VAT in UK, case of cultural industry and overseas invoices
Your answer will need loads of information and clarification, so I will ask you to visit the VAT and have a peruse. 1) Obligation is for you to find out the correct rate of VAT, charge and pay tax accordingly. You can call up the HMRC VAT helpline for help, which they will be happy to oblige. Normally everybody pays VAT every 3 months or you can pay once in a year. 2) Depends on your annual turnover, including VAT. Less than £150000 you join the Flat rate scheme. There are schemes for cultural activities. Might be good to check here on GOV.UK. 3) If you pay VAT in EU countries, you can reclaim VAT in UK. You need to reclaim VAT while filing in your VAT returns. But be careful about your receipts, which can be checked to verify you are not defrauding HMRC.  The basic rule is that B2B services are, as the name suggests, supplies from one business to another. And, subject to some exceptions, are treated as made where the customer belongs. No VAT is chargeable on B2B supplies to an overseas customer. But where you make a B2C supply, VAT depends on where your customer is located: 1) if they are outside the EU, you don’t need to charge VAT 2) if they are located in an EU country, then you must charge VAT. Source All in all keep all records of VAT charged and paid to satisfy the taxman. If the rules get complicated, get an accountant to help you out. Don' take chances of interpreting the law yourself, the fines you might pay for wrong interpretation might be a deal breaker.
I suspect that the new VATMOSS rules come in to play here.  So you owe VAT for donations from EU countries,  providing you are below £81k there would be no UK vat payable though, however then you couldn't recoup the vat you paid out.   Note I am not an accountant but I did speak to one this week about a similar issue. "If you assign preference to one race over another, you are a racist plain and simple, there are no two ways about it.  I really couldn't care less what you or Marc Faber think about that (""so be it I am a racist"" yada), you are a bad person and you deserved to labelled with every such label that follows. For example, if someone would call you a piece of shit I would agree with that person.  Your points about ""culture"" making an impact are complete BS, so is saying that you want to ""encourage the efforts of people who made our country great over the actions of people who make our country not so great"" (where have I heard that one before? hint: he recently met with the President of the Virgin Islands...)   ""People"" and ""culture"" don't make a country great - consequences do. These consequences could come from a human foreigner's actions (look at the NHS in the UK), or maybe not even from humans, perhaps from the actions of mother nature (look at the Gulf Countries).  If you want humans to make their country great, teach them the actions that have the right consequences. The fact that you don't understand this concept makes you an idiot. The fact that you then attribute a country's greatness to race makes you a racist. Together, these facts makes you a racist idiot." Not sure where the confusion is coming from - software/digital/intangible goods are just like any other product, with regard to VAT. Turns out it's being made complicated by HMRC... Anyone would think they enjoy making everyone who collects tax for free on their behalf a crook! You charge customers everywhere in the EU VAT and pay it to HMRC, the only exception being customers outside the UK who can provide you with a VAT number. For these customers you are free to not charge VAT, as it's assumed they would be reclaiming it in their home country anyway. The above is true until 2015, when the rules become more relaxed - you will not need a VAT number from customers outside the UK in order to exempt yourself from collecting VAT. Turns out you need to be part of the MOSS scheme (more here) which was set up to prevent you having to register for VAT in every country you sell your software. Unless you only sell through app stores, and then it's easier because each sale is treated as you selling your software to the store for it to be sold on. You can reclaim all VAT on your eligible purchases in the UK, just as any other UK VAT registered business would (usual rules apply). And of course you don't collect VAT from anyone outside the EU, so you can either reduce the price of your software or pocket the additional 20%. The rounding should always follow the same rule. If the value ends in .01 or .02 then you round to .00. Doesn't matter if it's 10.01 rounding to 10.00 or 0.01 to 0.00. The decision on what a company wants to do if an invoice total is $0.01 or $0.02 would be up to the company. The POS system should follow the rule and round to $0.00 if the method of payment is cash, but the company has the right to not give things away for free.  They can impose a minimum cash invoice amount of $0.05. But you would do this by requiring the customer to add more items to their purchase. You couldn't just round the invoice up to $0.05 and to charge them $0.05 for a $0.01 item It would be similar to companies having a minimum purchase amount when paying by credit card. If their minimum amount is $10.00 and you want to buy something that's $5.00, you either pay cash or add something to your order. They don't just charge you $10.00 for your $5.00 item. I think this would be a extreme edge case where you have an invoice with a total of $0.01 or $0.02, without any discounts, partial payments, etc. If the customer's total was $10.01 and they paid with a $10.00 gift card, the final amount owing of $0.01 would round down to $0.00 and they wouldn't owe any more. If they had paid cash, the total would have rounded to $10.00 anyway.  Similarly, if the customer returned an item and bought a new item, or used coupons, and the total owing was $0.01 or $0.02, then you would round down to $0.00 and they wouldn't pay anything. As BobbyScon said, you can implement some options to allow the company to decide how they want to handle this. You could have an option that doesn't allow a sale to be processed if the total amount is less than $0.03 and the sale doesn't include any discounts, returned items, coupons, etc. The option could be to completely block the sale, require a supervisor override, or just display a warning to the cashier. Best bet is to talk to as many of your current or potential clients as you can to see how they would like this edge case handled. For many, it's probably a mute case since they wouldn't have items that have a unit price less than $0.03. Maybe a place like a hardware store that sells individual nuts, bolts, and washers. Australian Goods and Services Tax is charged on the sale amount. Whatever internal accounting you do before billing the customer is of no interest to the Australian Tax Office. The VAT number should be equivalent from the point of view of your client. The fact that you are a sole trader and not a limited liability doesn't matter when it comes down to pay VAT. They should pay the VAT to you and you will pay it to the government. I'll guess that their issue is with tax breaks, it is a bit more tricky to receive a tax break on paid taxes if you buy something abroad (at least it is here in Finland). If they won't pay you because of that, you could open a LTD or contract the services of a 'management company' which will do the job of invoicing, receiving the money and passing it back to you, for a fee. Oh I see - then yes I agree with you. Even if it was a foreign company in that situation, they should pay taxes. But in regards to the concept of repatriated profits,  that has to do with profits generated outside of the borders... I thought the line is much blurrier than that though. Say you have a company with divisions. An overseas division makes an item, sells it to another division overseas for final packaging, then it's sold domestically. The domestic division should only pay taxes on the profits they earn, and overseas on the profits from what they ship.   But the company only wants to pay minimal taxes, so they set the foreign price high so that a majority of profits are made overseas. Who will argue that this isn't correct? Isn't that it? It's not foreign sales but interdivisional markup?