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Tax and your internet business
It has been said that there are only two things certain in life, death and tax! When you make a profit over a certain threshold the taxman will want to know about it. Tax evasion is a very serious offence.
We’ve outlined some of the important aspects of taxation that may affect domainers. However we state for the record that we are not tax experts so the information we have given should be taken as general guidance.The following taxes have a direct impact on your online business portfolio;
- Income tax
- Capital gains tax
- VAT
These are the four taxes to be aware of; however it is worth verifying with an accountant or tax adviser on the tax implications of your domain name investments.
Income tax
Income tax is a tax paid on income. Apologies for stating the obvious. Income tax is paid by employees and those who are self-employed. Obviously different countries have different tax policies, is it might be worth your while to get in touch with your local tax department for specific information.
Capital Gains
Everyone is entitled to a certain amount of capital gains free of tax. Each country has a set threshold per year. The principle is that if, in buying and selling domain names, you make more than the set threshold in a tax year you’ll have to pay tax on the extra profit.
VAT Value Added Tax (Sales Tax)
Has a limited impact on domain name investing. VAT also known as Sales tax is only charged at point the point of purchase. VAT is a tax that's charged on most business transactions. Businesses add VAT to the price they charge when they provide goods and services.
If you're a VAT-registered business, in most cases you charge VAT on the goods and services you provide and reclaim the VAT you pay when you buy goods and services for your business
If you're not a VAT-registered business or organisation then you can't reclaim the VAT you pay when you purchase goods and services.
My two cents...
Tax by its very nature is an emotional subject however ignore the tax department at your own peril. There is no running away from it’s impact and the seriousness of trying not to render to Caesar what belongs to Caesar can be traumatic.
Links to various national Tax departments
USA: Internal Revenue Service (IRS)
Germany: Tax Department
Australia: Taxation Office
China: State Administration of Taxation
Japan: National Tax Agency
Canada: Canada Revenue Agency
India: Tax Department
South Africa: Revenue Service
