Keysight Scope Giveaway

[rch]

The key question being VAT on which value?  RRP, VAT on fair market value, VAT on cost, VAT on wholesale?

Yes indeed, this is the question. I asked them to give me an approximate figure on how much I would have to pay if I accept the prize. This is something one would expect to be not to difficult to be answered by an international operating corporation, used to do worldwide business. Got no response on that.

As I understand the rules, at least as implemented in the UK, the distributor then has to pay to the government tax people the VAT on the retail market value of the scope when he hands it over to you.  But he can recover the VAT he paid when he imported it (but not any customs duty applicable) as an input tax.  So what he has to get back from you (or possibly Keysight) is the VAT on the retail market value of the scope at the time he hands it over, plus the duty.  He can't really charge you VAT as such, let alone duty, if you haven't bought it at that stage because  it is a gift.  But he can agree to hand the scope over in return for a sum high enough to pay the VAT and duty, which comes to the same thing as far as you are concerned.  But in legal and contract terms you are buying the scope for a cheap price, not being given it.   

It would be different if you imported it yourself, you'd be responsible for import taxes.

Edit:  an important point is that if Keysight or their distributor give you something they have imported into the EU (or built in the EU for that matter) you are not responsible for any tax.  Neither VAT nor income tax.  They are responsible for paying VAT, but can of course ask you to pay a similar sum of money to them if they care to make it a condition of receiving the scope.
Unlike the situation in America, you owe nothing unless you agree to pay it to Keysight or their distributor in return for the scope.

[hendorog]

The key question being VAT on which value?  RRP, VAT on fair market value, VAT on cost, VAT on wholesale?

Yes indeed, this is the question. I asked them to give me an approximate figure on how much I would have to pay if I accept the prize. This is something one would expect to be not to difficult to be answered by an international operating corporation, used to do worldwide business. Got no response on that.

As I understand the rules, at least as implemented in the UK, the distributor then has to pay to the government tax people the VAT on the retail market value of the scope when he hands it over to you. 

That doesn't make sense. The distibutor would pay tax on the amount they paid for the scope. Not the amount they will later sell the scope for.
Think about it - if you import some cheap thing from ebay that you later sell for a profit you don't pay import tax on the sell price.

... He can't really charge you VAT as such, let alone duty, if you haven't bought it at that stage because  it is a gift.  But he can agree to hand the scope over in return for a sum high enough to pay the VAT and duty, which comes to the same thing as far as you are concerned.  But in legal and contract terms you are buying the scope for a cheap price, not being given it.   

Yep that makes sense - its not tax as such, but instead it is reimbursing them for the cost they have incurred. The point is: how much cost is incurred?

It would be different if you imported it yourself, you'd be responsible for import taxes.

Yes, but the point is that the distributor gets a discount from trade price, correct? So the _amount_ of tax is different to if you import it yourself.
Assuming they are making a profit of course. Import tax is based on the price paid for the goods _by the importer_. When the importer is also Keysight that amount becomes even more arbitrary as Keysight declare the value to themselves. Some else mentioned this earlier in the thread.

[Macbeth]

As far as I am concerned it should be quite simple. If Keysight ship their goods to their UK subsidiary then there should be no VAT at all, perhaps there could be VAT if sent to a 3rd party distributor, but even if there was VAT then it would be 100% reclaimable. But the VAT is purely on the sale price of whatever the goods are.

Businesses are free to sell goods at a loss or a profit. This should be of no concern to the tax man. Who the fuck does Hector think he is, embedding himself in the strategic business decisions of a company? Deciding what a retail price should be? WTF? How subjective is that?

It all comes down to the actual money trail - ultimately Keysight (USA) are making a loss of the actual manufacturing and shipping cost. That will mean less profit in their books. No taxman in the world can tax losses surely?

When the send it out with an invoice as is required by law - if the invoice has a false price on it (like MSRRP) but with no payment then they are artificially inflating profits - illegal. The have to ship it with a $0 invoice.

Besides, it doesn't matter what all the VAT rates are between any business to business transactions as they are all reclaimable by the business involved. It's only the final customer who has to pay VAT - and it's clearly what is stated on their invoice - and in the UK is 20% of the goods+shipping net total. That is, what the customer HAS TO PAY total.

An invoice for FREE SCOPE £0.00 can't have any VAT.

I think the Americans have totally confused the issue as there is a personal income tax issue over there which is unheard of in Europe and they just assume its an income tax issue.

[rch]

Someone quoted a URL to the UK VAT rules on business gifts in this thread.  I assume they are from an EU directive, but I could be wrong.  They clearly say that a firm who gives a business gift or promotional gift has to account for VAT on its market value. Unless it is worth less than £50.    If they have to pay VAT to buy/import the goods  then this latter payment is what they can reclaim, but they have to pay the VAT on the gift.  I didn't know that until I read this thread.

[hendorog]

Someone quoted a URL to the UK VAT rules on business gifts in this thread.  I assume they are from an EU directive, but I could be wrong.  They clearly say that a firm who gives a business gift or promotional gift has to account for VAT on its market value. Unless it is worth less than £50.    If they have to pay VAT to buy/import the goods  then this latter payment is what they can reclaim, but they have to pay the VAT on the gift.  I didn't know that until I read this thread.

Ah I see - yes I just found that on google (easier than reading the thread looking for it). https://www.gov.uk/vat-businesses/discounts-and-free-gifts
That means the distributor or Keysight does need to charge the winner VAT on the "Full Value". Which the winner could claim back if they were registered for VAT which has already been discussed.

[ProBang2]

Sorry, there are many wild guesses about the VAT-system or the conditions for a scopemonth-winner in Germany.
Is there really no one else then me, who had learned it at school?
BTW: I had to deal with customs for years on a daily base.

To the winner in Germany:
You will have to sign a form from Keysight. Reason of this form:
- Assuring that you are a winner in legal kind. (minimum 18 years old, resident in a eligible country and so on).
- Permission for the public use of your name.
- Notes about the responsibility for taxes and duties. Remenber: This form has to fit for all countries!
Therefor there is written: "[...] responsive for local taxes and duties, if any. [...]".
The magic words: "local" and "if any".
- Further: You have to fill a form (W8BEN or so) for the US department of treasury.
Important: They have to know, that you are not a citizen of the US.
All this is needed from KS because legal and taxation laws.

What´s then going on?

- Keysight sends a new unit from malaysia to your chosen distributor. (It must not be KS Germany. It doesn´t really matter which distributor is used.)
- The distributor pays the VAT at the time of the import, BUT he gets the payed VAT back. Official text:
"However, as far as imports are concerned, VAT must be paid at the moment the goods are imported so they are immediately placed on the same footing as equivalent goods produced in the Community. Taxable people registered for VAT will be allowed to deduct this VAT in their next VAT return." 
- There are no duties on oscilloscopes, only one exception: CRT-scopes.
- Further possible taxes (depending of the country): lottery tax, income tax. Both is not the case in Germany.

Also: You get your scope for zero/ null/ nothing/ niente! No US-taxes, no malaysian taxes, no german taxes or duties.
What you want more???

You have only to fill the forms and to wait some days. (They build their scopes in malaysia and need some time for the shipping, you know?)

That´s a quite paradox situation: A winner in the US, winning a scope from an US-company, has worse conditions as a winner in the EU. He has to pay income tax.

A complete different case is the winning of Dave´s dumpster found scopes.

If you are a private person, then there is VAT to pay at the import. Depending of the declared value. Usually together with the handling fees from e.g. FED EX.

Example: Dave declares the value of the "used" scope as 1000 US$. And pays 100 US$ for shipping.
He doesn´t send it to a distributor, he send it direct to you. So, you are the importer.
You have to pay the VAT (e.g. 19%) for the value and the shipping.
In this case: (1000 + 100) * 19% = 209 US$ [the equivalent Euros, of course]
Fed Ex sues you with their fees, too: Additional 25 €. That´s it. Done.

Lowering the declared value lowers the taxes, but the value must be reasonable.
Otherwise will the value estimated from the costums...
And: The declared value ist important for the insurance.
Assuming the worst case: The scope will be lost on the way. Sad... But:
The money from the insurance (+ the money, dedicated for the VAT) allows you to buy a scope, allways.

But, that is not relevant for Germany anymore since Dave made his decision to rule Germany out.
(Probably based on the weird behavior of our new german hero: Sebastian W.)
I´m firmly confident: It´s quite fair to penalize a whole country for one guy, for sure...

Lesson learned: In an international forum are some countries more international than others.

[Towger]

Still charging/passing on to a competition winner the VAT on a prize is an alien concept in the EC. The VAT man may not like it, and the distributor would certainly not want to trigger a VAT audit.  Even if they have nothing to hide the costs of an audit can be large in both time and accountant's profession fees etc.

It would make more sense for the distributor to deduct the VAT from their own VAT payments, as normal.

BTW by same simplified rules above, selling the scope to the winner for a nominal fee would be cheaper.

[raupi]

@ProBang2: I don't know, they made it quite clear to me that I would have to pay the VAT on the scope. But they were unable or unwilling to tell me an approximate figure on how much that would be.

1.) Declared value of the scope: Unknown
2.) Shipping costs: Unknown
3.) Customs tariff: Probably none on digital scopes, 4.2% on old style CROs
4.) Income tax: None
5.) Einfuhrumsatzsteuer (~VAT): most likely 19% on the sum of (1 + 2 + 3)
6.) gambling tax: none
7.) other taxes: none

If you were to import the scope on your own, you would have to pay 5.) 19% "Einfuhrumsatzsteuer" (~VAT) on the sum of the declared value of the scope, the customs tariff and the shipping costs. This also seems to be the case for the Distributor when he imports the scope from Malaysia. He then sends the scope to you and you will be charged with whatever his expenses were to import the scope. At least that's how I understand it.

But since the declared value of the scope is totally unclear, as are the shipping costs, it's impossible to tell what your real expenses are when the scope is finally delivered.

I'm off to work now, a nice day to all of you...

[Macbeth]

But, that is not relevant for Germany anymore since Dave made his decision to rule Germany out.
(Probably based on the weird behavior of our new german hero: Sebastian W.)
I´m firmly confident: It´s quite fair to penalize a whole country for one guy, for sure...

Lesson learned: In an international forum are some countries more international than others.

No. Dave has had trouble with Germany's overzealous customs many times previously, like when selling his uCurrents. Nothing to do with Sebastian W.

[Brumby]

But, that is not relevant for Germany anymore since Dave made his decision to rule Germany out.
(Probably based on the weird behavior of our new german hero: Sebastian W.)
I´m firmly confident: It´s quite fair to penalize a whole country for one guy, for sure...

Lesson learned: In an international forum are some countries more international than others.

No. Dave has had trouble with Germany's overzealous customs many times previously, like when selling his uCurrents. Nothing to do with Sebastian W.

Yes.  This is an issue Dave has declared before.  It has nothing to do with that particular member's antics.

[ProBang2]

@ raupi

The one and only question of interest was already answered:

Dear Mr. Bogdanoff,

I have a question. Just to make it clear.
E.g. If the winner is located in Germany:
- The scope will be shipped from your nearest sales Office?
 (in this case: Keysight Technologies Deutschland GmbH, Boeblingen)

or

- The scope will only be shipped from Keysight, Santa Rosa? 

I firmly believe that your answer is interesting for all countries with your sales offices.

It would be great to get an answer to this one, or was it already answered?

Sorry, missed this one.  In general, the scope will come from a local distributor.  There are a couple exceptions, but this is the general case.  You'll be contacted via e-mail if you are a winner. Well, you're all winners (or something), but you'll be contacted if you win a scope.

Magic words: "will come from a local distributor"


Excuse the change of the quoting mode:


@ProBang2: I don't know, they made it quite clear to me that I would have to pay the VAT on the scope.
Interesting. How?

But they were unable or unwilling to tell me an approximate figure on how much that would be.
Do you really expect from a company the giving of any information about their price-calculation (Production costs)?

1.) Declared value of the scope: Unknown
Simply not of interest for you

2.) Shipping costs: Unknown
Same as 1.)

3.) Customs tariff: Probably none on digital scopes, 4.2% on old style CROs
Nope. Not probably. Fact. See yourself under the "Zolltarifnummer" 9030 20 91 90.
(It´s a link, down on this page: http://ec.europa.eu/taxation_customs/dds2/taric/measures.jsp?Lang=de&SimDate=20160318&Area=MY&Taric=90302091&LangDescr=de

4.) Income tax: None
Correct.

5.) Einfuhrumsatzsteuer (~VAT): most likely 19% on the sum of (1 + 2 + 3)
That´s not your business. It belongs to the distributor. And even the distributor gets the payed VAT back. From the "Finanzamt" hence "Vorsteuerabzug".

6.) gambling tax: none
Correct.

7.) other taxes: none
Correct.

If you were to import the scope on your own, you would have to pay 5.) 19% "Einfuhrumsatzsteuer" (~VAT) on the sum of the declared value of the scope, the customs tariff and the shipping costs. This also seems to be the case for the Distributor when he imports the scope from Malaysia. He then sends the scope to you and you will be charged with whatever his expenses were to import the scope. At least that's how I understand it.
He can charge you with nothing. Otherwise he would get the payback from the "Finanzamt" and your charged VAT. That would immediatly penalized as scam. The distributor would have really big fun with the taxation authority...

But since the declared value of the scope is totally unclear, as are the shipping costs, it's impossible to tell what your real expenses are when the scope is finally delivered.
Again... - Null, zero, nada, nothing. But... - wait! There are possible shipping costs! From the distributor to you!
Usually 5,95 or 6,95 €!
Seriously: Do you ever seen a receipt with the value 0,00 €, but 6,95 € for shipping?

I'm off to work now, a nice day to all of you...
Have a nice day, too. And don´t panic about nothing.

But wait... I´m so dumb   

Thought twice about this case. My best advice is: Decline the scope!
The VAT and other expenses will destroy your live! With guarantee!
So, give the scope back. Then another one has to face the winning.
(One more scope to win! Yeah!)
This should be a warning to everyone! Don´t win a scope!
(Less subscribers. Better chances for me...)
 

[nihtila]

No matter how many links or school examples you give, but if Keysight says we need to pay taxes, there are two choices: take the scope and pay the taxes or decline it.

Of course we all hope that their decision will be the correct one.

[continuo]

Someone has to pay for the VAT party. Keysight obviously hasn't the slightest interest to cover it for you, the distributor, out of his own pocket, won't do it either, so, as the German saying goes: "Den letzten beissen die Hunde" (the last one is bitten by the dogs), it's up to the lucky winners to reach for the (hopefully well equipped) wallet   

[rch]

Of course what to do about VAT is Keysight's choice. But they might choose to be sensitive to local values.   We all know that if an EU company said it was giving away a nice £10,000 prize to a lucky consumer, said company would be reviled in every corner of the media if it then tried to get the winner to pay the VAT!  (And, certainly in the UK, they would have to account for VAT at value of a promotional gift.  VAT is so universal that they wouldn't even think about it, their finance department would just tick the right boxes and the managers concerned would see it on the relevant budget lines only if they looked for it.)

[Macbeth]

Someone has to pay for the VAT party. Keysight obviously hasn't the slightest interest to cover it for you, the distributor, out of his own pocket, won't do it either, so, as the German saying goes: "Den letzten beissen die Hunde" (the last one is bitten by the dogs), it's up to the lucky winners to reach for the (hopefully well equipped) wallet   

In the UK VAT is ultimately only paid by the final consumer to the supplier, as invoiced, not to HMRC. Businesses do not pay VAT as such, they merely pass it around between each other on all the intermediate transactions. I have never seen an individual with a purely VAT bill. It's always the 20% added tax to the actual purchase cost of rated goods to that individual.

Keysight cannot abrogate paying the VAT to HMRC to the individual as it is the responsibility of the VAT registered business to do this. It has been established that Keysight will ship the goods to their EU distributors from their Malaysia factory, no doubt on the usual frequent cargo shipments involved and therefore at the usual negotiated or zero rated import rates they have already established.

The "Gift" tax which is 100% of the retail seems a bit of a red herring. This is not a gift but a prize/promotion. I would imagine a gift is something personal and occasional in nature, ie. The benefactor knows the individual personally and also it's for an occasion like birthday, christmas, valentines, etc. Gifts generally do not get given with invoices (that would be so rude! ahem).

There are so many ways of giving the goods away, including using a "Discount" - there is nothing that says a 100% discount can't apply, besides which the scope could be sold for £1. It just has to be on stated on the invoice (that thing that would be really tacky to give with a "Gift"). The VAT rules state that the discount is 100% recoverable to the business.

Also, "Samples" - I think a quantity of 1 is a good example of a "Sample". I imagine all of Daves freebies are sent to him as samples for example

Ultimately if it comes from one of Keysights EU distributors I can't see any reason why the individual would have to pay full VAT on a theoritical MSRP that hasn't been charged or accounted for. Worst case scenario is an invoice for £1 or 1 EUR.

[station240]

Also, "Samples" - I think a quantity of 1 is a good example of a "Sample". I imagine all of Daves freebies are sent to him as samples for example

Excellent point, I don't see dave having to go to the post office with a wad of cash to collect test gear etc companies send him for review.

[continuo]

We all know that if an EU company said it was giving away a nice £10,000 prize to a lucky consumer, said company would be reviled in every corner of the media if it then tried to get the winner to pay the VAT!

For an EU company, such a lottery, targeted at EU citizens, most likely would be unlawful in the first place. But, yeah, they're not in the EU and therefore can get away with it. I've yet to find just one single happy EU winner here on the forums, it's just another case of marketing horribly gone wrong. So the lesson to be learned here is: If you want to promote your product in a foreign market, better check their culture first and adapt according to it, if you don't, you will still get a lot of attention to your company - but of the long lasting, wrong kind... 

[Towger]

All the Keysight office or distributor needs to do if offset the VAT against their VAT payment.  On face value that would be standard practice.
The fact that Keysight still cannot confirm this as probably a result of them going to the winner's local distributor and telling them to charge the winner the local taxes. The distributor is then saying WTF, or words to same effect.  Maybe not directly back to Keysight the but internally and to their own accountants and auditors.

[Howardlong]

All the Keysight office or distributor needs to do if offset the VAT against their VAT payment.  On face value that would be standard practice.
The fact that Keysight still cannot confirm this as probably a result of them going to the winner's local distributor and telling them to charge the winner the local taxes. The distributor is then saying WTF, or words to same effect.  Maybe not directly back to Keysight the but internally and to their own accountants and auditors.

I don't understand. In the end HMRC or whoever the local tax agency is will want their pound of flesh however it is distributed. An intermediary can't simply withold VAT on your return by randomly choosing to offset it on a whim. If you could, I'd be offsetting everything thank you very much.

[Howardlong]

While there is somewhat understandable consternation from some quarters on possible local taxation on winning entry, equally it is hardly surprising on a cross-border draw like this. It's unrealistic to consider that it is right that an organiser should pick up -your- tax bill depending on -your- various differing circumstances.

Depending on where you live, and whether you're a private individual, or company for example, some people would be getting a bigger prize than others, now I can just imagine the cries of unfairness then. Being a random draw, how could KS account up front for that in their budgeting? You can't have a blank line in your budgeting "TBA", last time I checked accountants don't work like that.

While it might not be common practice for you to pick up the local tax bill for conventional locally run prize draws in your neck of the woods, you can be sure that any taxes due will have been paid by the prize doner instead, and that is easy to make work in a local jurisdiction as you know ahead of time what the liability is and can account for it. Doing the same on a global scale just isn't possible because you have a huge unknown liability on your accounts.

For fear of repetition, it's clear in the T's and C's, so if you don't want to be liable for the local taxes levied by the government that the people of your country elected, then just don't enter the competition.

On the subject of the devices that EEVblog reviews, in the UK, and I presume other jurisdictions like Australia there are specific tax exemptions around limited quantities of marketing samples used for testing. https://www.gov.uk/vat-businesses/discounts-and-free-gifts

In short, although nobody likes a tax bill, it is really rather naive to think that somehow the organiser of an international competition could somehow make some unknown tax liability simply disappear, either by stumping up the cash themselves or by being creative with their own tax affairs.

[continuo]

Maybe they should have restricted the scope giveaway to businesses and exclude private individuals completely. No problems with poor nagging students and hobbyists (who couldn't afford scopes of this caliber anyway) and no problems with VAT taxation, because businesses are used to it and able to pay a few K€ "out of their petty cash" without even thinking to much about it.

Private individuals should be open to "free" hand held DMM giveaways   

[Howardlong]

Maybe they should have restricted the scope giveaway to businesses and exclude private individuals completely.

Indeed, and in view of the response that will be exactly what happens. Be careful what you wish for.

[Towger]

In the end HMRC or whoever the local tax agency is will want their pound of flesh however it is distributed. An intermediary can't simply withold VAT on your return by randomly choosing to offset it on a whim.

This is very true, they may not be able to offset it against VAT received.

Look at it from the distributor's point of view. They are happly selling Keysight kit and all the sudden Keysight contacts them with this request. They know how competitions operate locally, but the idea of having to collect tax on prize is an alien concept to them. It is hassle they can do without.

[Towger]

The simple solution is back to the posting direct to the winner from Malaysia.  But tell the winner the declared value and let them decide if they want the scope, a cheaper scope or to decline the prize.
Half the problem is the uncertainty generated by the apparent inability to inform the winner's of the value.

[continuo]

Half the problem is the uncertainty generated by the apparent inability to inform the winner's of the value.

+1

Though I would consider this to be responsible for 90% of the anger expressed