Current EU VAT Overview

Overview

Today, EU companies providing Electronically Supplied Services (ESS, such as online gaming) to EU Consumers (users) are paying EU VAT based on the rate of the country the company is located in. Non-EU based companies with EU users should already be remitting applicable EU VAT based on EU user locations.

From January 2015 onwards, all companies, EU or non-EU based, need to apply and pay VAT based on the EU user’s location on any sales to EU users. In addition, the new law requires platform companies, such as Facebook, to remit applicable EU VAT on these electronic services transacted on the platform by EU users on behalf of the developer.

How Facebook will handle this change

  • Facebook will remit EU VAT as a platform company therefore taking care of calculation of VAT included in the sales price based on EU user location (this is new - up until now, you had to remit VAT yourself, and we hope to make this process easier by taking on the burden, instead).
  • Since Facebook will withhold and remit the VAT you may notice a change in your payout as you will no longer receive the VAT amount included in your sales price on sales to EU users.
  • Facebook will take on the VAT remittance and compliance obligations under the new law.
  • Facebook will provide the paid VAT amount in both the Graph API payment object and the daily transaction/payout reports.

What this means for you:

  • As Facebook is going to withhold and remit EU VAT for developers, you do not need to take care of remitting EU VAT yourself come January 1st, 2015. This law change only applies to sales to EU users.
  • This change is not a breaking change as changes to the Graph API payments object are additive and will not alter current behavior.

Examples [#examples]

Please see below for a comparison of payout calculation before and after the EU VAT change on January 1st:

Before January 1st, 2015 After January 1st, 2015

Assuming a person in the UK purchases an item with a total price of £100, inclusive of VAT, the payout was calculated as follows:

  • Total item price (VAT inclusive): £100
  • Facebook fee (30% of £100): £30
  • Facebook pays the developer: £70

The developer remits EU VAT £16.67 (20% in the UK).

Assuming a person in the UK purchases an item with a total price of £100 the payout is now caluclated as follows:

  • Total item price (VAT inclusive): £100
  • VAT (20% in the UK): £16.67*
  • Facebook fee (30% of £100): £30
  • Facebook pays the developer: £53.33

Facebook remits EU VAT £16.67 on behalf of the developer.

*As prices are VAT inclusive the formula for calculating VAT is as follows:

  • Total item price / (1 + VAT)×VAT.
  • For the example above this means: £100/(1+20%)×20% = £16.67

Implementation

Below is an overview of planned additions to the payment Graph API object and the payments reports API.

payments Graph API object updates

In addition to the already existing parameters of the payment Graph API object the following parameters will be added:

Parameter Description

tax

The tax parameter specifies if a payment is subject to VAT and, if so, how the tax was paid. This parameter can take on one of the values: not_taxed, already_paid or tax_remitted. These are explained in more detail below.

tax_amount

Shows the amount reduced from your payout for any taxes remitted by Facebook.

tax_country

The country determined by Facebook for tax calculation of this purchase, given as an ISO 3166-1 alpha-2 country code. Note: This field is for your information only and it should not be used for any recalculation or reconciliation purposes.

The values of the tax and tax_amount parameters depend on the type of payment and also the location of the payer:

tax Description tax_amount

not_taxed

There's no VAT on this payment because it came from outside the European Union

irrelevant, this field will be omitted from the payments object

already_paid

The tax on this payment has already been paid by the user's mobile carrier or other upstream party

irrelevant, this field will be omitted from the payments object

tax_remitted

Facebook paid the VAT on this payment on your behalf. The tax amount will be deducted from your payout.

tax_amount equal to the actual amount reduced from the developers payout

Below is an example of a transaction which was not taxed, for example where the payer was based outside of the EU:

{
  "id": "...",
  "actions": [
    {
      "type": "charge",
      "status": "completed",
      "currency": "USD",
      "amount": "2.99",
      ...
    }
  ],
  "tax": "not_taxed",
  "tax_country": "US"
  ...
}

The below example shows a sample transaction where tax has already been paid, for example in the case of a mobile payment:

{
  "id": "...",
  "actions": [
    {
      "type": "charge",
      "status": "completed",
      "currency": "GBP",
      "amount": "2.99",
      ...
    }
  ],
  "tax": "already_paid",
  "tax_country": "GB",
  ...
}

The below example shows a transaction where the tax has been remitted by Facebook as the payment was made by a EU payer:

{
  "id": "...",
  "actions": [
    {
      "type": "charge",
      "status": "completed",
      "currency": "EUR",
      "amount": "2.99",
      "tax_amount": "0.1",
      ...
    }
  ],
  "tax": "tax_remitted",
  "tax_country": "DE"
  ...
}

Payments Reports updates

A tax_amount field will be added to the detail section and the digest section of the payments reporting API.

Parameter Description

tax_amount

The actual amount remitted by Facebook on your behalf.

A sample payment details row:

SD,480369938658210,S,P,362736900505327,2013-06-12 16:33:52 PDT,USD,1.99,6E5D989082A04A68AA801DB17A30721A,1,USD,QQ6C7XaxeMyCW4RdZXFGwKTQM1IkMBIOpeWtFFJelHUdSC9NaeYlBXEMJd3LO17k,US,0.1

How to read the payments sample row:

Column Value Description

1

SD

row type: section data

2

480369938658210

the app_id in which the payment took place

3

S

the transaction was a sale

4

P

the transaction was from a payment

5

362736900505327

the payment ID of the sale

6

2013-06-12 16:33:52 PDT

time the payment processing completed

7

USD

the purchasing costumer paid in US dollars

8

1.99

the costumer paid US$1.99

9

6E5D989082A04A68AA801DB17A30721A

the exchange rate batch ID

10

1.0000000000

the exchange rate from USD to USD

11

USD

the developer is paid in US dollars

12

QQ6C7XaxeMyCW4RdZXFGwKTQM1IkMBIO-peWtFFJelHUdSC9NaeYlBXEMJd3LO17k

the app's request_id for this payment

13

US

the purchasing costumer is in the United States of America

14

0.1

the actual tax amount remitted by Facebook on your behalf is USD 0.1

A sample payment digest row:

SD,900000000000009,Game9,S,P,USD,1.42,FXBATCHID1,1.0,USD,1.42,0.1

How to read the digest row:

Column Value Description

1

SD

row type: section data

2

900000000000009

considering the app with ID 900000000000009

3

Game9

...which is called "Game9"

4

S

...looking at all sales

5

P

...of payments

6

USD

...requested in USD

7

1.42

...and totalling USD 1.42

8

FXBATCHID1

...which were converted under FXBATCHID1

9

1.0

...at a rate of 1

10

USD

the developer is paid in USD

11

1.42

total: "Game9 had US$1.42 in sales during the report period, summing across people who bought in-app goods with payments using USD during FXBATCHID1"

12

0.1

the actual tax amount remitted by Facebook on your behalf

FAQ

1. Will this affect how disputes and refunds are handled?

No, the handling of disputes and refunds is not affected by this change.

2. What is the exact cut-off time for when this change will come into effect?

Facebook will start withholding and remitting taxes on behalf of developers in the EU on Jan 1, 2015 at 00:00 PST