Ask HN: Is charging less VAT illegal? | Hacker News Reader

Ask HN: Is charging less VAT illegal?

2 pointssdevonoes5 comments

I know it's illegal to charge more VAT than the specified by a given country and that if the VAT is changed during the year then companies should update it as well (by law).

But, let's say that the current VAT for a given type of product in a given country is 20%. Is it illegal that I, as a company, charge 5% only (or even 0%)? Sure, I understand that I, as a company, will pay the difference to the tax system anyway.

Why would I do it? Well, mainly because staying up-to-date to how VAT changes across different countries is a PITA. I know that there are companies that provide this kind of services (VAT related), but let's imagine that I want to keep my company as independent as possible of external factors and that losing VAT money, in my opinion, is worth it if that means I don't have to worry about VAT anymore.

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I happen to be a lawyer and I would say you would probably want to consult an accountant on this as well. I'm also presuming this is a B2C situation.

My two cents is that you are the one paying VAT to whichever government your business is obliged to pay VAT to. Even if you calculate your prices without VAT you will still need to 20% owed according to your example.

So if you only add a surplus of 5% for VAT the extra 15% would come out of your product price.

I would choose a payment processor that applies the right kind of VAT according to where your buyers are located and have that data directly fed to my accountant. Then you can be sure your are not loosing money to taxes and that your are following the law to the best of your abilities.

If you’re going to pay the tax, how would not passing it on to your customers make you “not having to worry about VAT anymore”?

You still would have to know how much to pay and have to be able to prove to the tax department how much you have to pay, which means tracking how much value your company added, which means tracking all your sales. Adding an amount you already have to compute and store to each bill wouldn’t be The problem.

(I’m not a lawyer, certainly not one who happens to know what VAT looks like everywhere in the world)

Always consult a lawyer. I am not a lawyer and this is not legal advice, but if you are paying the difference, then why would the government care if the consumer paid less? There are probably countries where doing this can cause problems, audits, book keeping issues, etc... For sure, ask a lawyer.

Thanks. Updated.

>Always consult a lawyer.

Obligatory, I am not a tax lawyer. My, laymen, understanding of VAT is that it is the companies responsibility to pay 100% of the VAT. You can "pass" some, all, or none of it on to your consumers. You can show them on their receipts that you are charging them VAT, or not. This is fundamentally different from a sales tax, where the one purchasing the product must pay the sales tax at the point of sale. You are legally responsible for recording your sales and paying the VAT on them, but as far as I know you don't have to tell/show your consumers what, if any, of they payment goes to VAT (but you CAN of course).

I am just some random internet person, so I would suggest, as the other commenter did, to check with a tax lawyer.

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