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Out of curiosity more than need, I was trying to purchase a pretty interesting piece of software – RubyMotion. I was trying, since I gave up annoyed and slightly angered.

You see, they are (still) having an “early bird” sale of 25% off the price. However, while trying to check out, I found out that the price was magically increased one more time by the addition of an extra 24% VAT tax (which you might miss if not careful when checking out).

Wait, what? VAT tax? Of 24%? There must be some error here. Why should a Romanian resident need to pay Romanian-level VAT for a product purchased from outside of Romania? This is actually a common occurrence, and I had met it more than once. But let’s talk about this case only.

First of all, if  RubyMotion’s seller were a US company and not a EU one, there probably shouldn’t be any VAT tax charged at all.

Let’s assume for a second that the seller were indeed a EU company and I, as a EU citizen, should indeed have to pay VAT for my purchase. As many big companies know, one needs to pay VAT at the amount existent in the country where the product was sold in. If I travelled to France and buying a computer, I’d need to pay the French VAT amount and not the Romanian one. Similarly, for internet purchases of products and services, the VAT being charged is the one from the seller’s country and not the buyer’s(which would be extremely messy to keep track of) and is the reason(I think) why many of Apple’s and Google’s payments to developers are being sent from Luxembourg, where VAT rates are lower. And they are lower than the required 24% in a lot of EU countries. So I was actually being charged the VAT level from the buyer’s country of residence, despite the law(as much as I know of it) asking that I’d be charged the VAT level of the online seller’s one.

So why were RubyMotion trying to squeeze more money from me than legally required? I noticed the checkout page url was actually of a 3rd party, FastSpring, who seem to be a payment fulfillment of sorts, used by a lot of websites. Since they most likely(I’d bet money on it) don’t have a delivery server physically located in Romania, there is no law binding them to charge me an extra 24% out of every purchase. Still, they do so, although(and I’m also willing to bet on it) they aren’t forwarding the extra VAT money to the developer, and are probably paying a much lower VAT amount(if any) to the government, since they are probably located in a country with lower VAT than Romania’s rather big one.

Summing up this story, I think it says: a company uses a e-commerce engine from a 3rd party. The 3rd party charges customers way more than required, claiming to be for VAT purposes. But they don’t actually need to pay VAT for the purchase, except for some very small cases. What’s left is a huge amount of money that the 3rd party ends up with, which they won’t give to the developer because it’s not “product price” nor to the government because it’s not required by the law.

Or maybe I got it wrong and one informed reader will point out that am missing something fundamental to the law,  and the Romanian government actually gets its fair share of VAT from my online purchases. It would be awesome and am looking forward for it. Anyone?

Oh, and my purchase? I guess I’ll skip this one – it’s way too annoying to have to pay more than legally required, only because of a seemingly merchant error.