EU customers with national VAT numbers: should VAT be charged?
Thread poster: Attila Piróth

Attila Piróth  Identity Verified
France
Local time: 18:11
Member
English to Hungarian
+ ...
Oct 22, 2009

This forum topic is related to a previous thread, Do I charge VAT for a private person in another EU country?, so I was pondering whether to post it there. Since it applies to a different kind of customer, I preferred to open a new topic, making cross-references.

Recently I completed a translation assignment for a Spanish customer, and had some problems with invoicing. The company had a Spanish VAT number but not an EU VAT number. I was fairly convinced that I had to charge VAT according to the rate applicable in France (where the supplier's (my) business is registered). This is how I understood Astrid's comment (which I also thought to be true):
Before you agree not to charge a client in another EU country VAT, you should always ask them for their VAT number and then try it in this box:

http://ec.europa.eu/taxation_customs/vies/vieshome.do

Only when you get a positive answer, that their number is valid, after doing this, are you free not to charge them 19% VAT.

This also seems to be in line with the following explanation on the VIES site:
Please note, however, that the confirmation of the validity of a VAT number and of its attribution to a given taxable person is only ONE of the elements of evidence supporting the VAT exemption of intra-community supplies of goods (article 138, paragraph 1 of Council Directive 2006/112/EC) or the non-application of VAT on a supply of services due to its localisation in another Member State. http://ec.europa.eu/taxation_customs/vies/viesspec.do


However, this is not exactly right. The customer got in touch with Gary Wilkinson from the European Commission DG Taxation and Customs Union, who gave the following explanation:

If you provide the service of translation of texts to a customer who is a taxable person established in another Member State then the place of supply is where your customer is established (Article 56 of the Directive 2006/112/EC). It is then your customer who is responsible to pay the VAT under the reverse charge procedure (Article 196 of Directive 2006/12/EC). You should mention on your invoice a reference indicting that the supply is subject to the reverse charge procedure and mention your customer's VAT number (Article 226 of Directive 2006/112/EC). In this case you should not charge VAT to your customer.

To my further inquiry, Mr. Wilkinson confirmed that
The place of supply rules in Article 56 of the VAT Directive apply whether the supplier is registered for VAT or not.

The customer established in the EU, as per Article 56 of the VAT Directive, must be a taxable person. The taxable person may not have a VAT registration number, for instance if they are under the VAT threshold for small enterprises, but as from 1 January 2010 they will in any case need to be identified for VAT (Article 214 of the VAT Directive will be amended)

The concept of "taxable person" is of crucial importance here; as he later developed,
Article 56 of the Directive 2006/112/EC applies to taxable persons established in the EU and any customer established outside the EU. So if you customer is a private individual outside the EU the rule would still apply. For a supply of translation services to a private individual in the EU who is not a taxable person the place of supply would be where you the supplier is established and the rules of this Member State will apply.

This means that, according to the EC Directive, a supplier should NOT charge VAt to a customer who has a valid VAT national number -- since in that case (but not only then) the customer is considered as a taxable person residing in an EU state.

VAT has to be charged according to the rate in force in the supplier's country if the customer resides in the EU but is not a taxable person. If the customer resides outsife the EU, VAT does not need to be charged.

Mr. Wilkinson also added,
The Commission is responsible for ensuring the correct application of Community law, which in this case is the VAT Directive (Council Directive 2006/112/EC of 28 November 2006 – as amended).

However, since this Community legislation is based on a Directive, each Member State is responsible for the transposition of these provisions into national legislation and their correct application within its territory. In the light of this and the basic principles of subsidiarity, national tax administrations have the principal responsibility for informing their taxable persons about the interpretation and application of these provisions.

Therefore, I would suggest that you contact the relevant national tax administration direct, in order to obtain a precise, complete and binding answer to your query. You will be able to find the contact addresses for all national tax administrations in the document "VAT in the European Community", which is on the Directorate General "Taxation and Customs Union" web site, available at:

http://ec.europa.eu/taxation_customs/taxation/vat/traders/vat_community/index_en.htm

I checked that the provisions of the Directive were implemented in France.

If you need any more specific information, please turn to the relevant tax administrations rather than the EC; it is the former's responsibility to advise taxpayers about the VAT rules applicable in the Member States.

Kind regards,
Attila


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Astrid Elke Witte  Identity Verified
Germany
Local time: 18:11
Member (2002)
German to English
+ ...
Interesting! Oct 22, 2009

Thanks very much, Attila, for providing this extensive information on the topic.

I shall double-check the matter very carefully in the future, with the relevant authority. It so happens that I am just in the process of enlarging my client portfolio, so this topic could arise.


Best regards,

Astrid


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