Site Support
VAT and TAX estimation and correction
Content
This article is only for monetized channels. If you are only buying content, this information does not apply to you.The article describes the reason behind the "estimated VAT deduction", and the correction of it at the beginning of each month.
These changes are necessary for consolidated TAX invoicing which was introduced at WatchFighters.com in August 2022.
It only applies to channels that operate as a private person (without a valid registered company with an EU VAT number) from Europe.
The rest of the world is not affected and therefore won't see any VAT deductions in the wallet.
How it works
- Directly with each sale, we deduct an estimated VAT amount from your wallet.
- At the beginning of each month you receive the invoice for the previous month. This invoice will have the final VAT value.
- We add up all the estimated amounts from the past month which got already been deducted from your wallet and compare them to the final amount of the official invoice.
- In case the total estimated VAT deduction was too high or low a "VAT correction" wallet event will be triggered to correct your paid VAT to the amount on the official invoice.
If you want more details and need an example you can keep reading.
But why?
The natural question might come: Why do we estimate your VAT at all, and don't calculate it correctly from the beginning?The answer is very simple: Rounding issues.
Example
To understand the answer, let's go through one example:- You price a video for 15EUR
- Your site cut is 10%
- You live in Germany with a current VAT rate of 19%
| Income | Expense | Balance | Note |
| €15 | €1.79 | €13.21 | €1.5 commission to WatchFighters €0.29 VAT paid by WatchFighters (estimated) |
Looks good right? Well not really if you run the numbers:
We have to pay 19% VAT for our commission of €1.5 because you are located in Germany in this example.
But 19% of €1.5 is: €0.285 and not €0.29, which was actually deducted.
You can see the problem if you imagine your not selling only one video but 100 or even 1000 during a month, these fraction cents - which can be rounded up or down, depending - can add up quickly to a few cents or even Euros by the end of the month.
The VAT correction event each month will correct these rounding VAT estimations. You might get some money back, or get some deducted. Consolidated TAX invoices allow us to apply VAT only to the total at the end of the month and NOT for each individual sale.
To make this more clear: Same example as above, but this time you sell the video 100 times during the month.
| Total income | Total expense | Total Balance | Total Note | |
| Single invoicing: | €1500 | €179.00 | €1321.00 | €150.00 commission to WatchFighters €29.00 VAT paid by WatchFighters (estimated ) |
| Consolidated invoicing: | €1500 | €178.50 | €1321.50 | €150.00 commission to WatchFighters €28.50 VAT paid by WatchFighters |
As you see, we estimated and deducted €29.00 for the sales individually. However, the official final Consolidated invoice, calculated the 19% VAT based on the total: €1500 which results in exactly: €28.50 and not €29.00 as it was rounded up 100 times by €0.005.
That means together with the final invoice you will find the following correction event in your wallet
| Date Member | Item | Income | Expense | Balance | Note |
| 01/09/2022 Support | Estimated VAT correction | €0.50 | - | €0.50 | VAT correction based on invoice ID for August 2022 |
We had two options, either we wait with VAT deduction until the end of each month, or we estimate it per sale and correct once the invoice is created.
We don't want to hide any costs from you and then make a big tax deduction each month. We always want to be as transparent as possible. Therefore your wallet should reflect your actually money as closely as possible.
We also pay you out each week, which only works, if we know the amount which can be paid out, and therefore we make VAT estimations so, that each week we know what can be sent to you.
We hope this article helps in explaining to you why we deduct estimated VAT and send a correction each month.