Forum Discussion
GST/VAT in Microsoft-managed countries
Hi,
I am in a Microsoft -managed jurisdiction and have a transactable offer in AppSource. I have only recently onboarded some customers and I don’t fully understand how GST is being managed. We are in Scenario 5 as described in https://learn.microsoft.com/en-us/partner-center/marketplace-offers/tax-details-marketplace which means Microsoft collects from the customer at the list price + GST. Ignoring store fees for this purpose, Microsoft pays the (10%) GST to the tax authority then pays out the balance. Unfortunately, the way GST works here, we have to show the amount we receive from Microsoft as gross revenue and then deduct a further 10% to pay to the tax authorities. In other words, we get no credit for the tax Microsoft has paid. As I understand it, the publisher should invoice Microsoft for the sale price + GST then Microsoft invoices the customer at the price plus GST and claims an input tax credit for the GST it pays to the publisher. There may be some specific tax ruling that overrides this. Would be very grateful if any ISV in a similar jurisdiction has encountered this issue.
3 Replies
Thanks very much for your reply.
Without wanting to go too deep into this question, there are a couple of factors that are probably worth highlighting:
- Under the Microsoft Publisher Agreement (8.0 July 2024 update), publishers agree to “appoint Microsoft as your agent or commissionaire, as applicable, for the purpose of facilitating Customer purchases through the Commercial Marketplace.”
- The Publisher Agreement also includes the following: “You and MRS or MPL (as the case may be) agree for purposes of Section 84-60 of A New Tax System (Goods and Services Tax) Act 1999 (the "AU GST Act"): (A) Section 84-55 of the AU GST Act applies to sales of your Offers made available by you through the Commercial Marketplace as if such sales were an inbound intangible consumer supply; and (B) for the purposes of the AU GST Act, MRS or MPL (as the case may be) is treated as the supplier of and as making the supply for consideration for which it was made.” This relates to “inbound intangible consumer supply” which excludes an enterprise that the supplier carries on in the indirect tax zone, which is defined as Australia. In other words, Microsoft acts as the supplier for the purposes of the GST Act for publishers outside Australia, but the agreement is silent as it relates to publishers inside Australia.
- For an Australian publisher appointing Microsoft as its agent (in 1 above) it seems the Australian GST rules would apply. For an agent who resells, it seems that Goods and Services Tax Ruling GSTR 2000/37 (https://www.ato.gov.au/law/view/document?docid=GST%2FGSTR200037%2FNAT%2FATO%2F00001&document=document ) applies which requires a supplier (publisher) to charge its agent (Microsoft) GST on its supply. The agent then charges GST to the end customer. The agent then remits GST calculated as the net amount of the GST it charged the customer and what it paid in GST to the supplier. The supplier then remits GST based on the amount of GST it charged to the agent.
On the basis of the above, I don’t think I can consider the income I get in my bank account as Net income but rather as Gross income. When I complete a Business Activity Statement, the first line is amounts received and GST is due on that amount. There does not seem to be a capacity to claim some form of credit for GST paid by an agent.
I suspect I am not the only ISV in Australia with a published App that is selling to Australian customers. So, I may be missing something the GST rules.
Thanks again
Ken
- justinroyal
Microsoft
Thank you alexdrenea-ms ! Let me know if that answers your question, Ken_Barton
alexdrenea-msI'll start by saying that I am not a tax / legal expert and my note should not be considered tax advice.
I am from Canada, and I have worked with partners from Canada, selling to Canadian customers before but I have not heard this before: "the way GST works here, we have to show the amount we receive from Microsoft as gross revenue"
Based on my understanding, because Microsoft handles the end customer taxation and remittance on your behalf - as you correctly pointed out in Scenario 5 of the docs - you should be able to consider the income you get in your bank account as Net income and not Gross income. Microsoft will provide reports in Partner Center that will show all details: net price, price + tax, tax collected, tax remitted, payout issued, etc.. so you can count all of those elements, and have proof that the tax collected was already remitted.
