| Pages in topic: < [1 2] | Should I denounce this US company to the tax authorities? Thread poster: John Rawlins
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John Rawlins 
Spain
Local time: 10:34
Spanish to English
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TOPIC STARTER | a legal pretense that does not smell right | Sep 12, 2008 |
Tomás Cano Binder wrote: John Rawlins wrote:
Surely, we would all choose to invoice via PayPal from a small online office in the outskirts of Timbuktu and so avoid all tax liabilities forever.
John, I think you are confused about something here. Independently on how and when you are paid, you ALWAYS must issue an invoice on paper in Spain.
Hi Tomás
I appreciate your advice.
I have made invoices and paid tax on this work - it only totalled a couple of hundred euros. My real concern is the legal pretense that this is an overseas order, when the physical reality is that this is business received from a Spaniard working in a Spanish office. It doesn't smell right.
| | | | Steven Capsuto
United States
Local time: 04:34
Member (2004)
Spanish to English
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| This is increasingly an issue | Sep 12, 2008 |
Our profession is international by definition, and it's often hard to figure out a client company's location for legal or tax purposes. For instance, I was contacted by the Spanish office of a British company and told to deliver the job to their American office.
It occurred to me that if they don't pay on time, I'll have no idea which country's laws to invoke.
[Edited at 2008-09-12 14:22]
| | | | | What is the country of residence and VAT of the company in your PO? | Sep 12, 2008 |
John Rawlins wrote:
I have made invoices and paid tax on this work - it only totalled a couple of hundred euros. My real concern is the legal pretense that this is an overseas order, when the physical reality is that this is business received from a Spaniard working in a Spanish office. It doesn't smell right.
Let me ask a simple question John: What is the country of residence and VAT of the company shown in your the PO you received for this work?
| | | | John Rawlins
Spain
Local time: 10:34
Spanish to English
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TOPIC STARTER | No purchase orders, no tax numbers | Sep 12, 2008 |
Tomás Cano Binder wrote: John Rawlins wrote:
I have made invoices and paid tax on this work - it only totalled a couple of hundred euros. My real concern is the legal pretense that this is an overseas order, when the physical reality is that this is business received from a Spaniard working in a Spanish office. It doesn't smell right. Let me ask a simple question John: What is the country of residence and VAT of the company shown in your the PO you received for this work?
This company contacted and dealt with me from Spain but does not issue purchase orders. It says it produces its own invoices for the translator. Jobs are accepted by clicking 'ok' in their online accounting system.
They make payments from Canada, so I put their Canadian address on the invoices I generated for my records - but they make it very clear that they do not want translators sending invoices to them.
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| No tax number needed with US or Canadian firms | Sep 12, 2008 |
John Rawlins wrote:
They make payments from Canada, so I put their Canadian address on the invoices I generated for my records - but they make it very clear that they do not want translators sending invoices to them.
Well, then as far as I can see, if you did not receive a PO from the Spanish branch, from a company incorporated in Spain and with a Spanish VAT number... there is nothing to complain about John. You just worked for a Canadian company for all purposes!
| | | | John Rawlins
Spain
Local time: 10:34
Spanish to English
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TOPIC STARTER | Yes, but no. | Sep 12, 2008 |
Tomás Cano Binder wrote: John Rawlins wrote:
They make payments from Canada, so I put their Canadian address on the invoices I generated for my records - but they make it very clear that they do not want translators sending invoices to them.
Well, then as far as I can see, if you did not receive a PO from the Spanish branch, from a company incorporated in Spain and with a Spanish VAT number... there is nothing to complain about John. You just worked for a Canadian company for all purposes!
Yes, Tomás. When you look at the e-documentation I worked for the Canadian subsidiary of an American company.
But that isn't the physical reality. To any observer watching the transaction, a Spanish resident worked for company operating in Spain - but the documents were organized in such a way that taxes were avoided or evaded.
Can we expect this practice to spread?
| | | | | Still don't see any incorrect behaviour here... | Sep 12, 2008 |
John Rawlins wrote:
But that isn't the physical reality. To any observer watching the transaction, a Spanish resident worked for company operating in Spain - but the documents were organized in such a way that taxes were avoided or evaded.
Well John, I can only encourage you to call the Agencia Tributaria, explain your doubts and let them tell you whether they see any problem here. And/or, even better: Why don't you call the person who hired you in the Spanish office and explain your concerns about this situation and the lack of a PO from a Spanish firm etc. etc.?
| | | | | Precisely what I would do ... | Sep 12, 2008 |
Tomás Cano Binder wrote:
Why don't you call the person who hired you in the Spanish office and explain your concerns about this situation and the lack of a PO from a Spanish firm etc. etc.?
There's a lack of information here which can probably be best resolved by phoning or addressing an email outlining your concerns to the Spanish office. I certainly wouldn't be reporting anything to the tax authorities at this stage.
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CFK TRAD
France
Local time: 10:34
English to French
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| Double taxation treaty | Sep 12, 2008 |
Dear John,
I'm not a specialist of taxation law, though I'm lawyer; as I'm a French lawyer, I'll speak from the view of the French law.
First, we all assume that, whatever system you used, you sent an invoice (be it an e-invoice, a paper-invoice sent by regular mail, or whatever).
Then, what you've got to do is to check what is the entity you invoiced: if it's a Spanish entity, and if you were supposed to charge VAT (which you did not do), you're in a mess.
... See more Dear John,
I'm not a specialist of taxation law, though I'm lawyer; as I'm a French lawyer, I'll speak from the view of the French law.
First, we all assume that, whatever system you used, you sent an invoice (be it an e-invoice, a paper-invoice sent by regular mail, or whatever).
Then, what you've got to do is to check what is the entity you invoiced: if it's a Spanish entity, and if you were supposed to charge VAT (which you did not do), you're in a mess.
Now, if it's NOT a Spanish entity, but a French, American, Canadian or whatever, you're clean with it.
Yes, there are translation offices (not mine, but I know some of them) who have their GHQ in one country, and a subsidiary in another country. Imagine the GHQ is in Spain, and the subsidiary is in Germany. Whatever you do, I bet you'll be asked to charge the German subsidary of the Group because you're in Spain, so the group won't have to pay the VAT.
And there's nothing illegal in it, in so far as both companies have been lawfully registered. They HAVE to reconcile their accounts, especially all VAT accounts, and provide each and every fiscal authority with ALL the records of every entity of the group.
This is common, more and more companies do it. They can switch from one entity to another to lessen the amount of tax, and unless they are in Taxation Paradise (Caïman Island), this is not a problem. Because the amount of taxes which is NOT paid in Spain will be paid in the USA, and vice versa. And, if they HAVE to reconcile, fiscally, their accounts, it's all because "double taxation treaties".
Remember, even outside of the EU you have plenty of "double taxation conventions" which regulate the situation you're referring to. So, the international laws admits the situation you describe, and rules it. If you're still worried, call your tax advisor, but honestly, I don't think there should be any kind of problem...
As for the place where the PM stands, physically : who cares? It's only the entity you charge that matters.
What you must firmly refuse is the following :
- Being paid "out of accounting books" = without any invoice ;
- Charging, at the end of the job, a company that has nothing to do with the one you worked for (not the Spanish bureau of the Italien GHQ, I mean truly another company). A client (a direct client, a rather large TV production company) recently asked to send the invoice to... a company which rents cameras !!! Of course I refused, I lost the client (I just hope I'll get paid, there're 3k € at stake), but accepting can, under the French law, drive you to jail...
-"Forgetting" to charge for the VAT if you're legally required to charge VAT (that is, if the client is in the same country OR if they're in Europe AND don't have a VAT number).
But, as for the situation you describe, if there had not been a "double taxation treaty" between the USA and Spain, I would have shared your concern... but the USA have executed double taxation treaties with every "historical" EU countries (as for the new members, I'm not sure whether they are in effect or not).
Once again, you may want to call your tax advisor, but I have been confronted with the same situation, and I would not have done something illegal (and I would not mention it publicly in this post, I have had any doubt).
Hope this helps !!
Best
Coralie. ▲ Collapse
| | | | John Rawlins
Spain
Local time: 10:34
Spanish to English
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TOPIC STARTER | Thanks for some sensible advice | Sep 12, 2008 |
I'd like to say thanks to Tomás, Lawyer-Linguist, Coralie, and others, for some sensible advice and helpful info.
| | | | Marc P (X)
Local time: 10:34
German to English
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| Should I denounce this US company to the tax authorities? | Sep 12, 2008 |
FORMATION CFK wrote:
Imagine the GHQ is in Spain, and the subsidiary is in Germany. Whatever you do, I bet you'll be asked to charge the German subsidary of the Group because you're in Spain, so the group won't have to pay the VAT.
This is not correct. In this case, the German subsidiary would not have to pay Spanish VAT, but it would become liable for German VAT (which it could in turn offset against its own VAT revenues). In other words, its VAT liabilities for a service sourced from Spain are precisely the same as for a service sourced from Germany.
There may on the face of it be a benefit to the group as a whole in arranging for the VAT to be paid in an EU member state with a lower VAT rate, but with a few exceptions the differences are minor, and in any case most companies will be able to offset all the VAT on purchases against their own VAT receipts. There may be advantages in reducing (but not eliminating) the VAT obligations if the group is itself not registered for VAT, but again, that is very much the exception.
Marc
P.S. I'm not an accountant either, and this is not financial advice.
[Edited at 2008-09-12 17:01]
| | | | CFK TRAD
France
Local time: 10:34
English to French
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Marc P wrote: FORMATION CFK wrote:
Imagine the GHQ is in Spain, and the subsidiary is in Germany. Whatever you do, I bet you'll be asked to charge the German subsidary of the Group because you're in Spain, so the group won't have to pay the VAT. This is not correct. In this case, the German subsidiary would not have to pay Spanish VAT, but it would become liable for German VAT (which it could in turn offset against its own VAT revenues). In other words, its VAT liabilities for a service sourced from Spain are precisely the same as for a service sourced from Germany.
Yes indeed, I may have expressed myself the wrong way. The German subsidiary will have to pay the VAT in Germany, but what I point out here, is that the Spanish translator won't have to charge the VAT to the German subsidiary.
And, basically, just imagine the client is based in Italy... and has a valid VAT number : should the German subsidiary pay the VAT in Germany? I guess not, but I don't know the German taxation law !
The interest of the system might be to pay VAT in some countries where VAT are low (which is, of course, not the case in Germany !).
Yet, despite my poor way of expressing myself, what I mean here is that a translator who is, for taxation purposes, a resident of a country A is not supposed to charge the VAT to a client who, for taxation purposes is a resident of a country B insofar as the client has a valid VAT number OR is outside the EU.
After that, what the client does from a fiscal, accounting, legal, etc., point of view is not the translator's business.
When the client asked me to charge another company, he added "I would not ask you to do that if it were not extremely common in my industry, you know it's the way all things are, [etc., etc.]". Having a client who commits an offence is not an offence, unless and until you help the client.
Maybe, to answer Mark's point, I should have mentioned very clearly ONE translation agency I work with on a regular basis (they are wonderful, by the way), and which has 2 offices in 2 countries of the EU. But giving details (too many details...) on what countries, how they work, etc, could have been (perhaps) a breach of the rules on the Forum.
Best
Coralie
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Tatty
Local time: 10:34
Spanish to English
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| For your invoice to be valid | Sep 13, 2008 |
For your invoice to be valid according to Spanish law, you need use the correct company name, not its trading name, and include its VAT number. If these two elements are missing from your invoice, then the invoice is invalid, and that is indeed your problem. But I still wouldn't worry about it, the chances of them inspecting your books are very slight.
| | | | | Not all that unusual to me | Sep 14, 2008 |
John Rawlins wrote:
When you look at the e-documentation I worked for the Canadian subsidiary of an American company.
But that isn't the physical reality. To any observer watching the transaction, a Spanish resident worked for company operating in Spain - but the documents were organized in such a way that taxes were avoided or evaded.
Can we expect this practice to spread?
For the record, I have been doing assignments for years for a company that operates in a similar manner.
Oh, back when I originally started taking jobs with them, they contacted me from - and I billed them at - different offices, England, France, Germany, Hong Kong, Australia.
A couple of years later they consolidated all of their billing at the US location.
After that, I was only "contacted" by someone working out of one of the offices or even at home - I know for a fact some of the PMs or contact points were not working from offices but were contractor-PMs for the same translation company assigning me jobs, and I noticed that some of their continental offices seemed to "disappear" - and this is all done apparently for time zone sake.
I take this to be an internal procedure they use to contact translators during different business hours around the world.
I'm also not an international tax expert, but this is a very large US company that I deal with, which has apparently grown by leaps and bounds since I started working with them several years back.
I could only assume at this point that they have all their ducks in a row, otherwise they would be - to put it succinctly - in very deep doodoo.
For me, it's just not an issue.
(And yes, I did formerly work out of Germany and was subject to VAT)
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