When it comes to advertising on LinkedIn, one of the key considerations is the cost and whether or not VAT (Value Added Tax) is included in the pricing. VAT is a tax added onto certain goods and services in many countries around the world. Determining if LinkedIn ads include VAT can help businesses understand the full cost of advertising on the platform.
The Short Answer
The short answer is: Yes, LinkedIn ads do include VAT. LinkedIn will charge VAT on top of the advertised pricing for ads in countries that require the tax to be collected. This means the final amount charged will be higher than the estimate or suggested bid price shown in the LinkedIn advertising platform.
VAT Rates by Country
The specific VAT rate applied depends on the country where the advertiser is located. Here are some of the standard VAT rates for key LinkedIn advertising markets:
- United Kingdom – 20%
- France – 20%
- Germany – 19%
- Italy – 22%
- Spain – 21%
- Netherlands – 21%
- Sweden – 25%
- Poland – 23%
- Australia – 10%
In the United States, there is no federal VAT. However, some states do charge sales tax on advertising services, which may apply to LinkedIn ads in those jurisdictions.
How VAT is Applied to LinkedIn Ads
When setting up and managing a LinkedIn ad campaign, the platform will show pricing and suggested bids exclusive of VAT. These estimates help advertisers plan and budget for their campaigns.
However, once the ads are running, LinkedIn will charge the advertiser VAT on top of the actual spend. Here is an overview of how it works:
- Advertiser sets a maximum bid amount when defining campaign – e.g. $5 per click
- LinkedIn auctions ad space and charges advertiser based on winning bid – e.g. $3 per click
- VAT is applied on top of actual spend – e.g. $3 + 20% VAT = $3.60 per click
- Advertiser is billed total including VAT at end of billing period
The VAT rate applied will depend on the advertiser’s country as outlined above. Any changes to local VAT rates are typically reflected in LinkedIn’s tax calculations within 30-60 days.
VAT Charges on LinkedIn Ad Accounts
LinkedIn applies VAT charges in a standardized way across most types of advertising accounts:
- Individual accounts – VAT applied based on country of residence of account owner
- Business accounts – VAT applied based on business location listed on account
- Agency accounts – VAT applied based on physical location of agency office
The only exception is cross-border campaigns run through LinkedIn’s Global Marketplace. In this case, VAT rules for the target country may override the account location. But for most advertisers, VAT is consistent for all campaigns run out of a specific LinkedIn ad account.
Are There Any VAT Exemptions?
In most cases, VAT will be charged on LinkedIn advertising spend as outlined above. However, there are some specific situations where businesses may be exempt from paying VAT on LinkedIn ads:
- Non-profit organizations registered as charities may qualify for VAT exemption in some countries.
- Some small businesses may be below local VAT registration thresholds so are not required to pay.
- Specific business types like financial services and insurance may be outside the scope of VAT rules.
- Transactions between VAT registered businesses within the EU can be zero-rated under certain conditions.
Additionally, ads run by EU-based advertisers targeting only non-EU countries are typically exempt from VAT. Businesses unsure of their VAT position can check local regulations or consult a tax advisor.
How Does LinkedIn Calculate VAT?
LinkedIn has standardized processes to accurately identify VAT requirements and calculate the correct amounts due on advertising transactions. This includes:
- Validating business locations against national registers during account setup.
- Mapping accounts to the right VAT rate based on business location and status.
- Updating rates whenever VAT rules change in a given country.
- Applying VAT calculations consistently across payment methods.
- Issuing compliant VAT invoices as proof of advertising costs.
By following local VAT rules closely across all its operations, LinkedIn aims to apply tax correctly and avoid scenarios where advertisers are faced with unexpected additional VAT charges down the line.
How Does VAT Impact Cost of LinkedIn Ads?
The bottom line impact of VAT on LinkedIn ads for most businesses is that the tax will make campaigns more expensive. With standard rates ranging from 10% to 27% across key markets, VAT can add substantially to the end cost of advertising.
Some example scenarios to illustrate the impact:
- UK business with £10,000 ad spend – With 20% VAT, taxes = £2,000 so total cost = £12,000
- German company with €15,000 ad spend – With 19% VAT, taxes = €2,850 so total cost = €17,850
- Australian startup with AU$5,000 ad spend – With 10% VAT, taxes = AU$500 so total cost = AU$5,500
The increased cost of LinkedIn advertising due to VAT needs to be factored into campaign budgets and return on investment calculations.
Tips for Managing VAT on LinkedIn Ads
Here are some tips for businesses to effectively manage VAT on LinkedIn ad campaigns:
- Build tax costs into budgets from the start rather than being surprised by VAT charges later.
- Take advantage of LinkedIn’s billing and reporting features to stay on top of VAT expenses.
- Confirm VAT status during account setup to avoid unexpected tax bills down the line.
- Optimize campaigns regularly to improve ROI – important given VAT increasing overall ad costs.
- Check eligibility for VAT exemptions if applicable based on business structure or location.
- Look at VAT inclusive costs when assessing campaign performance and attribution.
Frequently Asked VAT Questions
Some frequent questions that come up around VAT for LinkedIn advertisers:
Does LinkedIn charge VAT on campaign management fees?
Yes, LinkedIn will charge applicable VAT rates on any campaign management fees when running ads on behalf of advertisers.
Can I download VAT invoices for my LinkedIn ads?
Yes, registered advertisers can download detailed VAT invoices from LinkedIn to get proof of their advertising costs.
Is it possible to reclaim VAT paid on LinkedIn ads?
Businesses that are registered for VAT may be able to reclaim VAT paid on LinkedIn ads as input tax, subject to local regulations.
Do promotional LinkedIn ad credits include VAT?
Typically no – the value of any promotional ad credits is applied exclusive of VAT, which is then added at the applicable rate.
Is VAT charged on audience exports or LinkedIn Lead Gen Forms?
No – products like audience exports and Lead Gen Forms which don’t drive advertising impressions are not subject to VAT on LinkedIn.
Conclusion
VAT is a complex area but fundamentally, LinkedIn advertisers should remember that applicable VAT will be charged on top of their advertising spend in most countries. Building these taxes into budgets and ROI forecasts is key. LinkedIn aims to make VAT calculations and reporting as clear as possible to avoid any surprises down the line. As with any tax issue, seeking guidance from qualified finance and tax professionals is advisable for businesses unsure of their specific situation.
