9 ms·

Microsoft evading VAT tax with GitHub sponsors

40 points by dustinmoris 6y ago

iso1210 6y ago
Interesting. As I came into the industry in the late 90s I'm still very warely on Embrace Extend Extinguish from Microsoft. Tax, especially international tax, is hard, especially when Microsoft hide who your customers are. Why are Microsoft so bad at implementing it?
- yxhuvud 6y ago
  They are not. The twitter commenter is confused as to the difference between selling things and sponsoring things. Github sponsorships is intended for sponsorships, but the tweeter wanted to use it as a platform for selling stuff.
  - Cu3PO42 6y ago
    I have to disagree. The different tiers clearly incentivize giving back something. Sometimes this may only be a featured mention on their website or README, but depending on the exact modalities of that placement and your jurisdiction even that may be subject to VAT.
    - dustinmoris 6y ago
      It 100% is. A mention is nothing less of an advertisement. Giving someone a mention somewhere in return for a sponsorship is simply selling an online ad. Otherwise every company in the world could legally evade tax by calling their sales "sponsorships" and offered services as a "favour".
      - Cu3PO42 6y ago
        In Germany there are certain classes of sponsorships where VAT does not apply. For example if I just put your logo in the corner of my website or a billboard I'm paying for and do not draw special attention to it or otherwise mention it, VAT would not apply. Now if I turn your logo into a link, things might be different. But analyzing when VAT applies and when it doesn't for every possible sponsorship reward and every country that Sponsors works in is a ridiculous overhead to put on either GH or the developer being sponsored, so they should just give you two options in my opinion: give back absolutely nothing, do not even list their name on the sponsors page OR charge VAT and allow the developer to provide whatever services they want.
        iso1210 6y ago
        > But analyzing when VAT applies and when it doesn't for every possible sponsorship reward and every country that Sponsors works in is a ridiculous overhead to put on either GH or the developer being sponsored Microsoft have a large legal team that operates in practically every country in the world, I'm sure it wouldn't be a ridiculous overhead to do this
        Cu3PO42 6y ago
        If you could select the kind of reward you're offering from a GH-provided list that could work, but at that point you're putting the burden on the developer to correctly judge the reward they're offering. If GH/MSFT were to manually check every reward by every developer that might still be doable, but I do think that's a lot of effort to check in a hundred or more different jurisdictions for free. I certainly wouldn't expect it. Also, who's accepting liability for wrong categorization? Say, my sponsors in Belgium should have been charged VAT for the $20 tier but weren't. Since I'm in the EU and so is Belgium I believe it would have been my responsibility to pay the VAT, but GH decided VAT didn't apply. I doubt GH would be willing to put themselves on the hook for errors their law department made for a free service. And if I'm on the hook I'm just going to want to always charge VAT so I'm on the safe side.
geerlingguy 6y ago
Note that this only affects you (potentially) if you offer services or goods at certain tiers, and in most countries there's a certain threshold before you'd have to worry about it anyways. Honestly, VAT is one of the most puzzling aspects of trying to do any trade with people/entities in Europe, and unless you use some service that handles the accounting for you, it's impossibly hard to figure it out all on your own.
- dustinmoris 6y ago
  > Note that this only affects you (potentially) if you offer services or goods at certain tiers, This affects everyone who has sponsor tiers as effectively all sponsor tiers come down to a trade: You sponsor me (e.g. pay me) and I give you something in return (e.g. mention somewhere, a sticker, support, etc.). It also affects GitHub because they will very unlikely be able to argue that they are just payment processors with the current way it's implemented. Additionally it's even worse than what the tweet suggests, because VAT rules are different for digital services and physical goods in most countries in the world. So if you give someone something physical in return (e.g. stickers, coffee mug, some merch, etc.) for a sponsorship then you must distinguish your VAT collection for sponsors who only get a digital service in return and those who get a physical good in return. It's a real bloody mess and VAT is the worst bureaucratic nightmare to digital businesses. Nonetheless, no excuse for a huge corporation like Microsoft to blatantly violate tax laws which they are very well aware of. > Honestly, VAT is one of the most puzzling aspects of trying to do any trade with people/entities in Europe, and unless you use some service that handles the accounting for you, it's impossibly hard to figure it out all on your own. True, but it's beyond Europe. VAT applies in the country where the customer lives which means you also have to deal with VAT rules for South African customers and many others and not just EU or UK.
  - thu2111 6y ago
    VAT used to be much easier in Europe because you were charged VAT in your home country, not the country of the customer. That's far easier to establish and means you're dealing with your local government in your native language. The EU Commission forcibly changed this some years ago to the present system which is drastically more complicated, where you have to figure out where your customer is. There are even special rules for things like people who buy things whilst on cruise ships. Then you have to submit VAT returns to every single country where you have customers, and those countries are under no obligation to make it easy, for instance, they usually only offer tax returns in their own language. Because this is impossible to comply with without enormous numbers of staff, there's now a whole industry of tax middlemen who do it for you. Thus selling to the EU is a nightmare of overheads and costs. It doesn't have to be this way because it never used to be that way, but the EU is ideologically committed to the socialist notion that tax competition is harmful and should be eliminated.
twiss 6y ago
> Until now I did not offer any rewards for sponsorships but planned to introduce them. > VAT is due on any exchange, but not when receiving money without a counter performance. > To make things worse, if you offer a 'digital good' for a sponsorship, for example access to a streaming a video course, many countries apply special rules for VAT handling. So, clearly GitHub sponsorships aren't meant to be used for selling stuff. If you would try to do so anyway, it would indeed likely be illegal, but I don't think it's necessarily clear that anything illegal is going on at the moment. > Because it happened to Patreon which now charges VAT. And to other digital service platforms like OnlyFans. With these services it's more directly obvious that you're getting something in return for your money. GitHub will likely claim that sponsors aren't typically getting anything in return directly, as development on the open source projects would happen to some extent regardless of each (individual) sponsor's contribution.
- lathiat 6y ago
  At least for some taxes Patreon allows you to specify what percentage of your pledge is for physical or digital goods versus “community” and taxes are apportioned appropriately. Though unsure if that applies to VAT.
- iso1210 6y ago
  > With these services it's more directly obvious that you're getting something in return for your money. Article mentions that you have to sponsor a certain amount to get 1) early access to software 2) Access to videos The second especially is a "sponsors only" feature "A few weeks later I added a new “private” group of screencasts for GitHub sponsors only."
- Cu3PO42 6y ago
  > So, clearly GitHub sponsorships aren't meant to be used for selling stuff. I replied the same thing in another sub-thread, but I just don't think that you can make that claim in good conscience. There are different tiers and you can specify "rewards" for each. If I give you money and you give me certain goods or services in return, you are selling me something. > GitHub will likely claim that sponsors aren't typically getting anything in return directly Even the examples they feature on https://github.com/sponsors https://github.com/sponsors do give something in return. OpenSSL has a tier (at $400/mo) that will feature your name or your company's name on their website in a sponsorship section. Depending on your jurisdiction VAT may already apply to this.
Analemma_ 6y ago
I realize that Twitter threads have no title and so the submitter has to summarize it as best they can, but this headline is just wrong. It’s not clear that VAT is even owed for GitHub sponsorships because it’s not a payment for goods/services, and even if it is, Microsoft isn’t “evading tax” that they owe. Something like “Microsoft avoids responsibility for calculating GitHub sponsorship VAT” would be better.
- dustinmoris 6y ago
  Disagree very strongly. Microsoft actively invites the user to offer something in return for sponsorship. They have features built into their sponsorship program to encourage that like the tiers and also documentation and examples on GitHub owned properties demonstrate examples of doing exactly that. Therefore Microsoft actively wants you or at least strongly suggests that this is what the user should do whilst at the same time making it impossible for the user to comply with national VAT laws because they withhold you the information and don't allow you to capture that information yourself and don't invoice correctly which is also done by Microsoft automatically. Therefore Microsoft is actively evading VAT and actively pushing their own customers to evade VAT which is a double offence IMHO.
- iso1210 6y ago
  But it is payment for services -- access to the videos is for sponsors only, just like OnlyFans. Microsoft are arguably acting like Uber, and arguing that they person being sponsored is responsible for the VAT collection. On the other hand they are specifying neither the price, nor what the service is, so perhaps they're more like ebay and amazon. Unlike OnlyFans and Uber, Microsoft isn't a 'disrupter' company that can take the risk, it's an established company in most countries. Uber in the UK, and OnlyFans, and AnyAnswers, are all facing VAT charges. I'm sure other countries are doing the same (and of course in the UK we're about to get an online business tax for some regressive populist reason) https://www.accountingweb.co.uk/tax/business-tax/uber-faces-ps15bn-vat-crisis https://www.accountingweb.co.uk/tax/business-tax/uber-faces-... > As with many VAT issues, including the OnlyFans and Any Answers Ltd cases, it comes down to the simple question: “Who is supplying what and to whom?” > Is Uber acting as an agent for the drivers, putting work their way? If Uber is based in the UK, this agency commission will be standard rated for VAT. > If Uber is supplying passenger transport in the UK, rather than the self-employed driver, the gross fare paid by the passenger to Uber is standard rated. The place of supply for passenger transport is where the journey takes place. Of course it's even more complex with github as the customers aren't all in the UK (almost everyone paying for an Uber in the UK is in the UK - not sure how cross border journeys work in Ireland, and I guess you could engage an uber to take you cross channel too)
Glavnokoman 6y ago
first - the title is misleading at least second - this is one of the very few events where I actually think MS did something good.
gruez 6y ago
AFAIK for sales taxes there's a minimum amount of sales you need to make per year before you're required to collect it. it's usually some high amount in the tens or hundreds of thousands of dollars. Does the same apply for VAT? If so, most projects are fine because I doubt many are raking in 50k a year in sponsorship money.
- FormFollowsFunc 6y ago
  For EU VAT the minimum threshold is €10k (excl. VAT). You register with a mini one stop shop within your country which distributes the VAT to the other countries. If you're not selling to consumers in other EU countries the threshold is a lot higher.
- iso1210 6y ago
  Microsoft are taking money from hundreds of different jurisdictions and delivering it to people in 30. It's not clear if they are simply a facilitator like paypal, or a business charging customers and paying suppliers (like youtube). It seems to me to be acting as the latter. In my jurisdiction you get upto about $100k without having to register for VAT, but I wouldn't have a clue what tax implications I'd have if I took money and sold a service to someone from Peru. 40 years ago international trade was very specialised, especially trade in services, and companies had experts to help them with the legalities. The internet allows anyone to trade with anyone else, and tax law just doesn't keep up. It's quite possible for a company or sole-trader with a revenue of $50k a year to be providing services to customers in 150 countries. That was unthinkable even 20 years ago. How do they ensure that they meet all applicable local laws (including buy not limited to tax)? What about if their customers are anonymous? If I'm providing coding services to "Joe Blogs" who pays me via bitcoin or western union or even cash in the mail, how do I know he's not in Iran or Cuba and I'm breaking American law. If I'm a developer in India and I do work with a customer in the USA and a customer in Iran (and customers in 50 other states), am I breaking US laws? Or Iranian laws? Or Indian laws? Not just tax laws, but economic boycotts, export laws, etc. How do I keep on top of that even if I'm pulling in $50k/year in sponsorship, what about if it's just micropayments for my blog and I'm getting $500/year into my bitcoin wallet?
jsiepkes 6y ago
As far as I can tell in the Netherlands you should just declare it as income with the tax service. I don't think you need to do anything with VAT.
throw8932894 6y ago
Rafael is in Norway, he has good reason to be paranoid. Their tax office is a bit greedy and strange when it comes to taxes. For example even after leaving Norway, person is still tax resident of Norway for three years. In normal EU country this would be a donation. There is no contract signed, no work relation, no goods to deliver.
rognjen 6y ago
Hanlon's razor would suggest that they just didn't do it "properly" rather then that they're actively "evading". Also they aren't evading VAT but actually they're just not assisting their users in complying. The most likely answer I think is that they just didn't think it's important or relevant (yet).
rambojazz 6y ago
Can someone please ELI5 this for me? Isn't github's sponsors a way to donate money? Or is it a way to sell services? If it's for donations, why is he worrying about VAT???

40 points by dustinmoris 6y ago

Interesting. As I came into the industry in the late 90s I'm still very warely on Embrace Extend Extinguish from Microsoft. Tax, especially international tax, is hard, especially when Microsoft hide who your customers are. Why are Microsoft so bad at implementing it?

yxhuvud 6y ago
They are not. The twitter commenter is confused as to the difference between selling things and sponsoring things. Github sponsorships is intended for sponsorships, but the tweeter wanted to use it as a platform for selling stuff.
- Cu3PO42 6y ago
  I have to disagree. The different tiers clearly incentivize giving back something. Sometimes this may only be a featured mention on their website or README, but depending on the exact modalities of that placement and your jurisdiction even that may be subject to VAT.
  - dustinmoris 6y ago
    It 100% is. A mention is nothing less of an advertisement. Giving someone a mention somewhere in return for a sponsorship is simply selling an online ad. Otherwise every company in the world could legally evade tax by calling their sales "sponsorships" and offered services as a "favour".
    - Cu3PO42 6y ago
      In Germany there are certain classes of sponsorships where VAT does not apply. For example if I just put your logo in the corner of my website or a billboard I'm paying for and do not draw special attention to it or otherwise mention it, VAT would not apply. Now if I turn your logo into a link, things might be different. But analyzing when VAT applies and when it doesn't for every possible sponsorship reward and every country that Sponsors works in is a ridiculous overhead to put on either GH or the developer being sponsored, so they should just give you two options in my opinion: give back absolutely nothing, do not even list their name on the sponsors page OR charge VAT and allow the developer to provide whatever services they want.
      - iso1210 6y ago
        > But analyzing when VAT applies and when it doesn't for every possible sponsorship reward and every country that Sponsors works in is a ridiculous overhead to put on either GH or the developer being sponsored Microsoft have a large legal team that operates in practically every country in the world, I'm sure it wouldn't be a ridiculous overhead to do this
        Cu3PO42 6y ago
        If you could select the kind of reward you're offering from a GH-provided list that could work, but at that point you're putting the burden on the developer to correctly judge the reward they're offering. If GH/MSFT were to manually check every reward by every developer that might still be doable, but I do think that's a lot of effort to check in a hundred or more different jurisdictions for free. I certainly wouldn't expect it. Also, who's accepting liability for wrong categorization? Say, my sponsors in Belgium should have been charged VAT for the $20 tier but weren't. Since I'm in the EU and so is Belgium I believe it would have been my responsibility to pay the VAT, but GH decided VAT didn't apply. I doubt GH would be willing to put themselves on the hook for errors their law department made for a free service. And if I'm on the hook I'm just going to want to always charge VAT so I'm on the safe side.

geerlingguy 6y ago

Note that this only affects you (potentially) if you offer services or goods at certain tiers, and in most countries there's a certain threshold before you'd have to worry about it anyways. Honestly, VAT is one of the most puzzling aspects of trying to do any trade with people/entities in Europe, and unless you use some service that handles the accounting for you, it's impossibly hard to figure it out all on your own.

dustinmoris 6y ago
> Note that this only affects you (potentially) if you offer services or goods at certain tiers, This affects everyone who has sponsor tiers as effectively all sponsor tiers come down to a trade: You sponsor me (e.g. pay me) and I give you something in return (e.g. mention somewhere, a sticker, support, etc.). It also affects GitHub because they will very unlikely be able to argue that they are just payment processors with the current way it's implemented. Additionally it's even worse than what the tweet suggests, because VAT rules are different for digital services and physical goods in most countries in the world. So if you give someone something physical in return (e.g. stickers, coffee mug, some merch, etc.) for a sponsorship then you must distinguish your VAT collection for sponsors who only get a digital service in return and those who get a physical good in return. It's a real bloody mess and VAT is the worst bureaucratic nightmare to digital businesses. Nonetheless, no excuse for a huge corporation like Microsoft to blatantly violate tax laws which they are very well aware of. > Honestly, VAT is one of the most puzzling aspects of trying to do any trade with people/entities in Europe, and unless you use some service that handles the accounting for you, it's impossibly hard to figure it out all on your own. True, but it's beyond Europe. VAT applies in the country where the customer lives which means you also have to deal with VAT rules for South African customers and many others and not just EU or UK.
- thu2111 6y ago
  VAT used to be much easier in Europe because you were charged VAT in your home country, not the country of the customer. That's far easier to establish and means you're dealing with your local government in your native language. The EU Commission forcibly changed this some years ago to the present system which is drastically more complicated, where you have to figure out where your customer is. There are even special rules for things like people who buy things whilst on cruise ships. Then you have to submit VAT returns to every single country where you have customers, and those countries are under no obligation to make it easy, for instance, they usually only offer tax returns in their own language. Because this is impossible to comply with without enormous numbers of staff, there's now a whole industry of tax middlemen who do it for you. Thus selling to the EU is a nightmare of overheads and costs. It doesn't have to be this way because it never used to be that way, but the EU is ideologically committed to the socialist notion that tax competition is harmful and should be eliminated.

twiss 6y ago

> Until now I did not offer any rewards for sponsorships but planned to introduce them. > VAT is due on any exchange, but not when receiving money without a counter performance. > To make things worse, if you offer a 'digital good' for a sponsorship, for example access to a streaming a video course, many countries apply special rules for VAT handling. So, clearly GitHub sponsorships aren't meant to be used for selling stuff. If you would try to do so anyway, it would indeed likely be illegal, but I don't think it's necessarily clear that anything illegal is going on at the moment. > Because it happened to Patreon which now charges VAT. And to other digital service platforms like OnlyFans. With these services it's more directly obvious that you're getting something in return for your money. GitHub will likely claim that sponsors aren't typically getting anything in return directly, as development on the open source projects would happen to some extent regardless of each (individual) sponsor's contribution.

lathiat 6y ago
At least for some taxes Patreon allows you to specify what percentage of your pledge is for physical or digital goods versus “community” and taxes are apportioned appropriately. Though unsure if that applies to VAT.
iso1210 6y ago
> With these services it's more directly obvious that you're getting something in return for your money. Article mentions that you have to sponsor a certain amount to get 1) early access to software 2) Access to videos The second especially is a "sponsors only" feature "A few weeks later I added a new “private” group of screencasts for GitHub sponsors only."
Cu3PO42 6y ago
> So, clearly GitHub sponsorships aren't meant to be used for selling stuff. I replied the same thing in another sub-thread, but I just don't think that you can make that claim in good conscience. There are different tiers and you can specify "rewards" for each. If I give you money and you give me certain goods or services in return, you are selling me something. > GitHub will likely claim that sponsors aren't typically getting anything in return directly Even the examples they feature on https://github.com/sponsors https://github.com/sponsors do give something in return. OpenSSL has a tier (at $400/mo) that will feature your name or your company's name on their website in a sponsorship section. Depending on your jurisdiction VAT may already apply to this.

Analemma_ 6y ago

I realize that Twitter threads have no title and so the submitter has to summarize it as best they can, but this headline is just wrong. It’s not clear that VAT is even owed for GitHub sponsorships because it’s not a payment for goods/services, and even if it is, Microsoft isn’t “evading tax” that they owe. Something like “Microsoft avoids responsibility for calculating GitHub sponsorship VAT” would be better.

dustinmoris 6y ago
Disagree very strongly. Microsoft actively invites the user to offer something in return for sponsorship. They have features built into their sponsorship program to encourage that like the tiers and also documentation and examples on GitHub owned properties demonstrate examples of doing exactly that. Therefore Microsoft actively wants you or at least strongly suggests that this is what the user should do whilst at the same time making it impossible for the user to comply with national VAT laws because they withhold you the information and don't allow you to capture that information yourself and don't invoice correctly which is also done by Microsoft automatically. Therefore Microsoft is actively evading VAT and actively pushing their own customers to evade VAT which is a double offence IMHO.
iso1210 6y ago
But it is payment for services -- access to the videos is for sponsors only, just like OnlyFans. Microsoft are arguably acting like Uber, and arguing that they person being sponsored is responsible for the VAT collection. On the other hand they are specifying neither the price, nor what the service is, so perhaps they're more like ebay and amazon. Unlike OnlyFans and Uber, Microsoft isn't a 'disrupter' company that can take the risk, it's an established company in most countries. Uber in the UK, and OnlyFans, and AnyAnswers, are all facing VAT charges. I'm sure other countries are doing the same (and of course in the UK we're about to get an online business tax for some regressive populist reason) https://www.accountingweb.co.uk/tax/business-tax/uber-faces-ps15bn-vat-crisis https://www.accountingweb.co.uk/tax/business-tax/uber-faces-... > As with many VAT issues, including the OnlyFans and Any Answers Ltd cases, it comes down to the simple question: “Who is supplying what and to whom?” > Is Uber acting as an agent for the drivers, putting work their way? If Uber is based in the UK, this agency commission will be standard rated for VAT. > If Uber is supplying passenger transport in the UK, rather than the self-employed driver, the gross fare paid by the passenger to Uber is standard rated. The place of supply for passenger transport is where the journey takes place. Of course it's even more complex with github as the customers aren't all in the UK (almost everyone paying for an Uber in the UK is in the UK - not sure how cross border journeys work in Ireland, and I guess you could engage an uber to take you cross channel too)

Glavnokoman 6y ago

first - the title is misleading at least second - this is one of the very few events where I actually think MS did something good.

gruez 6y ago

AFAIK for sales taxes there's a minimum amount of sales you need to make per year before you're required to collect it. it's usually some high amount in the tens or hundreds of thousands of dollars. Does the same apply for VAT? If so, most projects are fine because I doubt many are raking in 50k a year in sponsorship money.

FormFollowsFunc 6y ago
For EU VAT the minimum threshold is €10k (excl. VAT). You register with a mini one stop shop within your country which distributes the VAT to the other countries. If you're not selling to consumers in other EU countries the threshold is a lot higher.
iso1210 6y ago
Microsoft are taking money from hundreds of different jurisdictions and delivering it to people in 30. It's not clear if they are simply a facilitator like paypal, or a business charging customers and paying suppliers (like youtube). It seems to me to be acting as the latter. In my jurisdiction you get upto about $100k without having to register for VAT, but I wouldn't have a clue what tax implications I'd have if I took money and sold a service to someone from Peru. 40 years ago international trade was very specialised, especially trade in services, and companies had experts to help them with the legalities. The internet allows anyone to trade with anyone else, and tax law just doesn't keep up. It's quite possible for a company or sole-trader with a revenue of $50k a year to be providing services to customers in 150 countries. That was unthinkable even 20 years ago. How do they ensure that they meet all applicable local laws (including buy not limited to tax)? What about if their customers are anonymous? If I'm providing coding services to "Joe Blogs" who pays me via bitcoin or western union or even cash in the mail, how do I know he's not in Iran or Cuba and I'm breaking American law. If I'm a developer in India and I do work with a customer in the USA and a customer in Iran (and customers in 50 other states), am I breaking US laws? Or Iranian laws? Or Indian laws? Not just tax laws, but economic boycotts, export laws, etc. How do I keep on top of that even if I'm pulling in $50k/year in sponsorship, what about if it's just micropayments for my blog and I'm getting $500/year into my bitcoin wallet?

jsiepkes 6y ago

As far as I can tell in the Netherlands you should just declare it as income with the tax service. I don't think you need to do anything with VAT.

throw8932894 6y ago

Rafael is in Norway, he has good reason to be paranoid. Their tax office is a bit greedy and strange when it comes to taxes. For example even after leaving Norway, person is still tax resident of Norway for three years. In normal EU country this would be a donation. There is no contract signed, no work relation, no goods to deliver.

rognjen 6y ago

Hanlon's razor would suggest that they just didn't do it "properly" rather then that they're actively "evading". Also they aren't evading VAT but actually they're just not assisting their users in complying. The most likely answer I think is that they just didn't think it's important or relevant (yet).

rambojazz 6y ago

Can someone please ELI5 this for me? Isn't github's sponsors a way to donate money? Or is it a way to sell services? If it's for donations, why is he worrying about VAT???