| Pages in topic: [1 2] > | Silly me, I made an assumption: Outsourcers and VAT Thread poster: Patricia Lane
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Hello,
I hope this silly story will help someone else avoid wasting time and energy.
Back in the spring, I spent some time responding to an outsourcer (who posts on Proz), presenting my credentials, taking a test (the very last unpaid one I ever did in fact) and again some time today to discuss an upcoming project and my availability.
The very last email from this outsourcer asked whether I was going to charge VAT or not (an outsourcer within the EU who is ... See more Hello,
I hope this silly story will help someone else avoid wasting time and energy.
Back in the spring, I spent some time responding to an outsourcer (who posts on Proz), presenting my credentials, taking a test (the very last unpaid one I ever did in fact) and again some time today to discuss an upcoming project and my availability.
The very last email from this outsourcer asked whether I was going to charge VAT or not (an outsourcer within the EU who is a professional *should* have some knowledge of VAT regulations...). I replied that it depended on their situation, not mine. Indeed in some countries the threshold is so high that perfectly legitimate businesses do not have to get a VAT number; their business registration number is sufficient for service providers in other countries to not have to charge them VAT.
This outsourcer is not even a registered business.
To accept working with this outsourcer, I would have had to work totally illegally.
My mistake was to assume months ago that this EU outsourcer was a registered business. And they didn't bother to mention it.
It is a question worth asking. It saves time and energy, neither of which we have to spare.
Cheers,
Patricia
[Edited at 2006-11-22 15:43] ▲ Collapse
| | | | | I don't quite get your point, Patricia | Nov 22, 2006 |
You can do a translation for anyone, including a private individual, so there is nothing illegal about their not being a registered business from that point of view.
Did they say they did not agree to pay VAT on your invoice, or what is the problem here? Regardless of their amount of knowledge about VAT matters, as long as you know the rules you can inform them at the negotiating stage whether or not VAT will be due on your invoice. If they have no VAT number, and also no registered... See more You can do a translation for anyone, including a private individual, so there is nothing illegal about their not being a registered business from that point of view.
Did they say they did not agree to pay VAT on your invoice, or what is the problem here? Regardless of their amount of knowledge about VAT matters, as long as you know the rules you can inform them at the negotiating stage whether or not VAT will be due on your invoice. If they have no VAT number, and also no registered business, then I take it you would make clear that VAT will be due on the invoice. They will then have to pay it if they work with you.
Astrid ▲ Collapse
| | | | Patricia Lane 
France
Local time: 23:58
French to English
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TOPIC STARTER
Hi Astrid,
Yes of course, Astrid, one can do a translation for anyone anywhere. That wasn't quite the point, but perhaps I was not very clear.
Back in the spring when I was contacted by this outsourcer who was actively recruiting people, I sent in all my documentation - which state clearly my VAT number and SIRET (business registration in France).
So, the outsourcer knew I was a business and one who paid Vat.
When we finalized discussion on an... See more Hi Astrid,
Yes of course, Astrid, one can do a translation for anyone anywhere. That wasn't quite the point, but perhaps I was not very clear.
Back in the spring when I was contacted by this outsourcer who was actively recruiting people, I sent in all my documentation - which state clearly my VAT number and SIRET (business registration in France).
So, the outsourcer knew I was a business and one who paid Vat.
When we finalized discussion on an upcoming project, the outsourcer asked if I was going to charge VAT. It seems to me that if one is running a business with international clients and subcontractors, one should have a bit of knowledge about that (the individual is in Europe).
I explained it depended on their situation: if they had a VAT number OR was a registered business, no, as they are not in France.
The person replied they had no VAT number and were not even a registered business and thus did not want to pay the VAT, it would cost too much money.
Obviously, the project is not going forth. I am neither going to work illegally (from France's point of view) or pay the VAT for the outsourcer.
I was stupid months ago to make the assumption that an outsourcer who is actively looking for people is not a registered business (issues of professionalism, business insurance, etc..) because they sure behaved as if they were.
And I find it crummy that the person never mentioned anything right from the start when we were discussing things like rates, payment terms and deadlines and all the rest of the administrative issues.
The point of the post was to avoid others like me (who are registered for VAT and have obligations) wasting time and energy - or taking risks. I never thought of asking the question, I shan't make that mistake again. Just wanted to pass it on.
Am I making more sense now?
Kind regards,
Patricia ▲ Collapse
| | | | Clara Duarte
Portugal
Local time: 22:58
English to Portuguese
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| From what I understood... | Nov 23, 2006 |
Patricia,
I understand you have a moral issue with clients asking you not to charge VAT, and you find it to be unprofessional, is that it?
Greetings from Portugal
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| Invoicing through your books | Nov 23, 2006 |
As far as I understand it, Patricia's customer did not want an invoice that included VAT. For Patricia to do this, she would have to send an invoice that does not show on her books because of the way she is registered in France (i.e. registered for VAT purposes).
This would, therefore, be illegal because she would not be paying income tax on the earnings either.
It is tricky.
Plumbers and such call this doing a 'foreigner'. I.e. doing a job for someone who ... See more As far as I understand it, Patricia's customer did not want an invoice that included VAT. For Patricia to do this, she would have to send an invoice that does not show on her books because of the way she is registered in France (i.e. registered for VAT purposes).
This would, therefore, be illegal because she would not be paying income tax on the earnings either.
It is tricky.
Plumbers and such call this doing a 'foreigner'. I.e. doing a job for someone who is not your employer or normal customer and for whom you do not issue an invoice. This means it is cash-in-hand, no questions asked.
The UK is one of those countries where you have a high threshold before you have to register for VAT (approx. 90,000 euros).
If someone in a EU country that is registered for VAT does a job for a UK customer who is not registered for VAT, there is a problem. The person in the EU country should charge VAT and the UK customer can deduct it from their income (tax) at the end of the financial year but not declare it at the UK VAT office in the period in-between. If the UK customer's earnings are low, they would, in theory, not get the VAT payment they made back. ▲ Collapse
| | | | Patricia Lane
France
Local time: 23:58
French to English
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TOPIC STARTER | you got most of it Marijke | Nov 23, 2006 |
The added twist is that, I could have invoiced normally - ie, excluding VAT for a non-France based client even if the client did not have a VAT number - but in order to do that, the outsourcer had to be registered.
The outsourcer said they were not even registered.
I would have had to invoice as if this outsourcer was a private individual - with VAT. Of course, they did not want that.
But this outsourcer is acting as a business even though, apparently, fro... See more The added twist is that, I could have invoiced normally - ie, excluding VAT for a non-France based client even if the client did not have a VAT number - but in order to do that, the outsourcer had to be registered.
The outsourcer said they were not even registered.
I would have had to invoice as if this outsourcer was a private individual - with VAT. Of course, they did not want that.
But this outsourcer is acting as a business even though, apparently, from what they said, they have none of the required attributes.
Yeah, I have a moral problem with that, Clara - its called professionalism - and would have had a legal one as well.
Patricia ▲ Collapse
| | | | Marc P (X)
Local time: 23:58
German to English
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| Silly me, I made an assumption: Outsourcers and VAT | Nov 23, 2006 |
Marijke wrote:
If someone in a EU country that is registered for VAT does a job for a UK customer who is not registered for VAT, there is a problem. The person in the EU country should charge VAT and the UK customer can deduct it from their income (tax) at the end of the financial year but not declare it at the UK VAT office in the period in-between. If the UK customer's earnings are low, they would, in theory, not get the VAT payment they made back.
I disagree, Marijke. If the UK customer is a business, VAT-registered or not, the EU-based supplier charges no VAT; if the UK customer is a private individual, the EU-based supplier charges VAT. (As already described by Patricia.) This is not a "problem" - it's the legislation.
As Patricia describes it, her situation is not a "problem" either, it is incitement to commit fraud. I wonder though whether there is a misunderstanding over the term "registered". The regulations governing business registration differ between EU countries, and in some countries, the term or its equivalent might be associated with VAT registration. In Germany, for instance, "registering" a translation business essentially consists of informing the tax office that income is being generated in this way, and obtaining a tax number in return. Patricia's customer may therefore not consider themselves a "registered business", whereas in the context of the VAT legislation, they are.
I heard of a similar case in reverse yesterday: a UK-based colleague's Spanish customer has decided to deduct 25% from her invoice because she is not in Spain, with the argument that "it's the legislation".
Marc
| | | | Patricia Lane
France
Local time: 23:58
French to English
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TOPIC STARTER | Spot on, Marc | Nov 23, 2006 |
MarcPrior wrote:
As Patricia describes it, her situation is not a "problem" either, it is incitement to commit fraud. I wonder though whether there is a misunderstanding over the term "registered". The regulations governing business registration differ between EU countries, and in some countries, the term or its equivalent might be associated with VAT registration.
Marc
There may well be a misunderstanding on the term "registered". I am making no assumptions here! However, the dialogue between this outsourcer and myself was not new. Both are native English speakers, so that trouble zone is a non-issue. In both instance (spring and yesterday), the outsourcer sought me out, which suggests an interest in working with me. It would be logical to suppose then to "dot i's and cross t's' to ensure undersanding with a view to making this collaboration possible. The minute the VAT issue came up, the outsourcer "exited, stage left" as the Pink Panther liked to do! The manner in which all this came up and was handled does not signal great professionalism in my eyes.
Again, the aim of my post was to help others avoid such situations, their potential consequences, and overall wasted time.
Thanks for echoing my concern, Marc!
Patricia
[Edited at 2006-11-23 08:49]
[Edited at 2006-11-23 08:50]
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Patricia Lane
France
Local time: 23:58
French to English
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TOPIC STARTER | Just had an idea | Nov 23, 2006 |
What do others think of this....
Should it not be possible (uh, mandatory?) for outsourcers who post here to specify whether they are:
- private individuals
- freelancers registered as such in their own country (all countries at least tax your income as such!)
- with or without VAT registration (their VAT number in the first instance)
- full fledged businesses (with their business number)
This may help prevent some of these surprises from croping... See more What do others think of this....
Should it not be possible (uh, mandatory?) for outsourcers who post here to specify whether they are:
- private individuals
- freelancers registered as such in their own country (all countries at least tax your income as such!)
- with or without VAT registration (their VAT number in the first instance)
- full fledged businesses (with their business number)
This may help prevent some of these surprises from croping up, answer the oh too frequent VAT questions, and help in recouping funds due by non-paying customers.
What say?
Patricia ▲ Collapse
| | | | Stefan de Boeck (X)
Belgium
Local time: 23:58
English to Dutch
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Patricia Lane wrote:
Should it not be possible (uh, mandatory?) for outsourcers who post here to specify whether they are:
- private individuals
- freelancers registered as such in their own country (all countries at least tax your income as such!)
- with or without VAT registration (their VAT number in the first instance)
- full fledged businesses (with their business number)
?
This would certainly take a lot of the anxiety out of the first negotiations.
Especially with UK outsourcers I look for a highly reassuring (in this respect) Ltd following the company name; if it’s not there I’m in a limbo: propose a rate that has in fact VAT silently included? I’ve done so and found it to be no problem. (BE VAT is 21% by the way.) This was for a registered (UK) business -as they all are- which is why I doubt that you are free to NOT charge them (registered but no VAT-number) the VAT: I -and more particularly so- my accountant insist that any EU outsourcer needs to be VAT-registered for us NOT to need to charge them -your legality issue- the bloody vat.
“Especially UK” because, as has been said here, VAT registration there only becomes compulsory at a 60.000 GBP turnover threshold --which is massive in comparison to any other EU country. Yet, of course, they are such nice people to work for, if only because their emails aren’t riddled with highly cryptic nonEnglish. If an outsourcer from any other EU country is ducking the vat issue, they’re probably working ‘under the table, no questions asked’. That is the assumption I go from. I usually turn my back on them.
On the whole, confusion even as to what a VAT number is, persists. If working for Italians ask for their P.Iva, and they’ll understand; VAT number questions might deliver a lot of useless didgits (yes, “didgits” --I’m going to leave that in for “digits”) --I suppose same goes for most countries.
In Belgium you have only ONE business-ID. Now there’s an idea.
This issue, I’m afraid, will remain inexhaustible for many years to come.
| | | | RobinB
United States
Local time: 16:58
German to English
I don't know why they bother, I really don't. Probably total ignorance of the way VAT works, I guess.
But it's also evidence of a large degree of sheer stupidity. Tax authorities in most EU countries now regularly trawl all sorts of online B2B and B2C platforms for indications of tax evasion, and I wouldn't be at all surprised if ProZ wasn't one of their targets. Works both ways, of course, as any translator registered with ProZ will also be assumed to be engaged in business activit... See more I don't know why they bother, I really don't. Probably total ignorance of the way VAT works, I guess.
But it's also evidence of a large degree of sheer stupidity. Tax authorities in most EU countries now regularly trawl all sorts of online B2B and B2C platforms for indications of tax evasion, and I wouldn't be at all surprised if ProZ wasn't one of their targets. Works both ways, of course, as any translator registered with ProZ will also be assumed to be engaged in business activities, and thus potentially come under scrutiny.
Patricia Lane wrote:
What do others think of this....
Should it not be possible (uh, mandatory?) for outsourcers who post here to specify whether they are:
- private individuals
- freelancers registered as such in their own country (all countries at least tax your income as such!)
- with or without VAT registration (their VAT number in the first instance)
- full fledged businesses (with their business number)
As Marc pointed out, you don't need to "register" as such in countries like Germany, where you also don't need a VAT number if your annual revenue is less than the de minimis threshold of EUR 50k. In that case, though, you're required to state your income tax (rather than VAT) number on your invoices, so maybe the simplest solution would be:
- private individuals
- self-employed (with registered VAT, income tax, or other official registration number)
- partnerships and corporations (with their registered business number)
I certainly agree that this sort of information should be mandatory, firstly to afford potential freelancers and outsources greater protection, and secondly (which of course would be in Proz's best interests) to clamp down on fraud. It could also be usefully extended to freelancers, too, i.e. they wouldn't be able to quote without this information being available. Just a thought...
Robin
[Edited at 2006-11-23 10:35] ▲ Collapse
| | | | Patricia Lane
France
Local time: 23:58
French to English
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TOPIC STARTER | Henry, oh Henryyyy!! | Nov 23, 2006 |
To the tune of Belafonte's duet with Odeta "There's a whole in the bucket".......
RobinB wrote:
I certainly agree that this sort of information should be mandatory, firstly to afford potential freelancers and outsources greater protection, and secondly (which of course would be in Proz's best interests) to clamp down on fraud. It could also be usefully extended to freelancers, too, i.e. they wouldn't be able to quote without this information being available. Just a thought...
Robin
[Edited at 2006-11-23 10:35]
Any chance Proz could plug a hole in this bucket??
Cheers,
Patricia
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Samuel Murray
Netherlands
Local time: 23:58
Member (2006)
English to Afrikaans
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| Are you registered for VAT? | Nov 23, 2006 |
Patricia Lane wrote:
The very last email from this outsourcer asked whether I was going to charge VAT or not (an outsourcer within the EU who is a professional *should* have some knowledge of VAT regulations...).
So? He wanted to know if you were registered for VAT. If yes, then say so. If not, then say so. There's nothing illegal about enquiring whether someone you do business with is registered for VAT or not.
This outsourcer is not even a registered business.
You don't have to be a registered business to pay VAT (at least not in my country).
[Edited at 2006-11-23 10:58]
| | | | Patricia Lane
France
Local time: 23:58
French to English
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TOPIC STARTER | Not the point, Samuel | Nov 23, 2006 |
The outsourcer knew for months that I was registered - it is on all my paperwork.
The Outsourcer is not and claims to not be a registered business.
The outsourcer did not want to be charged VAT.
As MarcPrior put it, the outsourcer would have wished for me to commit VAT fraud.
Patricia
| | | | Samuel Murray
Netherlands
Local time: 23:58
Member (2006)
English to Afrikaans
+ ...
| Are you sure he knew? | Nov 23, 2006 |
Patricia Lane wrote:
The outsourcer knew for months that I was registered - it is on all my paperwork.
Yes, but sometimes we ask people questions because it is quicker to ask and get a quick answer than it is to go sift through all previous correspondence trying to find if the answer had previously been given.
(Added: A regular client recently asked me if I had Trados. I'm very sure I have told this client before that I don't have Trados, but I think it was quicker for her to just quickly ask me again than to check her records.)
Are you sure the outsourcer *knew* that you were registered for VAT at the time when he asked the question? Your assuming that the outsourcer's question is an invitation to commit fraud is based on the assumption that the outsourcer is a highly organised person with extensive notes on every one of his contacts, instantly accessible to him.
The solution is quite simple: tell him that you will charge VAT. Say no more, and see if his response indicates a continued invitation to commit fraud.
[Edited at 2006-11-23 11:45]
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