VAT is coming too

VAT: A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of general consumption tax that is collected incrementally, based on the value added, at each stage of production and is usually implemented as a destination-based tax, where the tax rate is based on the location of the customer.

As a long delayed monster, VAT is finally coming to iRacing. Sad and expected news.

Unfortunately, VAT (Value Added Tax) will be added to your iRacing digital purchases going forward for applicable countries that require us to collect and pay VAT to the various taxing authorities.

This change will only impact our customers in certain countries, mainly (but not only) western European countries that belong to the European Union (EU) but the list of countries is growing beyond that and change is constant. For example Russia, New Zealand, Belarus and India all just were recently added to the list of countries/tax jurisdictions that have enacted new digital downloads/internet software sales tax laws. Australia is coming later this year. The tax laws around the globe are adjusting and changing constantly to the digital world, jurisdiction by jurisdiction.

Although the VAT rates, tax laws and tax laws specifically for digital downloads/internet software keep changing country by country, VAT has been around for digital goods in a limited number of countries for quite a long while. Therefore, why is iRacing adding VAT now? As a company we started largely with a North American customer base but as each year passed our international business has grown. Until now we simply have absorbed the VAT liability which has mainly been a Western Europe tax when it comes to the digital world. However, with our International business growing, combined with the list of countries growing who are adding VAT for digital downloads, we simply no longer can afford the overall tax liability and we have little choice but to pass it on to our customers.

Although most customers would not know it, we actually charge and always have charged our U.S. based customers’ sales tax in states that we are required to pay sales tax. On a side note, those tax laws continue to change as well. For those U.S customers in certain states, counties and cities, we have always charged the appropriate sales tax on top of the invoice purchase price so in that sense this is not a new policy. Those U.S. customers would know it in those certain states, we clearly break it out and display the tax in the invoice/check out process. We will do that for the VAT as well going forward.

We hope you understand and thanks for all your support.

iRacing.com

Update:

iRacing.com Credits are not “real money”, they are essentially a sales discount. You are not taxed on the amount by which irCredits reduces your invoice amount. They are applied towards your invoice first, before irDollars or any other form of payment, specifically to help reduce the taxable amount of the purchase.

iRacing.com Dollars are “real money”, just like paying with a credit card or PayPal. The amount of your invoice paid for with one of these forms of payment is taxed.

BUT. Purchasing a Gift Card, or applying one to your account (thus increasing your irDollar balance) does NOT incur tax. It’s only when you spend those iRacing.com Dollars to actually purchase something (subscription, content, hosted session) that tax is added.

A new price increase for content and subscription. Rates from 20% to 25% for EU customers.