Taxes on the sale of Google applications and ads

We continue a series of notes on taxes when monetizing mobile applications on foreign sites.

In the last article What taxes should be paid when withdrawing revenue from applications in Apple iTunes, we briefly outlined the algorithm for calculating taxes when earning income in Apple iTunes. Now we offer to discuss sales taxes for Google Play applications and Google AdSense ads .
')
We will be guided by the following agreements with Google, which are in the official Russian translation on the website of the corporation:

• Google Play Software Distribution Agreement
• Google Play Terms of Use
• Google AdSense Terms of Use

Details under the cut.

1) Taxes author application developer

Like last time, let's start with the most interesting thing - a single author, who receives income from the results of his creative activity.

Current legislation does not require registration as an individual entrepreneur in the event that a citizen receives income from the use of his own works. Computer programs are protected by copyright as literary works. Hence the conclusion : any use of software that brings income to the author does not fall under the definition of entrepreneurial activity.

But at the same time there is an essential nuance: by “use” of software we mean the disposal of rights to it from the point of view of copyright . In other words, the receipt by the author of income under a software license agreement is not related to business activities.

As a result, at the end of the fiscal year, it is enough for the author to file an income declaration, where you can indicate the proceeds from the sale of your applications on Google Play and pay 13% of the personal income tax from them. At the same time, the author doesn’t care where or how Google pays taxes on such revenues and what commissions it holds.

It should be remembered that the considered option is valid only when selling your own software . In other words, the author, if necessary, must confirm the exclusive rights to such software.

The easiest way to confirm is the state registration of computer programs in Rospatent. Based on the registration results, a certificate is issued, in which the right holder and the author are clearly indicated. In this case, they must be 100% identical. Until a person is proved, another person specified in the Certificate will be considered the author and copyright holder of the program.

Other options for the systematic extraction of income based on the application of software can be attributed to business activities. What does this include? For example, displaying Google AdSense ads in an application can be viewed as providing advertising services . With this method of monetization of applications, we recommend that the author register as an individual entrepreneur and display the income from Google AdSense to the IP bank account with all the tax obligations involved.

2) Taxes of application developers in the form of individual entrepreneurs and organizations

Profit tax and income tax

The issue of taxation of income from the sale of applications is described in detail in the previous material on the withdrawal of money from Apple iTunes. Therefore, we will not repeat.

With respect to Google AdSense advertising revenue, the approach is as follows: only funds received in your account are considered income, since Google acts as a customer of advertising services.

In other words, in the case under consideration, it is not the agent scheme of work with end users that is applied, but subcontracting. Google buys and resells advertising services on its behalf. Therefore, the Google margin does not increase the amount of developer income, in contrast to the sale of applications through the Google Play platform using an agent scheme.

VAT from the sale of applications and agency services

As you remember, from January 1, 2017, the concept of “services in electronic form” was introduced into the Tax Code of the Russian Federation (hereinafter referred to as the RF Tax Code) and the obligation to pay VAT on their cost, which is commonly called “Google tax”.

In the previous article on taxes on income from Apple, we discussed in detail what types of services are subject to VAT under the new law.

However, developers continue to ask questions about the validity of the retention of foreign service companies, including Google, VAT on sales amounts to Russian consumers.

Let's return to the definition of services in electronic form:

the provision of services in electronic form is recognized as the provision of services through the information and telecommunications network, including through the information and telecommunications network “Internet”, automated using information technologies (paragraph 1 of Article 174.2 of the RF Tax Code). Among such services, the Tax Code directly refers to the “provision of rights to use programs for electronic computers (including computer games), databases via the Internet, including by providing remote access to them, including updates to them and additional functionality .

We look at clause 2 of article 174.2 of the RF Tax Code:

When foreign organizations provide services to individuals who are not individual entrepreneurs (hereinafter referred to as individuals) services in electronic form ... ”. Further, paragraph 3 repeats the disposition: “Foreign organizations that provide services to individuals in electronic form, referred to in paragraph 1 of this article ...

Conclusion: this condition should be applied only in the case when a foreign organization grants rights to the software on its own behalf. If in the case of Apple it is still possible with a stretch to agree with the fulfillment of these conditions, then under the agreement with Google, in our opinion, they are absent.

We explain that Apple acts under a contract with the developer as a commission agent. Therefore, end user contracts are concluded on behalf of Apple. Google, on the contrary, positions itself in relations with end users as an agent for a developer who makes deals on behalf of a developer.

See section 2 of the Google Play Terms of Use:

Sales directly through an intermediary and through applications. Buying Content on Google Play, you buy it:

a) directly from Google (hereinafter referred to as Direct Selling);
b) from the Content Provider (hereinafter referred to as the Supplier), in respect of which Google acts as an Intermediary (hereinafter - Sale through an intermediary);
c) from the Supplier of the application in the case of purchase through the Android application (hereinafter - Sale through the application).
Each time you purchase Content, you enter into a separate purchase agreement:
d) based on the Terms (if applicable) with Google Commerce Limited (in the case of Direct Selling);
e) on the basis of the Conditions (if applicable) with the Supplier of the Content acquired (in the case of Sale through an intermediary);
e) with the Supplier of the purchased Content (in the case of Sales through an application).
Such a separate contract provided for in subparagraph (e) or (e) above supplements the contract with Google Inc. about using the Service (i.e., these Google Play Terms of Use).

Therefore, from the position of contracts concluded with the end user, the implementation of software and content is carried out under contracts with the developer.

Certain difficulties for developers are caused by the interpretation of clauses 3.4. Google Play Software Distribution Agreements. The latter directly relate to the conditions for paying Google VAT per developer.

If Google collects and pays value-added tax on customer payments (in accordance with applicable local laws) and these payments comply with the requirements for value-added tax on such payments, then this tax is not the responsibility of the Developer. In cases where Google is required to collect and pay taxes, as described in this section, Developer and Google take into account the supply from Developer Google for tax purposes, and the Developer assumes all tax obligations associated with such additional delivery.

However, we do not consider these conditions as a separate contract for resale of software through Google, since, in conjunction with other provisions of the cited Agreement and the Google Play Terms of Use, there is a condition for paying commission fees and concluding an agreement with the end user on behalf of the developer.

Additionally, pay attention to the second significant point. Remuneration under a software license agreement is exempt from Russian VAT on the basis of paragraph 26 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation. These provisions apply equally to foreign organizations. See, for example, on this issue Letter of the Ministry of Finance of 03.04.2017 N 03-07-08 / 19407 .

I confess, we don’t understand why Google doesn’t use the above 2 reasons for exempting Russian users from VAT payments for software purchased on Google Play. It’s just right for Russian consumers to complain about agreeing to an over-pricing of software sold through Google’s platforms.

Tax implications of discrepancies for developers.

Frequently asked questions are whether such provisions create additional VAT risks for Russian developers. What if Google does not pay VAT in Russia or does not pay it reasonably? Shouldn't a developer like a tax agent re-pay VAT in this case?

I think that such risks are absent for the following reasons:

1. In this case, a foreign organization is considered a taxpayer of VAT under contracts with individuals (see Art. 174.2 of the Tax Code of the Russian Federation);
2. Additionally, you can refer to the fact that the rights are realized under a license agreement for software that is exempt from VAT (clause 26 of paragraph 2 of Article 149 of the Tax Code of the Russian Federation).
3. The developers at the simplified taxation system do not pay VAT, in principle, and there are no tax agent obligations here.

If the fulfillment of the first condition does not depend on you, then the second one is quite capable of every developer. To reduce the risk of tax liability for non-payment of VAT from the sale of applications to Russian users by developers of DOS, it’s enough to submit your own EULA, which takes into account the nuances of VAT exemption of software applications, when downloading software. If desired, the terms EULA can be extended to online services. How to do it correctly, the subject of a separate article.

VAT on the amount of remuneration of Google under an agreement with the developer.

There are no differences from paying Apple services. In this case, Google uniquely provides the Russian developer with services in electronic form with a place of sale in Russia. Therefore, the developer, as a tax agent, is obliged to withhold and pay VAT on the amount of Gugul’s agency fee.

VAT from the sale of advertising services

In this matter, everything is quite simple and unambiguous. See Section 6 of the Google AdSense Terms of Use:

As part of your relationship with Google, Google is responsible for all taxes (if any) related to transactions between Google and advertisers that place Ads on Resources. You are responsible for all taxes (if any) related to the Services, other than taxes based on Google’s net income. All payments to you by Google in connection with the Services will be considered as including tax (if applicable) and will not be subject to adjustment.

According to Article 148 of the Tax Code of the Russian Federation, the place of sale of advertising services is determined by the location of the buyer. The buyer of advertising services is Google. Consequently, the place of sale in Russia is absent. Therefore, the Russian VAT on the developer's fee for advertising Google in applications is not charged .

Moreover, if the developer applies the simplified taxation system, then in principle he has no obligation to pay VAT on the cost of his services .

If you have any questions, write comments.

A source