“I own a digital marketing company. We provided services to a nonprofit and, at its request, paid for its Facebook advertising using the company's credit card. The nonprofit is now reimbursing us. Must we add VAT to the reimbursement?”
The question has been reworded based on the case presented to the firm.
The firm's answer
The reimbursement may fall outside the service price—if the regulation's conditions are met.
In the case presented to the firm, the payment was classified as an expense paid on the client's behalf. When Regulation 6(a)'s conditions are met, the reimbursement is not part of the service price, so VAT should not be added. Check that the invoice, or another document approved for this purpose by the Director, was issued in the client's name.
Using the company's credit card or simply calling a payment an “expense reimbursement” is not enough. What matters is on whose behalf the expense was incurred and what the documents show.
What should be checked before reimbursing the money?
- That the expense was paid on the nonprofit's behalf and the document required by the regulation is in its name.
- That the reimbursement matches the payment made and is documented separately from the service fee.
- If the advertising document is in the marketing company's name, do not automatically assume the regulation applies.
This answer concerns reimbursement after payment has already been made. Collecting funds in advance for a client's expenses is subject to additional conditions under Regulation 6(b). Tax issues involving services purchased from Meta as a foreign resident require separate review.
Campaign management fees and reimbursement of a payment made for a client are two different components. The nonprofit's status alone does not exempt the marketing service from VAT.
This information is for general learning. Before applying it to another case, review the documents and transaction circumstances with the firm.