What is VAT (value-added tax)?

Each business in the chain charges VAT on what it sells and deducts the VAT it paid on its own purchases, so in the end the tax is carried by the final consumer. Standard rates in the EU range roughly from 17 % to 27 %, depending on the country.

VAT matters for affiliates in two ways:

• Commission base: programs usually calculate a percentage commission from the net price, without VAT. A 30 % commission on a €119 sale that includes €19 VAT is 30 % of €100.
• Your own invoices: commissions are a payment for a service. If you are VAT-registered, you may need to add VAT to your invoices or apply the reverse charge for business customers in another EU country.

Payment processors acting as merchant of record collect and pay VAT on the sales themselves. Rules differ by country, so check your situation with a local accountant; this is not tax advice.