Imagine i want to partner with a US author and promote his ebook product, for a 40% share of revenue.
I tell him i will sell the ebook at $100 and give him $60 on every sale.
If i sell that ebook to a US / non-EU customer things are fine. I collect $100 and keep $40 profit.
I'm not even sure if it's possible or allowed to dynamically adjust the price so that for UK/EU customers, they'd pay $83.30 (instead of $100 like everyone else) + $16.70 (20% VAT).
Ofcourse, i could charge them $100 + $20 VAT and lose some sales.
Either way i'm responsible for collecting the VAT for the UK govt from my customers, so tax authorities will wan't to know which sales were attributed to EU/UK customers and will want 20% on the sale price of those.
Some people are saying that the business isn't viable if VAT is an issue, but that is dismissing the scope of the problem. It certainly can make the difference between a profit and a loss.
Theres a big difference between my $40 margins and $23.30 margins, especially once you consider that i'd have costs.
If i paid 3% transaction fees + it costs $20 in advertising to make a sale (realistic numbers), i'd be left with 0% rather than a 20% profit.
Imagine i reduce the product to $70. I'd be losing money ($58.3 + $11.7 VAT means i don't have enough to pay $60 to my supplier, even assuming zero costs).
For businesses models that would have <20% margin and rely on high turnover, it's impossible - even with 30-40% margins might not be a worthwhile venture.
As i'm aware, a US business can operate profitable and sell to EU customers in these conditions.
Now, if most of my market is outside the EU - which they actually would be in my case - then i don't really mind. I might be better off not selling to EU customers at all.
I tell him i will sell the ebook at $100 and give him $60 on every sale.
If i sell that ebook to a US / non-EU customer things are fine. I collect $100 and keep $40 profit.
I'm not even sure if it's possible or allowed to dynamically adjust the price so that for UK/EU customers, they'd pay $83.30 (instead of $100 like everyone else) + $16.70 (20% VAT).
Ofcourse, i could charge them $100 + $20 VAT and lose some sales.
Either way i'm responsible for collecting the VAT for the UK govt from my customers, so tax authorities will wan't to know which sales were attributed to EU/UK customers and will want 20% on the sale price of those.
Some people are saying that the business isn't viable if VAT is an issue, but that is dismissing the scope of the problem. It certainly can make the difference between a profit and a loss.
Theres a big difference between my $40 margins and $23.30 margins, especially once you consider that i'd have costs.
If i paid 3% transaction fees + it costs $20 in advertising to make a sale (realistic numbers), i'd be left with 0% rather than a 20% profit.
Imagine i reduce the product to $70. I'd be losing money ($58.3 + $11.7 VAT means i don't have enough to pay $60 to my supplier, even assuming zero costs).
For businesses models that would have <20% margin and rely on high turnover, it's impossible - even with 30-40% margins might not be a worthwhile venture.
As i'm aware, a US business can operate profitable and sell to EU customers in these conditions.
Now, if most of my market is outside the EU - which they actually would be in my case - then i don't really mind. I might be better off not selling to EU customers at all.
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