Thread: VAT on CJ commission payments

I believe so, yes - going by what I've read.

Please don't hold me to it - can only guesstimate as the new EU directive is a bit cloudy still

That's my understanding too. So I wonder why we haven't received a broadcast email yet, advising of the changes and requesting our VAT status?

No idea! Maybe a quick email direct to the UK office is the way to go?

I might have this wrong but is this not a merchant issue.

I.e. we pay Google Adwords so they charge us VAT now but can't claim it back. Where as CJ pay us... I don't know for sure myself but something that will need looked into if we all don't want to end up in jail

Merchants will probably say we are paid inclusive of VAT.. so you have to take it out of the commission they already pay us.

Since VAT is a tax on consumer spending I dont think it applies to commissions anyway.

> "I dont think it applies to commissions anyway"

It definitely does: VAT applies to any good or service - whether B2B or consumer - when the provider is VAT registered. An affiliate is a service provider like any other. And a VAT registered affiliate must receive VAT in addition on their commissions (service charges / fees / invoices / bills).

> "Merchants will probably say we are paid inclusive of VAT"

Any merchant who does this (under an independent scheme) is a) breaking the law and b) effectively paying commission at two different levels, paying less to VAT registered affiliates. All affiliates MUST receive the same commission. Those who are VAT registered must then also receive VAT in addition (which they obviously don't get to keep, as they must pay it out to HM C&E).

Merchants who have VAT registered affiliates don't face any extra costs - they claim back any VAT they pay like this as it relates to their input costs.

All the other affiliate networks add VAT to the overall commission payments for VAT registered affiliates as do all reputable independents. Those that don't should be avoided at all costs.

I don't really know the answer to this, but I don't agree that because Google adwords now have to charge VAT that means CJ have to pay it.

The reason is that when advertising with Google we're the (UK) customer and they're the (US) supplier. With CJ they are the (US) customer and WE are the (UK) supplier.

We don't usually have to charge VAT to US customers, as that would make us uncompetitive when exporting services. I saw these rules as a way of ensuring that US suppliers (or other countries) were made to charge VAT to EU businesses if supplying in the EU so that EU businesses weren't at a disadvantage due to having to charge VAT.

E.g. if a UK company offered advertising to a UK company their costs would be 17.5% higher than a US company doing that, everything else being equal. This is clearly against the interest of UK companies so I saw these rules as a way of leveling the field, something that's not needed when we export services to a US company.

It may be that if you read the full details that VAT is chargable, but I just disagree that because Google does when supplying a service to a UK business it then follows that we should charge VAT when exporting a service to a US company.

Has anyone actually emailed CJ or customs to ask?

Yeap I agree with wibble99 that's my thinking also, he just put it in to words

wibble99, that sounds perfectly logical - thanks - and I hope you're right for all sorts of reasons. I have asked CJ and await their reply (!)

Phoned CJ early this morning and asked them what they were doing with regards to the new EU directive.

Heres there reply.


-----Original Message-----
From: Stephanie Cooke [mailto:scooke@cj.com]
Sent: 03 July 2003 14:46
To: steve@steveandcompany.co.uk
Subject: FW: Vat Query


Hi Steve,

Please see the guideline below that came from our Legal/Financial Counsel in the States;

Because Commission Junction (CJ) is a USA company, the agreements which CJ enters into with its international Advertisers and Publishers are also USA based, and CJ's international operations are structured as service companies; CJ is not required to collect nor remit VAT on transactions fees paid by Advertisers or received by Publishers. We suggest you consult with your tax advisor as to the applicability of VAT remittances and payments to the proper tax authorities.

We have employed PWC to look into how the EU directive of July the 1st will effect this and as soon as we get a heads up we will let you know more

Best regards

Steph Cooke
Sales Co-ordinator
Commission Junction
+44 (0)20 7659 6153
+44 (0)7939 040065
www.cj.com

Worrying! So they basically don't know and have left it way too long before even looking into it, let alone implementing any changes that might be required, given that it actually came into effect on 1 July.

Worrying also as I don't understand vat.

Where does it come from and where does it go? I assume that the government ends up better off?