VAT, or “value added tax” is applied on sales in the European Union (EU). LoveKnitting is VAT responsible. We collect VAT on pattern sales made in the EU pay you exclusive of it.
When you sell your patterns through LoveKnitting or LoveCrochet, you conduct a business-to-business transaction with us and we conduct a business-to-consumer transaction with the customer buying your pattern. As LoveKnitting and LoveCrochet are the ones carrying out the transaction with the customer, we are responsible for managing the VAT for pattern purchases.
You are able to set VAT preferences when you sell with LoveKnitting / LoveCrochet; including whether your pattern prices ‘exclude’ or ‘include’ VAT.
Pricing your patterns Excluding VAT
Pricing your patterns excluding VAT means setting a base price and letting us add the appropriate VAT based on the buyer’s country. The prices within the EU will vary by up to 9% depending on the VAT rate in the buyer’s country and there will be no VAT applied in the rest of the world. The amount you receive will be the same and will not depend on the buyer’s location.
This is the default VAT preference setup. However, if you would prefer to price your patterns including VAT you can now choose to do so.
An example of VAT-exclusive pricing:
- Let’s say you set the price of your pattern at £4.00
- If this pattern sells to a customer in Germany, where VAT is charged at 19%, the price the customer will see and pay is £4.76
- When a sale of this pattern is made, we’ll pay you this £4.00, keeping the 76p to pay the VAT
Pricing your patterns Including VAT
Pricing your patterns including VAT means all customers worldwide will pay the same price for your pattern. You will account for the cost of VAT in your pattern price and your profit will vary depending on the VAT rate in the buyer’s country. No VAT will be deducted in countries where VAT doesn’t apply, whereas in the EU the VAT deducted may range between 17% and 25%, dependent on where the pattern is sold.
An example of VAT-inclusive pricing:
- Let’s say you set the price of your pattern at £5.00
- If this pattern sells to a customer in Germany, where VAT is charged at 19%, the price the customer will see and pay is £5.00
- When a sale of this pattern is made in Germany, we’ll pay you £4.20, keeping the 80p to pay the VAT
- If this pattern sells to a customer in Australia, where there is no VAT, the price the customer will see and pay is £5.00
- When a sale of this pattern is made in Australia, we’ll pay you £5.00, as no VAT is due
You qualify for a self-billing agreement if you are VAT registered, yet based outside the EU.
This is because VAT will not be added to invoices outside the EU, and the Agreement allows us to process payments we owe you without you having to send us an invoice.
According to this agreement you will receive a self-billing invoice accounting for your sales, if your sales exceed the minimum monthly payment threshold. This agreement will expire 1 year after you sign it. We will contact you to let you know when you need to sign a new agreement after 1 year is about to lapse.
You must notify us and update your details on your Designer Profile immediately when your VAT number changes, you stop being VAT registered or sell your business.
The GST (goods and and services tax) in Australia is changed on 1 July 2017 and apples to sales from foreign sellers (i.e. LoveKnitting and LoveCrochet) to Australian customers.
The GST is 10% and applies on both physical and digital products, such as downloadable patterns, similar to how the VAT works for EU customers. Since LoveKnitting and LoveCrochet are the seller to the customer, we’re also responsible for collecting GST to pass on to the authorities. As a designer selling through LoveKnitting or LoveCrochet, you do not need to register for GST.
GST will be handled according to your settings for VAT handling. As long as you’re not GST-registered you don’t have to do anything, we will automatically start handling GST on sales.
If your GST status changes, remember to update your account and let us know!