LinkedIn is a popular professional networking platform used by millions of people around the world. As with any paid service, one common question is whether Value Added Tax (VAT) applies to LinkedIn subscriptions. In this article, we’ll take an in-depth look at VAT rules for LinkedIn to help provide clarity around this topic.
What is VAT?
VAT (Value Added Tax) is a consumption tax levied on goods and services sold to consumers. It is collected incrementally at every stage of the supply chain, from production to point of sale. The tax is ultimately borne by the end consumer.
The standard VAT rate varies by country – for example, it is 20% in the UK, 19% in Germany, and 21% in Netherlands. VAT rules can be complex given that they differ across jurisdictions.
Generally, VAT applies whenever a transaction takes place between two taxable persons, where goods or services are supplied in return for consideration. The vendor collects VAT from the purchaser and remits it to the tax authorities. Input VAT paid on business expenses can be offset against output VAT charged on sales.
Is LinkedIn VAT exempt?
The VAT treatment of LinkedIn subscriptions depends primarily on two factors:
- Whether LinkedIn is considered goods or a service under VAT rules
- The usage and location of the LinkedIn subscriber
LinkedIn can be classified as an electronic service under VAT regulations in many jurisdictions. Electronic services provided to non-business consumers are typically subject to VAT in the supplier’s jurisdiction.
However, VAT may not apply if LinkedIn is used for business purposes by a registered company. Business-to-business (B2B) supplies are often exempt from VAT.
VAT for personal LinkedIn accounts
For individual consumers using LinkedIn for non-business networking and job-seeking, VAT generally applies to premium subscriptions. This includes products like LinkedIn Premium, Premium Career, Recruiter Lite, etc.
As LinkedIn is headquartered in the United States, VAT for personal accounts is charged at the US rate and remitted to US tax authorities. Currently, there is no federal sales tax or VAT charged in the US.
However, buyers may be liable to pay VAT based on the rules in their jurisdiction. This is usually reverse charged or self-assessed by the customer.
VAT for business LinkedIn accounts
For companies using LinkedIn for recruiting, marketing, and business networking, the VAT treatment varies by country.
EU rules exempt VAT on B2B digital services provided to taxable persons in other EU member states. Only the customer’s local VAT applies. This is done to prevent double taxation under the ‘place of supply’ provisions.
For example, a Dutch company buying LinkedIn Recruiter would not pay US VAT. It would only pay Dutch VAT at 21% as an intra-EU supply of electronic services.
The situation is more complex for supplies to non-EU countries. Local VAT may or may not apply depending on tax treaties and jurisdiction rules.
How is VAT charged on LinkedIn?
LinkedIn applies VAT to subscriptions during checkout based on:
- Account type – Personal or Business
- Customer location
For personal accounts of users residing in the EU, Norway, or Switzerland, the applicable VAT rate is pre-added to the quoted price during checkout. The rate charged depends on which EU country the customer is based in.
Examples:
Country | VAT Rate |
---|---|
Germany | 19% |
France | 20% |
Italy | 22% |
Customers are advised to verify VAT details in invoices to ensure correct rates have been applied.
For business accounts, VAT is typically not included in the upfront pricing. Business customers are expected to self-assess VAT based on rules in their jurisdiction.
Can you reclaim VAT on LinkedIn subscription?
If LinkedIn VAT has been paid by a registered business, it may be possible to recover that VAT depending on local regulations.
For example, a UK business would be able to reclaim VAT paid on LinkedIn subscription by:
- Ensuring VAT is properly invoiced by LinkedIn
- Verifying the VAT registration number on invoices
- Claiming input VAT deduction in the next VAT return
However, the ability to recover VAT may be limited for certain business types or subscription models. Complex VAT rules around digital services also restrict input tax recovery in some cases.
Businesses should consult a tax advisor or the local tax authority to determine if VAT refunds are possible on LinkedIn subscriptions in their jurisdiction.
Does location of use impact VAT?
If a LinkedIn subscription is billed to an EU company but used by employees or offices outside the EU, the VAT treatment would differ.
VAT is charged based on where the customer belongs, not where the service is used. As intra-EU digital B2B supplies are exempt, VAT would still not apply in the above scenario.
However, if a non-EU customer uses LinkedIn within the EU, they may become liable to pay EU VAT under ‘use and enjoyment’ provisions.
What are the LinkedIn VAT registration thresholds?
VAT registration is mandatory for businesses whose taxable sales exceed a threshold set by each country. This threshold varies widely across jurisdictions.
A few examples of VAT registration thresholds:
Country | VAT Threshold |
---|---|
UK | £85,000 |
Ireland | €75,000 |
France | €85,800 |
Italy | €65,000 |
Companies must register and account for VAT once they cross these limits. For B2B LinkedIn sales, VAT only applies above the registration threshold.
Does a valid VAT number exempt LinkedIn VAT?
Possessing a VAT registration number may allow business customers to purchase LinkedIn subscriptions without paying VAT.
To qualify for VAT exemption, the customer must:
- Have an active VAT number from an EU member state
- Use LinkedIn for business purposes only
- Directly purchase the subscription, not via a reseller
Providing a valid EU VAT ID during checkout signals that VAT should not be charged as it is a B2B intra-EU supply. The customer would self-assess applicable VAT on the purchase in their home country.
What are LinkedIn’s VAT payment and invoicing requirements?
To reclaim VAT, business buyers must retain proper VAT invoices issued by LinkedIn as per local rules. This may include:
- Invoice containing date of issue, invoice number, seller details, customer name & address, description of services, VAT amount, etc.
- Correct VAT rates charged
- LinkedIn’s VAT number as the seller
- Customer VAT number (if B2B transaction)
Digital invoices are acceptable if they contain all information required by VAT laws. Businesses should download and store invoices securely for submission during audits or VAT returns.
LinkedIn automatically collects VAT payments during checkout and remits it to tax authorities. No additional actions are needed from subscribers to pay VAT on purchases.
How does Brexit impact VAT on LinkedIn?
The UK’s exit from the European Union has resulted in changes to how VAT is handled on digital services like LinkedIn:
- UK firms now pay UK VAT on LinkedIn purchases instead of EU VAT
- UK VAT registration is needed to reclaim tax on LinkedIn
- Overseas businesses may be liable for UK VAT on LinkedIn depending on usage
Post-Brexit, VAT collection on B2C services is based on customer location rather than the supplier’s jurisdiction. B2B transactions have more flexibility depending on the customer’s VAT status.
UK and EU companies should re-evaluate the VAT impact of business LinkedIn subscriptions after Brexit.
Conclusion
VAT application on LinkedIn follows the standard rules for digital services consumed by individuals and businesses. Location, account usage, and VAT registration status are key factors determining liability.
While no VAT may apply on business use, consumers are charged VAT based on their jurisdiction. Proper invoicing is essential for companies to recover input VAT on LinkedIn subscriptions.
With frequently changing compliance requirements around digital services, businesses should consult tax advisors or financial controllers to accurately determine VAT implications.