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VAT or no VAT?
Thread poster: lannor
lannor  Identity Verified
Belgium
Local time: 21:01
Member (2016)
English to Dutch
+ ...
May 17

Under Belgian law someone has to pay VAT for any service supplied.
1. For a Belgian customer I always charge VAT and pay it back to the Belgian state.
2. For a EU customer with a VAT registration I never charge VAT. My customer (a business in this case) sells the service to his customer, charges VAT and reclaims it.
3. For a EU customer without a VAT registration I always charge VAT and pay it back to the Belgian state.
4. For a non-EU customer I never charge VAT. My customer pays the taxes in his country.

I (have to) apply, and have applied these simple rules to all my customers! I'm backed up in this by my accountant and Belgian colleagues.

For the first time I have an issue. A UK customer without VAT registration claims he doesn't need to pay VAT and says that HM Revenue agrees with him.
I have no problem working with him again but I can't without charging VAT.

Can someone explain, show in which case(s) you don't have to pay VAT for services if you don't have a VAT registration, if any?

Thanks very much!
Patrick


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Thomas T. Frost  Identity Verified
Germany
Local time: 21:01
Member (2014)
French to Danish
+ ...
VAT May 17

Even if your UK client is VAT-exonerated, they still need to obtain a VAT number if they want to buy from other EU Members States without paying VAT, as you have to report all reverse VAT sales to your local tax authorities with the VAT number of the client.

If your UK client then pays VAT or not is their own problem, but you cannot use the reverse VAT procedure without obtaining and verifying your client's VAT number.


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RobinB  Identity Verified
Germany
Local time: 21:01
German to English
Not true May 17

The quick answer is that your UK client who is not VAT-registered still has to pay VAT on your invoice unless they can produce an EU VAT ID (which is perfectly possible even if you're not VAT-registered). In other words, they are treated in the same way as a retail customer (or EU institution). What sort of business is this UK client? A VAT exemption under the small business threshold, for example, means that you don't charge VAT, but you still have to pay it on your supplier invoices.

If your customer refuses to pay VAT, you will probably have no alternative to issuing a lawyer's letter in the first instance.


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Samuel Murray  Identity Verified
Netherlands
Local time: 21:01
Member (2006)
English to Afrikaans
+ ...
He doesn't have to pay VAT... to his tax man May 18

lannor wrote:
For the first time I have an issue. A UK customer without VAT registration claims he doesn't need to pay VAT and says that HM Revenue agrees with him.


What HM Revenue says is correct, but... I think he misunderstood what was said.

He doesn't have to pay VAT to HM Revenue on any income that he receives, but he still has to pay VAT to the seller on any purchases of non-exempt goods.

When he goes to any kind of shop to buy non-exempt goods (e.g. office stationery), even for business purposes, he does pay VAT (doesn't he?). He's buying from you (not selling to you), so he has to pay VAT to you.


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Tom in London
United Kingdom
Local time: 20:01
Member (2008)
Italian to English
VAT May 18

I am based in the UK. In compliance with UK tax law I am not registered for VAT and have no VAT number.

Most of my clients are in Italy, Spain, Germany.

My invoices specify that "VAT is not applicable in compliance with UK tax law".

Nobody has ever queried this. I always get paid.

HOWEVER

I have to pay VAT wherever it applies and I cannot claim it back.

Don't let anybody tell you anything different !

[Edited at 2017-05-18 07:14 GMT]


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Huw Watkins  Identity Verified
United Kingdom
Local time: 20:01
Member (2005)
Italian to English
+ ...
This is the situation as I understand it from the UK, however VAT rules are set at EU level... May 18

...so they apply to all countries in the EU when it comes to cross-border issues, and UK still is (for the time being).

https://www.gov.uk/government/publications/vat-notice-741a-place-of-supply-of-services/vat-notice-741a-place-of-supply-of-services

Specifically paragraph 2.1

"The place of supply
For EU VAT purposes, the place of supply of a service is the place where that service is treated as being supplied. This is the place where it’s liable to VAT (if any). There are a number of place of supply rules for working out where services of different kinds are supplied, for example:

where the place of supply of services is in a member state of the EU, that supply is subject to the VAT rules of that member state and not those of any other country. If the member state is not the UK, such supplies are said to be ‘outside the scope’ of UKVAT
where the place of supply of services is outside the EU, that supply is made outside the EU and is therefore not liable to VAT in any member state (although local taxes may apply). Such supplies are said to be ‘outside the scope’ of both UK and EU VAT".

Specifically paragraph 6:

"6.
The place of supply rules for services
6.1Introduction
The place of supply rules contain default or ‘general’ rules, one for supplies to business customers B2B and one for supplies to consumers B2C. There are a number of exceptions to the general rules and there are special rules to cover these.

In order to determine the place of supply of your service you should consider the exact nature of your services against each of the special rules first (see paragraph 6.4) and only if none apply will your service fall under a general rule. Once you have determined which rule applies you should refer to section 16 to determine whether your supply is subject to the zero rate.

6.2B2C supplies
The general rule for B2C supplies of services is that the place of supply is where the supplier belongs, irrespective of the location of their customer.

6.3B2B supplies
The B2B general rule for supplies of services is that the supply is made where the customer belongs.

Where the B2B rule applies you should obtain commercial evidence showing that your customer is in business and belongs outside the UK. VAT registration numbers are the best evidence that your EU customer is in business. If your customer is unable to provide a VAT number you can accept alternative evidence. This includes certificates from fiscal authorities or other commercial documents indicating the nature of the customer’s activities in their home country. Such evidence should be kept as part of your records.

Some customers may have non-business as well as business activities. Examples of such customers are government departments, local or municipal authorities and similar public bodies. In such circumstances, provided your customer can demonstrate that they have business activities (such as by providing a VAT number), the place of supply is determined by where the customer belongs.

Where a customer is unable to provide a VAT number, or other evidence to clearly demonstrate business activities, the supply should be treated as a B2C transaction.

If you are supplying services to a business customer that are being used for wholly private purposes, the B2C rules apply. To decide where a service is being used for private purposes, you should consider the nature of the services being provided. If in doubt, confirmation should be sought from the customer."

Therefore VAT is NOT applicable on invoices for B2B services supplied across borders in the EU, provided the customer is a business customer, is fully taxable and can provide evidence that they perform business activities (such as a VAT number or, if not VAT-registered, then a certificate of business registration, tax registration no/certificate, and even a company website is quoted in some sources).

The Irish website appears to say exactly the same thing, as it would, as these laws are EU-wide:

http://www.revenue.ie/en/tax/vat/guide/supply-of-services.html

With regard to it being a legal obligation that a VAT number be provided to prove you are performing business activities, this was ruled against last year by the Advocate General of the European Court of Justice. The case in question was actually for goods supplied from one EU country to another, making the ruling even more significant as VAT rules on the supply of goods are much more onerous than the supply of services (which are generally zero-rated when supplied cross-border).

http://www.vatlive.com/vat-news/eu-vat-number-for-intra-community-vat/

Obviously VAT may be charged and paid if the customer and supplier are based in the same country - that's a completely different matter altogether.


[Edited at 2017-05-18 12:20 GMT]


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Huw Watkins  Identity Verified
United Kingdom
Local time: 20:01
Member (2005)
Italian to English
+ ...
Goods are NOT services! May 18

Samuel Murray wrote:

lannor wrote:
For the first time I have an issue. A UK customer without VAT registration claims he doesn't need to pay VAT and says that HM Revenue agrees with him.


What HM Revenue says is correct, but... I think he misunderstood what was said.

He doesn't have to pay VAT to HM Revenue on any income that he receives, but he still has to pay VAT to the seller on any purchases of non-exempt goods.

When he goes to any kind of shop to buy non-exempt goods (e.g. office stationery), even for business purposes, he does pay VAT (doesn't he?). He's buying from you (not selling to you), so he has to pay VAT to you.


There are specific rules for the cross-border supply of services within the EU. Goods are a different matter entirely.


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Huw Watkins  Identity Verified
United Kingdom
Local time: 20:01
Member (2005)
Italian to English
+ ...
You can't May 18

How do you get an EU VAT ID if you are not VAT-registered in the UK?

RobinB wrote:

The quick answer is that your UK client who is not VAT-registered still has to pay VAT on your invoice unless they can produce an EU VAT ID (which is perfectly possible even if you're not VAT-registered). In other words, they are treated in the same way as a retail customer (or EU institution). What sort of business is this UK client? A VAT exemption under the small business threshold, for example, means that you don't charge VAT, but you still have to pay it on your supplier invoices.

If your customer refuses to pay VAT, you will probably have no alternative to issuing a lawyer's letter in the first instance.


I just phoned HMRC - you have to register for VAT to get an EU VAT number. In fact there is no such thing as an EU VAT number, it is simply your domestic VAT number, with perhaps the country code in front or some slight adaptations to be compatible with the VIES system.


[Edited at 2017-05-18 13:56 GMT]


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2G Trad  Identity Verified
Italy
Local time: 21:01
Member (2000)
English to Italian
+ ...
Thresholds May 18

Huw Watkins:
as these laws are EU-wide

That would be true and fair as long as the VAT registration thresholds were all the same across the EU.

For the time being it is still a tremendously unfair situation.

Cheers from Italy (EU)
Gianni


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Huw Watkins  Identity Verified
United Kingdom
Local time: 20:01
Member (2005)
Italian to English
+ ...
Very true! May 18

2G Trad wrote:

Huw Watkins:
as these laws are EU-wide

That would be true and fair as long as the VAT registration thresholds were all the same across the EU.

For the time being it is still a tremendously unfair situation.

Cheers from Italy (EU)
Gianni


Having phoned HMRC just now, they said it is possible that EU law may be interpreted slightly differently in each member state with regard to VAT, although the general rules all apply.


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Axelle H.
United Kingdom
Local time: 20:01
Member (Feb 2017)
English to French
+ ...
Headaches .. May 18

After a few year working as a freelancer in UK, it still gives me headaches to understand how it works with EU/no EU country.
But it is still better than France. Now I am waiting for Brexit and see what will happens ..

[Edited at 2017-05-18 15:59 GMT]


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Natalia Watkins  Identity Verified
United Kingdom
Local time: 20:01
Member (2016)
English to Russian
+ ...
One of the few benefits of Brexit May 18

Axelle Hawkins wrote:

After a few year working as a freelancer in UK, it still gives me headaches to understand how it works with EU/no EU country.
But it is still better than France. Now I am waiting for Brexit and see what will happens ..

[Edited at 2017-05-18 15:59 GMT]


The UK will be outside of the EU so any suppliers in the EU will automatically not apply VAT and vice versa. It'll be the same as collaborating with Agencies/Suppliers in the US. VAT does not apply to our translation services.


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Nikki Scott-Despaigne  Identity Verified
Local time: 21:01
French to English
; May 18

;

[Edited at 2017-05-18 19:47 GMT]


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Nikki Scott-Despaigne  Identity Verified
Local time: 21:01
French to English
Not quite May 18

Huw Watkins wrote:

How do you get an EU VAT ID if you are not VAT-registered in the UK?

RobinB wrote:

The quick answer is that your UK client who is not VAT-registered still has to pay VAT on your invoice unless they can produce an EU VAT ID (which is perfectly possible even if you're not VAT-registered). In other words, they are treated in the same way as a retail customer (or EU institution). What sort of business is this UK client? A VAT exemption under the small business threshold, for example, means that you don't charge VAT, but you still have to pay it on your supplier invoices.

If your customer refuses to pay VAT, you will probably have no alternative to issuing a lawyer's letter in the first instance.


I just phoned HMRC - you have to register for VAT to get an EU VAT number. In fact there is no such thing as an EU VAT number, it is simply your domestic VAT number, with perhaps the country code in front or some slight adaptations to be compatible with the VIES system.


[Edited at 2017-05-18 13:56 GMT]


It is called the "inter-community number". I live and work in France. I am not registered to pay VAT. I asked my taxa office for my "numéro intra-communautaire" and it is my business registration number with "FR" and, in my case, a number and a letter before the registration number. It cannot be invented. It has to be applied for.
And yes, if you are operating under the VAT threshold, you do'nt invoice VAT but you do pay it on your purchases of goods and services and you cannot, of course reclaim it. For that, you need to be VAT-registered and charge VAT.


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Huw Watkins  Identity Verified
United Kingdom
Local time: 20:01
Member (2005)
Italian to English
+ ...
I wish this were the case here in the UK May 18

Nikki Scott-Despaigne wrote:

Huw Watkins wrote:

How do you get an EU VAT ID if you are not VAT-registered in the UK?

RobinB wrote:

The quick answer is that your UK client who is not VAT-registered still has to pay VAT on your invoice unless they can produce an EU VAT ID (which is perfectly possible even if you're not VAT-registered). In other words, they are treated in the same way as a retail customer (or EU institution). What sort of business is this UK client? A VAT exemption under the small business threshold, for example, means that you don't charge VAT, but you still have to pay it on your supplier invoices.

If your customer refuses to pay VAT, you will probably have no alternative to issuing a lawyer's letter in the first instance.


I just phoned HMRC - you have to register for VAT to get an EU VAT number. In fact there is no such thing as an EU VAT number, it is simply your domestic VAT number, with perhaps the country code in front or some slight adaptations to be compatible with the VIES system.


[Edited at 2017-05-18 13:56 GMT]


It is called the "inter-community number". I live and work in France. I am not registered to pay VAT. I asked my taxa office for my "numéro intra-communautaire" and it is my business registration number with "FR" and, in my case, a number and a letter before the registration number. It cannot be invented. It has to be applied for.
And yes, if you are operating under the VAT threshold, you do'nt invoice VAT but you do pay it on your purchases of goods and services and you cannot, of course reclaim it. For that, you need to be VAT-registered and charge VAT.


This would save a lot of hassle. However HMRC do not give out intra-community VAT numbers. They simply require that you register for VAT.

Out of interest Nikki - if you contract the services of another translator - say a proof reader for your work as part of a TEP job and they are based in another EU country, do they charge you VAT? Or do they not charge you VAT because you give them your numéro intra-communautaire de TVA? Or do you side-step this by getting them to invoice the client direct?


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