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Who should follow it? The OP as an Aussie resident or companies that sell to Aussies?
So far I use vultr only limited testing, because the price is cheaper than DO. Now maybe its price will be more expensive plus tax, from your information that means can apply order without tax?
So far I use vultr only limited testing, because the price is cheaper than DO. Now maybe its price will be more expensive plus tax, from your information that means can apply order without tax?
Hey, guys, I get that this isn't great news for those residing in Australia, but at least it's only 10%. Vultr charges VAT to those residing in the EU, the rate depending on the country that you reside in, which is generally well over 10%. So while I sympathize, it's not such a big deal.
I wonder whether Vultr charges state sales tax to those residing in the US. I guess not, but doesn't Vultr have an office in New Jersey? In which case at least NJ residents should be charged sales tax. Can anyone confirm or disconfirm?
Wow, interesting to read some replies here.
I am not a Vultr customer but a business owner in Australia; them doing this is not due to "new regulations". It's because a lot of companies just got away with not doing it for ages and slowly the government is cracking down on that. 10% GST is low compared to sales taxes in many other places (many European countries are over 20%). In any case I think (not sure on the notice they sent in full) they would only need to charge GST on the services they provide from Australia - to all customers regardless of customer location. They do not need to collect GST for all locations.
So based on my understanding of the GST law it should result in the following:
American buying Vultr VPS in Australia - pay GST
Australian buying Vultr VPS in Australia - pay GST
Australian buying Vultr VPS in other country - don't pay GST
Anyone else buying Vultr VPS in any other location - don't pay GST
If you think moving hosts to another in AU will change anything; you are likely wrong. The reality is that Australian businesses selling services from here, and foreign businesses selling services from here are obligated to collect GST once they grow to a certain point. If a company is so small they don't charge GST here (because of revenue under $75,000) many people will not even take the business seriously since if your revenue is that low you likely don't have a viable/serious business unless you started it last week. :-)
So for example perhaps some small OVH resellers can avoid having to deal with this, but OVH themselves would be paying GST for anything that they are buying from Australia and they too will no doubt have to charge GST for services from their Australian location as well at some point if they don't already. Either when they read the tax law, or the Aussie Tax Office comes after them. No doubt a provider with a suite in Equinix selling servers is going to be hitting that $75,000 turnover per year threshold very quickly.
Our GST is based on where the product or service is provided from; not where the customer is or where the company is. However in recent times government is after more revenue so they are looking at ways to collect more GST for more purchases.
In any case if you are in Australia and run a business, you don't pay GST. Only the end customer buying pays this tax.
By the way @randvegeta once you get big enough that the tax office in any jurisdiction notices you then your attitude of not recognising their authority will not work. Either you play by the tax rules or you get sent home. Or if you are at scale of Amazon or Google you pay to lobby for the rules you want... A lot of business dealing in many countries get away with things because they are too small to matter basically; anyone thinking they are outsmarting the tax office in a jurisdiction they operate in is just naive, it'll catch up to you if you grow to a point where it matters.
I would be surprised if your interpretation is correct.
In the original notice from Vultr (see the OP's post), it says (my emphasis added):
In addition, it seems that Vultr didn't send this notice to all of its users but only to those located in Australia (but perhaps I'm mistaken about this).
Well my interpretation is only based on having done business and being registered for GST here for over a decade, as well as having professional tax advice from Australian accountants. Make of it what you will, lots of foreign small to medium business basically aren't doing things correctly here.
The government needs money, so they notice and enforce the rules, so now Vultr does something. Whether it's exactly done right or not I don't know.
You underestimate their size, by far. By FAR.
However, HK tax laws are very simple and excellent for business, unlike AU or EU, so they have not really any idea how that works operating only there.
HK has generally no VAT, once it was tried to implement at 5% and basically both the PRC and all local parties went against it, forcing it out of any mind. Will never happen unless tax revenue decreases massively, which is unlikely as there are some others that are levied, notably on rent and some income.
This seems very different to you as local with a local company, and more like the EU system to just charge locals that they also have for, well, EU.
For all I know, you may be right in theory, but it doesn't sound like Vultr will do that in practice (unless their notice is misleading).
To take a parallel example with Ramnode: if a EU resident orders a server located in the US from Ramnode (a US company), that person pays VAT to Ramnode based on their country of residence, even if the server that they order is located in the US and not in the EU. So it's the location of the customer that matters, not the location of the server.
But, yes, it could be that GST in Australia is implemented differently, as you suggest.
They sent the notice to Australian users so basically if you're from Australia you're screwed and have to pay 10% on top on your current charges (10% in USD!)
Are you saying that Vultr already charges +10% to users located in Australia and now they will start charging +20%?
no, i mean when the tax charge starts on August 1 2017
I guess that it was your formulation
that might sound like 10% + 10%.
Like I said above, EU users are already paying VAT to Vultr!
This is my understanding of the laws too, based on being registered for GST as a business and professional consultation.
The reason I said I'd be moving away from Vultr was not that I'd be paying GST for the Australian location, that's fair game. The fact they want to charge it on an account basis is what gets me.
I get the disappointment, especially you have the understanding of the GST law summarized above.
But, as I said above, these things seem to work according to the location of the user.
@Oliver: I've received different information from the SMB ATO callback service. I'm seeing my accountant in July and will get it confirmed.
GST does not apply to "sales not connected with Australia". Very interpretative.
"Exports of goods and services from Australia are generally GST-free."
So American buying VPS in an Australian Datacenter is GST free.
Source: ATO Website
It's MOSS all over again AFAIK.
If you are not willing to open a UK LTD and get a VAT ID (which is idiotic simple and total costs you less than 150EUR/year not living in UK, else less than 100EUR)... yea, i guess own fault.
No EU country has now below 15% VAT, unless you are in one of the exempt territories which come with other VAT numbers or interesting documents (Canary islands, French stuff on pretty much any continent, Madeira of Portugal...) which are hardly accepted at all.
You can do the same if you live in AU, outside you don't seem to pay it anyway (and cannot really open a local company either).
Yes, clearly.
My point was simply to draw a parallel between Vultr's charging of VAT to EU (private) users and Vultr's (imminent) charging of GST to Australian (private) users.
There is no US law that says to charge VAT to EU customers. US companies are not bound by EU laws, just like they are not bound by North Korean laws.
What happens is that some US companies have presence in EU and they are trying to cover their ass from predatory/mafia moves by the local governments there by voluntarily collecting vat from their US operations while lawfully they don't have to. And of course, there are the smaller ones who have no idea about all this nonsense and just follow like sheep what the bigger ones do.
No idea who you are referring to really or what that was in response to.
The tax office here doesn't care about 'generally doing business'. They say if you have 75,000 AUD revenue a year you have to register for GST if the service or good sold is 'Australia connected'. If you sell some hosting related services in Australia you can do some basic maths and see that you don't need to be particularly large to cross this threshold. It is not even 5K USD per month in revenue. Of course Vultr would be doing this much business in AU.
The other perspective here is that if some foreign company comes in and does not register for GST, but pays GST for services here (which they do) - then they can't claim it back.
I am no tax expert in any country; just a business owner in AU. I know from having lived in Europe and the discussions about VAT/Sales Taxes in the EU over the past years though that exactly as I suggest it is implemented very differently here to in the EU. From what I read in the EU they were trying to collect taxes based on the end customers location. That is a nightmare from a business point of view especially for online services. Here the collection is based on the origin of the service; which in reality from a business ownership perspective is very simple to deal with. I just charge 10% GST to all customers regardless of their location for all services from Australia. That is simple. The Europeans massively overcomplicate things especially since their VAT/GST equivalent taxes vary a lot across the entire continent...
If Vultr is doing it on the basis of location of customer I am quite sure they are wrong. Because in that case a user in Australia with one Vultr service outside of the country paying 10% extra would definitely be incorrect. It's only when that service is connected to Australia (i.e. from an Aussie datacentre) that GST collection is applicable. I really hope for their own sake that they are not using European tax experts to understand the Australian tax system.
@SplitIce I think you are interpreting it the way you wish to have it. If you take the wording literally then a service from an Australian datacentre is connected with Australia. It's service provided in Australia to everywhere. It is not exported since it is essentially "consumed" in Australia, therefore it is not GST free.
Honestly it seems from this thread and these discussions quite often that people read into tax regulations either one of two ways. a) Either they read it and interpret it in the way they wish or in a way that makes them come to a conclusion where they pay as little possible, often by looking for logic and fairness when in reality tax rules are about revenue collection and nothing else. b) They acknowledge that it is incredibly complicated, take professional advice, and then live with the advice they are given.
You are doing (a) by concluding that a service provisioned in an Australian datacentre location and available to Australian users is "not connected with Australia". That is not interpretative; it's just wishful thinking on your part. Your accountant will confirm it. Be honest with yourself here and ask how you can NOT see that a service from an Australian datacentre is not connected with Australia?
I'm just doing (b) - running my business and collecting and paying the sales taxes where required based on advice from people who make sense of these laws for a living. :-)
@deadbeef
US companies doing business in the EU are bound to EU laws in the same way European companies doing business in the US are bound to US laws. The EU countries can and will enforce them. A VPS in a DC in New York used by a European individual is taxable in Europe. A VPS in a DC in Frankfurt used by an American is not.
This has nothing to do with "mafia moves".
@Oliver As you pointed out I'll know more once I speak to my accountant of course. However as I understood it according to the ATO person I spoke to the changes going into effect apply to importing of goods and services to Australia by consumers (and hence businesses). For example an Australian buying a Laptop on eBay (should) now be charged GST on his/her purchase the same as an Australian buying a laptop at a brick and mortar store. The ATO documentation (which I CBF reading right now) contains lots of "imported by Australian consumers" qualifiers.
As we don't have any AU PoPs I have hence never requested advice in that respect. I wouldn't consider a service provided by a foreign company (Vultr is US based) as being "consumed in Australia" regardless of the compute node location. A tax accountant who has read the source legislation may say otherwise however. If that is the case however then Vultr should have been collecting since the start, nothing has changed.
You are in a different situation being Australian based compared with Vultr however.
@SplitIce, the changes you spoke about on the phone are not really related to this Vultr thing. That $1000 import thing has been that way for ages; but I believe after July it will change. They will have trouble enforcing it and I suspect many sellers for example on eBay (e.g. Asian sellers of electronics/consumable computers) will not be doing things "properly" but likely won't be able to be pursued easily so they will just not bother with it. Once a foreign company is literally doing business here (with some physical presence, not just sending stuff here by post) the potential for avoiding tax law is reduced significantly.
Sorry mate but you are just wrong if you wouldn't consider a service provided from a Australian data centre as connected with Australia. Even Vultr will now tell you you are wrong; otherwise they wouldn't be making the change that triggered this thread. Surely you see that? And yes they likely should have been collecting GST from the moment they hit that $75,000 AUD yearly threshold - but like many foreign companies especially with online based services they did not.
It doesn't matter that I am Australian based or my business is an Australian legal entity. It's based on the service being connected to Australia.
Foreign companies don't "do business", as they do not exist - they are foreign entities who may or may not buy resources/services from local, registered companies that export said resources/services.
You "do business" when you have a legal presence there (i.e. a local company) - which may or may not be a pre-requisite to buying physical resources that stay in the country. If you DO have a legal presence THEN that legal presence is bound to the local tax laws - and of course not the parent company.
Yeah, right.
@Oliver Vultr buy networking, space, etc from Equinix here in Australia. I would view that as "exporting" it in a goods sense. Equnix have a local presence & incorporation, much like you. Unless the Government plans to double dip (although if foreign companies can become GST registered they could claim it back).
Anyway as I am not a taxation accountant, this is all beyond me.
You can view it however you like. I will remain confused about how buying a service from a provider on Australian soil in an Australian datacentre facility is "exporting".
Perhaps if Vultr services were configured to literally be completely unavailable to anyone in Australia I would see some validity in saying it is "exported", but they aren't setup like that. The service is used in Australia therefore connected for tax purposes.
@Oliver I'm sticking with my view that they are changing their policies in order to comply with the (as of July 1st) import changes. Specifically the removal of the digital items exemptions (GST – applying to digital products and other services imported by consumers). The low value goods exemption which you mentioned does not apply to them due to the non-physical nature (although is relevant for other reasons to both of us).
I see no changes that would warrant them changing to charging GST to an individual or business in the USA. If they are supposed to be currently, then many people should be. The ATO site clearly states "Exports of goods and services from Australia are generally GST-free" matching with the common practice.
@SplitIce, that's fine. I don't really have an opinion. I just do what I am told is right. :-)
Next FY will be more interesting when the many foreign companies selling products to here, from here, or somehow "connected" to Australia find out whether and how the tax office will attempt to enforce things. It would not surprise me if the ATO goes to eBay and basically forces them or other 'middle men' to collect the GST in some way since getting for example some Asian company who sells products all over the world on eBay to collect the GST for them for phones, computers, or whatever else will be practically unenforceable.
Yeah, I agree, it also seems bizarre to me that Australia would start charging GST to people not residing in Australia.
In any case, I imagine that Vultr has gotten legal advice before deciding to introduce this change.
If they do it correctly and only charge GST for services sold from Australia, what is so bizarre about that?
They are a company privileged to be able to sell services from a mature developed and wealthy market place, to customers who want it and with legal and consumer protections that are typically working in the interest of all parties doing business with one another. Collecting and passing on 10% for the services they sell is hardly a big obligation or big ask.
To be honest based on the message in the original quote of this thread it is possible they don't really "get it". They write: "If you think you should be exempt from this tax, please submit a ticket to our support team along with a copy of your record of registration showing the ABN." If you have an ABN and an Australian business registered for GST you are not going to be exempt from this tax. You will pay it, record that you paid it, and you will get it reimbursed when you file your next activity statement anyway. So the end effect is that you don't pay more anyway, you just have a small amount of record keeping to do.