Working out what you do with a payment from Apple, when you are lucky enough to get one, can be quite tricky for a VAT registered company, this is the information I’ve been able to gather so far, via the Apple Developers Forum (so thanks goes to them)…..
Apple act as an undisclosed agent. You supply your products to Apple (one supply line), who then market and supply them to consumers (another supply line). Apple charge VAT on their supply line, as you’d expect.
Apple’s commission is a markup in the price, which they then add VAT to. This is very important. At no point do Apple invoice you for commission. Because of this, under HMRC rules this isn’t deemed to be a supply of “agency services” from Apple to you (the agency services in question being the marketing and sale of Apps on iTunes). That’s the second supply line – Apple to the Consumer. You can then account for VAT on your supply to Apple as normal. Because you are supplying software to Apple’s EU subsidiary, HMRC’s place of supply regulations mean you’re outside the scope for VAT.
You sell an app for £0.99 (it’s an easy number to use in this example, for simplicity)
Apple charges the user £0.84 (plus VAT)
Apple takes their commission (£0.25), except it’s technically a mark-up on price, not commission.
This leaves £0.59, which is the cost of supply. This is what you would invoice Apple for (even if you’re only generating invoices for your own internal paperwork)
As you supplied your product to Apple for £0.59, who then sold it on at a markup to the public, you were supplying directly to a business, and thus outside the scope of VAT.
Fortunately, the contract you have isn’t with Apple UK, but Apple Sàrl, based in Luxumberg. When a seller in one EU member state invoices a company in a different EU member state they can zero rate the VAT. You should still put VAT as an item on your invoices, but rate it at zero (ie, £0.00). As long as you use the addresses below on your invoices, HMRC should be satisfied.
Really Important point: Because your iTunes income is coming from another member state, you need to declare it in Box 8 of your VAT return. If you have an accountant you don’t need to worry about this, you just need to make sure s/he is aware your App income is from within the EU but outside the UK.
Should you need an address and Luxumberg VAT number for your records, it’s as follows:
iTunes s.à r. l.
8 rue Heinrich Heine
TVA/VAT No.: LU20165772
App Store Invoicing
Apple Operations Europe
iTunes s.à r. l.
Hollyhill Industrial Estate