VAT MADNESS

[midvalue]

Hi Guys,
I have a question regarding at what stage VAT is levied, and how is it taken into consideration if one is importing from America. Before someone goes and tells me "Do your research" I have tried in vain(EI VAIN ), and I cant find the specific info I need on a topic that can make or break a business...
An Example(Figures arent accurate in anyway)
Importing say Remote control cars from America;
#500 Euro worth of goods
#100Euro Shipping
#50 Euro Import Tarrif
=650 Euro cost to my door

Is 22% (I know its soon 23, lets just go with 22 for now) VAT added to this 650 Euro figure? (143 VAT)
Say one estimates to add 100 Euro on top of that to sell the goods for a worth of 750 Euro, is it 22% of this figure?(165 VAT)
Or is it 22% of the value added (I read this on some indian website) of 100 Euro? (22 VAT)

Thx for your time.

PS. I guess one cant claim VAT back from importing from a country outside of the EU?

[Rosamunda]

The timing of the VAT payment to Vero depends on the size of your business. VAT is due either monthly, quarterly or annually depending on your company's turnover.

Assuming you have to pay VAT monthly, the VAT is due on the 12th (?) of the month which follows the month you are reporting. So you have to pay the VAT on your sales from January on the 12th March - or thereabouts (it just changed, so I might be a day or two out).

If you live in Helsinki you could sign up for the course we are all going to on 12th and 19th April (see the Tax Account Training thread).

The sales VAT is 22% of your net price. So if you sell a remote car for 150e incl ALV - the VAT is 27.05e
in other words 150-(150/1.22) (at least that's how I work it out) and the net price would be 122.95e

If anyone disagrees please say so.

[midvalue]

hmm thanks for the answer penelope, but Im still confused, maybe you could put it in context to my example above
Also this might be biz basics, but the definition of net price I came across is:
"the price paid for goods or services after all relevant discounts have been deducted"
meaning with regards to my example above the VAT would be chardged on the 650 fictional price to my door in my example.
I have heard conflicting reports that the VAT is added to the TOTAL selling price, in the example the total price is 750 (what I would charge)

There is a big difference as say fictionally I would want 100Euro profit/mark up (with out other expenses, income taxes, ect)
the 3 options would be:

1) VAT levied on the cost of goods to me
650 + 143 (22% VAT) + 100 mark up =893 selling price

2)VAT levied on the cost of goods + my mark up
750(650 + 100 mark up) + 165(22%VAT) = 915 selling price

3)VAT levied on the value added or markup
100 mark up + 22 (22%VAT) = 122 + 650 = 772 selling price

Sorry if this is a bit of a noob question , I just want to be 100% sure about this. Yes I have made an appointment with NYP services in Helsinki, but I only can get an appoinment somewhere in 3 weeks time, too long to wait to find out if stage one of the biz idea is even worth continuing or not

Thx

[Upphew]

Importing say Remote control cars from America;
#500 Euro worth of goods
#100Euro Shipping
#50 Euro Import Tarrif

+132€ VAT(22%) = 782€ to your door.

so you want 100 markup?
650+100
Then you add the VAT so you get it from the customer:
750+165=915
Then you pay the vat due:
165-132=33

[Rosamunda]

Yes I agree with Upphew's maths. That is how it works.

The timing of your VAT payments will effect your cash flow calculations so bear that in mind too.
(By "net" I was simply referring to the selling price before sales VAT)

It is useful to refer to the VAT on the goods you buy from the USA as "Import VAT" and the VAT you collect from your customers as "Sales VAT"

[midvalue]

thx for the answers
wow thats a lot of vat lol..
the idea behid vat is all good and fine for big businesses as it was intended for (eg coal/steel ect)
but its an old idea that really needs to take into account internet businesses and the global market place...I mean since VAT isnt always charged on small orders (depending on your country and how efficient the customs office is), customers will almost always buy from the cheapest source when buying online, being from abraod or a country with lower or no VAT...this means VAT is biased to internet businesses located in high VAT countries, the market place is no longer local, and thus customers in that country can physically buy products from outside it. Just my thought on the matter.

I hear Aland is VAT free, anyone had any experience opening an internet biz from there? I also hear there is some special tarrif though for Aland

[Mook]

I mean since VAT isnt always charged on small orders (depending on your country and how efficient the customs office is), customers will almost always buy from the cheapest source when buying online, being from abraod or a country with lower or no VAT...this means VAT is biased to internet businesses located in high VAT countries, the market place is no longer local, and thus customers in that country can physically buy products from outside it. Just my thought on the matter.

I hear Aland is VAT free, anyone had any experience opening an internet biz from there? I also hear there is some special tarrif though for Aland

Well. Customs has a 50 Euros limit about which VAT is charged.

and theoretically, online stores inside Europe need to charge VAT according to the country the good are being sent to - well at least the big ones like amazon. Anyhow, the lowest vat in europe is 15% so it's not _that_ big an advantage i.e. VAT doesn't contribute so much to the stupid prices being asked for stuff here...

[midvalue]

Importing say Remote control cars from America;
#500 Euro worth of goods
#100Euro Shipping
#50 Euro Import Tarrif

+132€ VAT(22%) = 782€ to your door.

so you want 100 markup?
650+100
Then you add the VAT so you get it from the customer:
750+165=915
Then you pay the vat due:
165-132=33

Do you have to charge the customer VAT? I know this sounds silly since the burden would be on the seller, but its the bottom line price that drives customers away..
Eg. Pay the VAT of 22% on the cost of the goods to your door, then add the markup and sell it at this price, and send the gov this amount of which I paid as VAT? Instead of adding another 22% on this price that is meant to be placed on the customer...I didnt know VAT was double tax...

[Upphew]

I hear Aland is VAT free, anyone had any experience opening an internet biz from there? I also hear there is some special tarrif though for Aland

If your customers import stuff from Åland, then the VAT problem is on them.... unless we are talking about under 50e orders...

[midvalue]

Ok after reading ur post a few times Upphew I think I understand:
EXAMPLE
Product A costs 100e to my door. I then add 22% VAT = 122e (22e VAT)
I dont include this in this in the next stage, rather I factor the amount paid in VAT for decductions later
100e (not 122 right?)+100e markup = 200. Then add 22% VAT = 244e. This is what the customer pays

44e-22e = 22e VAT to be paid.

is this correct?

[Rosamunda]

When you talk about an internet business, do you just mean distance selling of imported products or are you selling some kind of e-service? I think there are different tax rules for some internet services.

Small businesses do get a VAT rebate if their annual turnover is less than (?) 22500 euros. Under the old system you could only apply for the rebate after you had closed your books for the year. But with the new tax account system I assume the VAT-free limit is integrated into the system (ie very small businesses are now only required to make VAT payments once a year).

[Pursuivant]

Go on a bloody entrepeneur course you twat.

[midvalue]

When you talk about an internet business, do you just mean distance selling of imported products or are you selling some kind of e-service? I think there are different tax rules for some internet services.

Small businesses do get a VAT rebate if their annual turnover is less than (?) 22500 euros. Under the old system you could only apply for the rebate after you had closed your books for the year. But with the new tax account system I assume the VAT-free limit is integrated into the system (ie very small businesses are now only required to make VAT payments once a year).

Ok Isee,

Hmm thanks for the info, you guys have filled me in with all the VAT knowledge thats specific to Finland. Will come in handy for sure! Also I was surprised at how fast the guys at TULLI replied to my mails, only in this country are public servants so efficient, if this was back in South Africa.....jeez, man I wont even get into how long/un accurate their reply would be!

As for Pursuivant, If you dont like my questions, dont reply, it really shows you have nothing better to do...
I am however signed up for a course at NYP, its in 3 weeks so I'm just seeking valuable opinions from those in the know till then. :

[Pursuivant]

As for Pursuivant, If you dont like my questions, dont reply, it really shows you have nothing better to do...

Your kind of annoying people start a business and in 3 months close up and spend the rest of their life whining here how unfair the tax office is. Theres literature, books and courses you can take. Why not study properly rather than believe some random stuff you read off the internet?

[Rosamunda]

I am however signed up for a course at NYP, its in 3 weeks so I'm just seeking valuable opinions from those in the know till then. :

I'm also going on the course (see other thread) on 12th and 19th April which will update my VAT knowledge most of which comes from my Other Half who is a pro-beancounter. Problem is he tends to round all the numbers up/down to the nearest €M! I want to be able to do all my bookkeeping myself (and on-line) not have to rely on him filling out forms for me. I hope the course will be a good one - I went on one of these before in Lahti and it was rubbish, nowhere near enough detail on the nitty-gritty stuff.