Value Added Tax (VAT) is a consumption tax that is placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. VAT is collected incrementally, based on the value added, at each stage of production or distribution. This means that businesses send VAT to the government based on the difference between VAT charged on sales and VAT paid on purchases.
What is VAT?
VAT is essentially a consumption tax that is levied on the value added to goods and services at each stage of production and distribution. It is based on the difference between a business’s sales and their purchases. VAT is charged as a percentage of the price of the goods or services provided. The standard VAT rate is different in each country, for example it is 20% in the UK.
VAT is an indirect tax, meaning that the government does not directly tax the consumer. Instead, businesses act as a collection agent for the government by adding VAT onto the prices of goods and services sold to consumers. This means that consumers ultimately bear the cost of VAT.
The way VAT works is that at every stage of production and distribution where value is added, from raw materials to the final sale, the amount of VAT levied at that stage is a percentage of the value added. For example:
- A timber company sells wood to a furniture maker for £100 plus VAT of £20. The timber company sends the £20 VAT to the government.
- The furniture maker uses the wood to make a table, which it sells to a retailer for £200 plus VAT of £40. The furniture maker sends £20 VAT to the government (the £40 it charged minus the £20 it paid).
- The retailer sells the table to a consumer for £300 plus £60 of VAT. The retailer sends £20 VAT to the government.
In total, the consumer has paid £60 of VAT on the table. This £60 is collected incrementally at each stage of production from the timber company (£20), furniture maker (£20) and retailer (£20). This way, VAT is charged on the value added at each stage.
What is LinkedIn?
LinkedIn is a business and employment-oriented online service. It is mainly used for professional networking and career development. As of 2023, LinkedIn has over 900 million members in over 200 countries, making it the largest professional network on the internet.
On LinkedIn, members create profiles summarizing their work experience, education, skills, and accomplishments. Members can then connect with other professionals and companies for networking, job searching, recruitment, business deals, and more. LinkedIn is particularly popular for:
- Building a professional identity online
- Networking with other professionals in your industry
- Finding job opportunities
- Recruiting new employees
- Promoting yourself or your business
- Staying up-to-date with industry news and trends
In addition to member profiles, LinkedIn also hosts industry groups, allows companies to post jobs, and provides paid subscriptions for additional services like expanded profile views and messaging capabilities. LinkedIn generates revenue through advertisements, premium subscriptions, and recruitment services.
Do LinkedIn Invoices Have VAT?
Whether VAT is charged on LinkedIn invoices depends on where the LinkedIn customer is located and whether they are VAT registered. Here is a breakdown for different types of LinkedIn customers:
Individual Consumers
For individual consumers purchasing LinkedIn services for personal use, VAT rules vary by country:
- In the UK and EU countries, VAT is charged at the standard rate (20% in the UK) on services provided to individual consumers.
- In the US, Canada, and many other countries, there is no VAT system so no VAT is charged.
- In Australia, there is a Goods and Services Tax (GST) of 10% rather than VAT.
So in summary, for individual customers, VAT will be charged on LinkedIn invoices if the customer is located in a country with a VAT system like the UK or EU. It will not be charged in countries without VAT like the US.
Business Customers
For business customers, whether VAT is charged depends on if they are VAT registered or not:
- VAT registered businesses – No VAT will be charged on LinkedIn invoices for VAT registered business customers in the UK/EU. This is because the business can reclaim the VAT so it is not a cost for them. LinkedIn only needs to charge VAT to the final consumer.
- Non VAT registered businesses – VAT will be charged at the standard rate for non VAT registered business customers in the UK/EU. These businesses cannot reclaim the VAT so it is a real cost for them, the same as for individual consumers.
In summary, for business customers in VAT implementing countries, VAT is only charged if the business is not VAT registered. Registered businesses can reclaim the VAT so LinkedIn does not need to charge it.
Usage Type
Whether VAT is charged also depends on what LinkedIn services are being purchased:
LinkedIn Service | VAT Treatment |
---|---|
Premium Subscriptions (e.g. Business, Sales Navigator, Recruiter) | Standard rate VAT charged in UK/EU unless business is VAT registered |
Job Ads | Standard rate VAT charged in UK/EU unless business is VAT registered |
Training Courses | VAT exempt in the UK/EU |
Marketing Solutions | Standard rate VAT charged in UK/EU unless business is VAT registered |
As shown in the table, VAT treatment depends on the type of LinkedIn service purchased. Training courses are VAT exempt in the UK/EU while other services have standard rate VAT applied unless the business is VAT registered.
Conclusion
In summary:
- For individual consumers, VAT will be charged on LinkedIn invoices in countries with a VAT system like the UK and EU.
- For business customers, VAT is only charged if the business is not VAT registered.
- VAT treatment also depends on the type of LinkedIn service purchased.
So whether VAT appears on a LinkedIn invoice depends on the customer location, VAT registration status, and services purchased. But in many cases, VAT registered businesses can reclaim the VAT charged by LinkedIn so it does not represent a real cost to them.