Is registering for VAT a good idea for a game dev in Ireland

Kilgore__Trout

Hi,

(Posted this over in GD.ie, thought I would try here too).

Thanks for reading. I’m hoping to release my first commercial game later this year or early next year. One of the things I’d like some advice on is whether or not it’s a good idea to register for VAT. Being based in Ireland, I’m not obligated to, unless my turnover reaches €75,000, but I do have the choice.

Based on the information I have, it wouldn’t seem like a good idea. It would either decrease profits/increase cost of game by 23% (whether sold through digital distributors or an order processor). In return, I would be able to claim back VAT on business related purchases. I’m doing most of the work myself, and most of the contractors I’m working with aren’t VAT registered. Can’t see myself having to buy a lot of stuff in the short term. So it would seem the only way I would benefit is by getting 23% off a portion of my utility bills. Any advice would be greatly appreciated!

Genghiz Cohen

Unless you are making enough money to pay for a (competent) account, don't bother. It's a whole lot of heartache.

srsly78

I think it's e75k for services, but a lower threshold for goods. Not sure exactly what your product counts as.... Ring the tax office and make sure!

VAT is actually very easy to administer I find, and I can reclaim lots of costs. For example on amazon.co.uk you can register your vat number and they zero-rate your stuff. Stuff bought in Ireland isn't zero-rated but you get the vat refunded when you file return. You can also get zero-rated sales off other foreign sites but it can be awkward sometimes (hardwareversand.de I'm looking at you).

Being able to buy fancy gear vat-free is pretty sweet obviously... Can also reclaim vat on mobile phone + broadband bills.

Running a ltd company is much more hassle than administering vat.

RedXIV

If you understand how to handle VAT forms and KNOW you'd be able to keep on top of them, then it might be worth looking at. Even better if you have an accountant to look at them. Otherwise, don't do it. We did, it sucked. Caused us way more headaches than any potential savings.

Personally, I wouldn't register for VAT unless I was making enough money to make it an accountant's problem

srsly78

You HAVE to register once you go over the threshold. It's only optional if you are below. And as said already: there are different thresholds.

I have an accountant to give advice when needed, but he doesn't handle the vat.

sonyvision

VAT

example,
Every 2 months ie Jan, Feb you must file a return online on or by the 23rd on the following month ie march with payment if you OWE VAT, other wise you get a refund

You just tot up your SALES ie how much VAT you must pay over, T1
TOT up VAT on purchases related to business, ie diesel for work, phone bills, T2

take away the difference if you OWE vat its a T3
if you claim VAT its a T4,

Its basically that simply in a nut shell, just use an excel sheet,

if your running a LTD business VAT returns will be the least of your worries

Kilgore__Trout

Thanks for the info.


Looks like digitally distributed games are a service, rather than a product as I first assumed, so it looks like the threshold would be €37,500. In contrast, physically distributed games seem to be classed as a product.
From (http://www.revenue.ie/en/tax/vat/leaflets/eservices-and-broadcasting.html)


Example 9: Games, including games of chance and gambling games

• Downloads of games onto PCs, mobile phones, etc.

Can I confirm my understand of the basics of VAT? This isn’t a replacement for consulting an accountant, but I’d like to have a better understanding of the situation before doing so.

When a business’s turnover exceeds a certain amount (€37,500 in this case), they must register for VAT.


23% of the marked price of each game sold by a VAT registered business is collected as VAT. This money is periodically sent to the revenue commissioners.


In return for collecting VAT, the VAT registered business can claim back VAT on any purchases they make. This includes:


· Office furniture & Computers
· Software
· Utility bills incurred as a result of operating business
· VAT charged on services by VAT registered contractors (artists, sfx, etc)

Can’t really see myself buying very much relating to the business soon, so they only way I’m likely to benefit is from Utility bills.



So by voluntarily registering for VAT (before I need to), I would effectively be giving away 23% of each sale and increasing my admin workload, in exchange for a few quid off electricity & broadband.


Am I missing something here?

srsly78

You don't give away 23% of each sale. You are still selling your product for 100% (your normal sale price). It just happens that you have to act as the taxcollector and collect the VAT.

If you start thinking of the VAT as your own money then this leads to suffering :P

Kilgore__Trout

srsly78 wrote: »

You don't give away 23% of each sale. You are still selling your product for 100% (your normal sale price). It just happens that you have to act as the taxcollector and collect the VAT.

If you start thinking of the VAT as your own money then this leads to suffering :P

Yes, attended a workshop by the local development company and they told us this, thanks for reminder!

Torakx

Hmm isn't that the same thing as revenue taking the vat out on each sale?
Seems to me they are getting it either way once you register.
I don't understand the difference there TBH.

Thanks for the interesting posts guys, some good info there and stuff I will probably have to learn myself down the road too.

srsly78

They don't take the vat out, you add the vat on then give it to them. Right now there is no vat at all because you are unregistered, so they get nothing.

The reason for this threshold (I guess) is so as not to impose unnecessary burden on small traders/businesses. However once you start to operate a "serious" business (as defined by the threshold) then you must operate VAT like other businesses.

edit: Oops torak isn't the OP... For clarity: yes once you are registered and charging vat of course you must pass it on. Otherwise you are doing a "Mick Wallace". Yes it's the same thing (taking it out vs adding it on), but it helps to think of it as added on. It doesn't really impact your business/books at all, you just hold it temporarily and then pass the money (which could be a negative figure if you are reclaiming a lot) along.

Torakx

Ah ok, I think I see what you mean, thanks.
This whole adding it on or taking it off your profit seemed a bit of a roundabout way..
You probably have to adjust your price to sell your product etc to include the vat and so you lose the money, in my view anyway.
If there was no Vat I think everyones prices would instantly go up by 23% haha.
But still good to know how its calculated.