More Countries Adopt Cross-Border Tax on Digital Services
Recently, CardNotPresent published findings from a study that show that global, cross-border e-commerce will triple from $300 billion in 2015 to $900 billion in 2020, accounting for about 22% of all e-commerce sales. The study, conducted by international shipper DHL, also reported that targeting international audiences can increase an online retailer's sales by 10-15%.
For B2C digital services seeking to expand their global footprint, one challenge is complying with international tax rules which are becoming increasingly complex. One new tax which more and more governments are implementing on cross-border services is commonly known as the “Netflix tax.” It’s used to make up for tax revenue that’s being lost on the local level to untaxed, non-local digital streaming services. B2B sales are generally excluded. Recurly has written about this tax in previous blog posts.
Coming to Australia
Last May, Australia passed their own cross-border digital services tax which requires businesses outside the country to register and collect GST on sales of digital services to consumers in Australia. The tax will go into effect on July 1, 2017.
To support compliance, the Australian Taxation Office (ATO) will be providing an online registration portal, starting April 1, 2017. Businesses that sell $75,000 AUD or more of digital services to Australian consumers in a 12-month period will need to register to collect GST, which they’ll be required to report on and pay quarterly. Location information already captured in sales transactions should be used to identify which consumers to tax. B2B sales are not impacted, and the Australian Business Number (ABN) is used to identify business customers.
Recurly already supports GST collection from Australian consumers. Before the July 1, 2017 rule goes into effect, Recurly plans to add support for ABN collection from business customers, as well as the ability to not apply the tax if the sale is cross-border, since business customers are exempt. If you need to comply with the July 1, 2017 changes, please contact Recurly Support and let us know so we can keep you updated on this new functionality.
Countries With New Digital Cross-Border Rules
On January 1st, Russia passed similar tax rules on cross-border digital services sales to consumers. To help businesses comply, Recurly extended its support of Russian VAT collection to include the collection of State Registration Numbers (SRN / SRNIE) from Russian business customers to ensure that they are not taxed on cross-border sales. Learn more about Russian VAT on Digital Services.
In case you missed it, Recurly also supports the recent New Zealand rules on cross-border digital sales that went into effect on October 1, 2016.
The increasing complexity of tax laws can make compliance time-consuming and burdensome. Recurly’s accurate, automated and streamlined tax solutions assist our customers in meeting these complex tax requirements. As more countries impose taxes on digital services, we will continue to make sure that our solution meets our customers’ global tax compliance needs.
Do you have tax compliance needs? Contact us to learn how Recurly can help streamline your tax collection processes.