4 ms·

I would like to leanr from the article, but it is low on facts (I may have overlooked them while reading). What is the relationship between Krita Foundation (K

I would like to leanr from the article, but it is low on facts (I may have overlooked them while reading). What is the relationship between Krita Foundation (Krita) and Dmitry? Is Dmitry an employee to Krita living in Russia? How can there be any VAT involved? Is Dmitry a freelancer who sends invoices to Krita? Do those invoices include VAT? If they do, why does Krita need to pay VAT to Dutch authorities? Does he have a VatID on the invoice? Do they just send money to Dmitry?

boudewijnrempt 9y ago
Dmitry is a freelancer who lives in Moscow, not an employee. For the kind of work Dmitry does, there is no VAT appliccable in Russia. If the Krita Foundation had been Russian, no VAT would have been applicable. There is no VAT ID on his invoices, but he does send invoices. He also keeps ownership over his work, and the Foundation doesn't tell him what to work on... But since the Krita Foundation is in the Netherlands, the tax authorities feel that the VAT is transfered to the Foundation. Like I said below... If 100% of our income had been from donations, no VAT would have been transfered. If 100% had been from sales, it would have been transfered, and then we would have claimed it back. Since it's a mixed bag, 100% is transfered, and we could only claim 15% or so back. I still don't understand the logic behind that, though...
- _Codemonkeyism 9y ago
  Thanks!
- KayEss 9y ago
  They think you should pay VAT on imported services? That sounds very fishy to me. I've never heard of such a thing (and I have been exporting into the EU for many years).
  - boudewijnrempt 9y ago
    Yes... It's no wonder that my first accountant never realized that this could be possible.
    - Michielvv 9y ago
      Seems if you click enough, the tax site does mention it in some obscure tool. I always thought it only applied to goods. For the dutch: https://www.belastingdienst.nl/rekenhulpen/diensten_in_en_uit_het_buitenland/ https://www.belastingdienst.nl/rekenhulpen/diensten_in_en_ui...
    - ralfn 9y ago
      Honestly, your accountant sucked. All the rules are about making sure value produced is taxed exactly once. No more no less. If you find a loophole out of that, you better triple check that, because it is definitely not the spirit these tax laws are written in. Not to blame you - i too would trust a professional. Also, in Holland, accountancy is a protected profession. You can report them, because at the end of the day he/she took a risk that you would likely personally not have taken if you were aware of it.
  - varjag 9y ago
    You should, in most places of the world that have VAT. E.g. you pay VAT on inbound courier services like UPS, FedEx, atop of the duty on the goods they carry. (but not on outbound ones).
    - Kiro 9y ago
      What do you mean? You pay VAT on imported goods. Not on imported services.
      - KayEss 9y ago
        You might pay a customs duty on imported goods, but you don't pay VAT.
        gcp 9y ago
        It depends. Goods from inside the EU: you'll pay VAT (and recover it). Goods outside EU: you pay import duty (which might include VAT - but you don't actually pay that VAT as a company, because it's VAT) If this wouldn't apply to services, it would give non-EU suppliers an unfair advantage.
        _Codemonkeyism 9y ago
        You need to pay VAT on imported goods into the EU. In Germany it is called "Einfuhrumsatzsteuer".
        DanBC 9y ago
        https://www.gov.uk/goods-sent-from-abroad/overview https://www.gov.uk/goods-sent-from-abroad/overview https://www.gov.uk/goods-sent-from-abroad/tax-and-duty https://www.gov.uk/goods-sent-from-abroad/tax-and-duty > You pay VAT on goods sent from non-European Union (EU) countries and EU special territories (eg the Canary Islands) if they’re: > gifts worth more than £39 > other goods worth more than £15 > alcohol, tobacco products and fragrances (eg perfume, eau de toilette and cologne) of any value Customs duty is different. > You’ll be charged Customs Duty on gifts and other goods sent from outside the EU if they’re above a certain value. > The value includes: > the price paid for the goods > postage, packaging and insurance Type and value of good Customs Duty Anything under £135 No charge Gifts worth £135-£630 2.5%, but rates are lower for some goods - call the helpline Gifts above £630 and other goods above £135 The rate depends on the type of goods and where they came from - call the helpline
  - DangerousPie 9y ago
    Really? I always need to charge/pay VAT on services. The only exception is if both are VAT-registered businesses in the EU (but in different member states), in which case you can charge 0% VAT.
    - KayEss 9y ago
      We're talking about things imported to the EU from outside the EU. Do you really pay VAT in europe on services you buy in the US? Or in Asia?
      - gcp 9y ago
        Yes? You have to declare this. You don't physically pay of course, it's just taken into account for the VAT balance.
      - mikekchar 9y ago
        The problem (at leas in Japan) is the other way around. If I export an service from Japan to another country, I have to pay the Japanese equivalent of VAT. The importer does not generally have to pay (but I guess it depends on the place) because it has already been paid. The problem for the Krita foundation was that their employee (who was outside of the EU) was doing consulting work through Krita. It didn't matter that he resided outside of the EU, because he was working as an employee. I presume if he were an arms-length contractor, he could have invoiced the work personally (and that's how they really should have set it up -- I assume he was trying to avoid Russian tax by invoicing through Krita, but I'm speculating). So it was an EU service done in the EU (even though the employee was physically outside of the EU). VAT has to be paid for that. What I don't quite understand (and what seems to also mystify the Krita people) is why they have to also pay VAT on their donations. That's a pretty crazy law.
        kgwgk 9y ago
        I think you got it completely wrong. He was not an employee. He was providing a service to the foundation and sending them an invoice. I guess that if he had been in the EU instead of Russia, they would have noticed earlier that they were required to pay also the VAT. As he was in Russia, they had to account for the VAT owed to the tax authorities for this imported service themselves but they didn't.
  - ralfn 9y ago
    Are you selling to consumers or companies? If companies: they need to pay taxes: not your legal risks but you be wise to warn them. If consumers they need to declare it or the service or good can be confiscated. None of this is fishy.. it works like this between all Western nations and all other modern economies. And if you find a country that is an exception that that would be a huge bussiness opportunity for every one just moving profits that way. There was actually a way to do this. Cheat your way out of VAT. But its a complicated trick only companies like Apple and IKEA use and that trick is under full attack by both the US and EU government.
- lvoudour 9y ago
  Just curious, if Russia has no vat for that service, Dmitry is based in Russia and the sole purpose of the foundation is to support him, why was the foundation set up in the Netherlands and not in russia?
  - gcp 9y ago
    From the article it sounds the Foundation is run by other (Dutch) people working on Krita who may or may not be paid from it as well.
    - boudewijnrempt 9y ago
      Yes... I'm Dutch, so that's where I created the foundation. Originally, we wanted to work through the German KDE e.V., but they couldn't support development work financially.
- popee 9y ago
  Hey, kudos on great product! You really should create donation page for new features once a year or something like that, because Krita has value. Also, ignore critique, most of them never dealt with bureaucracy in EU and native countries. Such a mess.
_Codemonkeyism 9y ago
It looks if you're importing services into the EU you need to pay VAT on those services (just like importing goods) - which Krita didn't. If you do not have other VAT from sales, you will get the money back, which essentially means you do not have to pay that VAT - "would not have to pay VAT" from the article (but declare it). If you have VAT from buying and selling items, the VAT you've paid for services is deducted from the difference of selling and buying.

boudewijnrempt 9y ago

Dmitry is a freelancer who lives in Moscow, not an employee. For the kind of work Dmitry does, there is no VAT appliccable in Russia. If the Krita Foundation had been Russian, no VAT would have been applicable. There is no VAT ID on his invoices, but he does send invoices. He also keeps ownership over his work, and the Foundation doesn't tell him what to work on... But since the Krita Foundation is in the Netherlands, the tax authorities feel that the VAT is transfered to the Foundation. Like I said below... If 100% of our income had been from donations, no VAT would have been transfered. If 100% had been from sales, it would have been transfered, and then we would have claimed it back. Since it's a mixed bag, 100% is transfered, and we could only claim 15% or so back. I still don't understand the logic behind that, though...

_Codemonkeyism 9y ago
Thanks!
KayEss 9y ago
They think you should pay VAT on imported services? That sounds very fishy to me. I've never heard of such a thing (and I have been exporting into the EU for many years).
- boudewijnrempt 9y ago
  Yes... It's no wonder that my first accountant never realized that this could be possible.
  - Michielvv 9y ago
    Seems if you click enough, the tax site does mention it in some obscure tool. I always thought it only applied to goods. For the dutch: https://www.belastingdienst.nl/rekenhulpen/diensten_in_en_uit_het_buitenland/ https://www.belastingdienst.nl/rekenhulpen/diensten_in_en_ui...
  - ralfn 9y ago
    Honestly, your accountant sucked. All the rules are about making sure value produced is taxed exactly once. No more no less. If you find a loophole out of that, you better triple check that, because it is definitely not the spirit these tax laws are written in. Not to blame you - i too would trust a professional. Also, in Holland, accountancy is a protected profession. You can report them, because at the end of the day he/she took a risk that you would likely personally not have taken if you were aware of it.
- varjag 9y ago
  You should, in most places of the world that have VAT. E.g. you pay VAT on inbound courier services like UPS, FedEx, atop of the duty on the goods they carry. (but not on outbound ones).
  - Kiro 9y ago
    What do you mean? You pay VAT on imported goods. Not on imported services.
    - KayEss 9y ago
      You might pay a customs duty on imported goods, but you don't pay VAT.
      - gcp 9y ago
        It depends. Goods from inside the EU: you'll pay VAT (and recover it). Goods outside EU: you pay import duty (which might include VAT - but you don't actually pay that VAT as a company, because it's VAT) If this wouldn't apply to services, it would give non-EU suppliers an unfair advantage.
      - _Codemonkeyism 9y ago
        You need to pay VAT on imported goods into the EU. In Germany it is called "Einfuhrumsatzsteuer".
      - DanBC 9y ago
        https://www.gov.uk/goods-sent-from-abroad/overview https://www.gov.uk/goods-sent-from-abroad/overview https://www.gov.uk/goods-sent-from-abroad/tax-and-duty https://www.gov.uk/goods-sent-from-abroad/tax-and-duty > You pay VAT on goods sent from non-European Union (EU) countries and EU special territories (eg the Canary Islands) if they’re: > gifts worth more than £39 > other goods worth more than £15 > alcohol, tobacco products and fragrances (eg perfume, eau de toilette and cologne) of any value Customs duty is different. > You’ll be charged Customs Duty on gifts and other goods sent from outside the EU if they’re above a certain value. > The value includes: > the price paid for the goods > postage, packaging and insurance Type and value of good Customs Duty Anything under £135 No charge Gifts worth £135-£630 2.5%, but rates are lower for some goods - call the helpline Gifts above £630 and other goods above £135 The rate depends on the type of goods and where they came from - call the helpline
- DangerousPie 9y ago
  Really? I always need to charge/pay VAT on services. The only exception is if both are VAT-registered businesses in the EU (but in different member states), in which case you can charge 0% VAT.
  - KayEss 9y ago
    We're talking about things imported to the EU from outside the EU. Do you really pay VAT in europe on services you buy in the US? Or in Asia?
    - gcp 9y ago
      Yes? You have to declare this. You don't physically pay of course, it's just taken into account for the VAT balance.
    - mikekchar 9y ago
      The problem (at leas in Japan) is the other way around. If I export an service from Japan to another country, I have to pay the Japanese equivalent of VAT. The importer does not generally have to pay (but I guess it depends on the place) because it has already been paid. The problem for the Krita foundation was that their employee (who was outside of the EU) was doing consulting work through Krita. It didn't matter that he resided outside of the EU, because he was working as an employee. I presume if he were an arms-length contractor, he could have invoiced the work personally (and that's how they really should have set it up -- I assume he was trying to avoid Russian tax by invoicing through Krita, but I'm speculating). So it was an EU service done in the EU (even though the employee was physically outside of the EU). VAT has to be paid for that. What I don't quite understand (and what seems to also mystify the Krita people) is why they have to also pay VAT on their donations. That's a pretty crazy law.
      - kgwgk 9y ago
        I think you got it completely wrong. He was not an employee. He was providing a service to the foundation and sending them an invoice. I guess that if he had been in the EU instead of Russia, they would have noticed earlier that they were required to pay also the VAT. As he was in Russia, they had to account for the VAT owed to the tax authorities for this imported service themselves but they didn't.
- ralfn 9y ago
  Are you selling to consumers or companies? If companies: they need to pay taxes: not your legal risks but you be wise to warn them. If consumers they need to declare it or the service or good can be confiscated. None of this is fishy.. it works like this between all Western nations and all other modern economies. And if you find a country that is an exception that that would be a huge bussiness opportunity for every one just moving profits that way. There was actually a way to do this. Cheat your way out of VAT. But its a complicated trick only companies like Apple and IKEA use and that trick is under full attack by both the US and EU government.
lvoudour 9y ago
Just curious, if Russia has no vat for that service, Dmitry is based in Russia and the sole purpose of the foundation is to support him, why was the foundation set up in the Netherlands and not in russia?
- gcp 9y ago
  From the article it sounds the Foundation is run by other (Dutch) people working on Krita who may or may not be paid from it as well.
  - boudewijnrempt 9y ago
    Yes... I'm Dutch, so that's where I created the foundation. Originally, we wanted to work through the German KDE e.V., but they couldn't support development work financially.
popee 9y ago
Hey, kudos on great product! You really should create donation page for new features once a year or something like that, because Krita has value. Also, ignore critique, most of them never dealt with bureaucracy in EU and native countries. Such a mess.

_Codemonkeyism 9y ago

It looks if you're importing services into the EU you need to pay VAT on those services (just like importing goods) - which Krita didn't. If you do not have other VAT from sales, you will get the money back, which essentially means you do not have to pay that VAT - "would not have to pay VAT" from the article (but declare it). If you have VAT from buying and selling items, the VAT you've paid for services is deducted from the difference of selling and buying.