the normal 42% tax I pay on earnings at the top level. Ouch. (via) Tags: accounts budget finance Linux software […]

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