VAT or no VAT? Who wins the business?
Thread poster: Rebecca Lyne

Rebecca Lyne
France
French to English
+ ...
Jun 12, 2010

Do agencies automatically work with non-VAT translators over those that are required to charge VAT due to the cost savings? For instance, should I expect to lose business as an American translator currently not charging VAT (as it does not exist in the USA) if I relocate to France, set up my business and then be required to charge VAT?


Any advice will be appreciated.

Rebecca


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Krzysztof Kajetanowicz  Identity Verified
Poland
Local time: 12:49
English to Polish
+ ...
no difference Jun 12, 2010

Agencies can deduct the VAT amounts you charge from the VAT amounts due to the tax office on their own sales. VAT is generally not a cost.

Exception: banks and insurance companies are VAT-exempt and they may not be able to deduct the VAT you charge them. This is where VAT could make a difference. No difference for an agency though.

VAT only makes a difference when you're working for non-businesses, or tiny businesses that don't have an active VAT registration, or VAT-exempt businesses, which can't deduct the VAT charged on their purchases.

[Edited at 2010-06-12 17:45 GMT]


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Teresa Borges
Portugal
Local time: 11:49
Member (2007)
English to Portuguese
+ ...
VAT or no VAT Jun 12, 2010

Where are your main clients located?

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Alex Eames
Local time: 11:49
English to Polish
+ ...
UK clients only need to be VAT registered at >£70,000 turnover Jun 12, 2010

Krzysztof Kajetanowicz wrote:

VAT only makes a difference when you're working for non-businesses, or tiny businesses that don't have an active VAT registration, or VAT-exempt businesses, which can't deduct the VAT charged on their purchases.

[Edited at 2010-06-12 17:45 GMT]


In the UK you don't need to be VAT registered if your turnover is less than £70k, which is a lot higher than most other European countries. So there are exceptions.

http://www.hmrc.gov.uk/vat/forms-rates/rates/rates-thresholds.htm#2

Some small agencies or startups fall into this category. I wouldn't categorise them as non-businesses or tiny businesses (implying not worth working for). Charging VAT to these clients could put you at a disadvantage. But broadly speaking Krzysztof is right.

Alex Eames
http://www.translatortips.com
helping translators do better business


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Tatty  Identity Verified
Local time: 12:49
Spanish to English
+ ...
VAT wouldn't apply Jun 13, 2010

My understanding is that you would only charge VAT to agencies based in France. When invoicing an agency anywhere else in the world you wouldn't charge them VAT. I think that French agencies would be expected to be charged VAT anyway, so it wouldn't really be an issue for them. I used to work at a small agency in Madrid and the owner there told me that she always owed VAT. VAT is added at every stage of the production process. The same goes for me as a freelancer, it is very rare for me to offset the VAT owed with expenses.

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Sergei Tumanov  Identity Verified
Local time: 13:49
English to Russian
+ ...
a guy without VAT Jun 13, 2010

wins in the long run.

From a practical perspective.


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Williamson  Identity Verified
United Kingdom
Local time: 11:49
Flemish to English
+ ...
It depends. Jun 13, 2010

Tatty wrote:

My understanding is that you would only charge VAT to agencies based in France. When invoicing an agency anywhere else in the world you wouldn't charge them VAT. I think that French agencies would be expected to be charged VAT anyway, so it wouldn't really be an issue for them. I used to work at a small agency in Madrid and the owner there told me that she always owed VAT. VAT is added at every stage of the production process. The same goes for me as a freelancer, it is very rare for me to offset the VAT owed with expenses.


From the US to Europe, it does not apply at the selling point, it applies at the port of entry if it are goods (customs duties and VAT have to be paid). If it are services, it does not apply.
Within Europe, it depends. It would be wise to consult the website of the Hacienda with regard to the Spanish treshold.
From the Uk to France, no VAT if you don't reach the treshold.


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xxxNMR
France
Local time: 12:49
French to Dutch
+ ...
For your information Jun 13, 2010

VAT threshold in France is € 32,000/yr. Under this threshold you can in some cases opt-in for VAT but above this level you always charge VAT (inside France: 19,6%, outside France: 0%).

As companies get back the VAT on their purchases, not being registered for VAT is only a selling point when the translator is invoicing to individuals. Even Government bodies, which don't get back VAT, don't mind.

Not charging VAT may even be counterproductive: I have a friend who has to stop translation in October, if he doesn't he will be reaching the threshold. He does this each year! How can he be taken seriously?

PS someone who isn't registered for VAT pays all his purchases as an end-user (+19,60), and also the translations he subcontracts to translators who are registered for VAT.



[Modifié le 2010-06-13 21:38 GMT]


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Neil Coffey  Identity Verified
United Kingdom
Local time: 11:49
French to English
+ ...
Turnover WITHIN your country? Jun 14, 2010

Alex & Malgorzata Eames wrote:
In the UK you don't need to be VAT registered if your turnover is less than £70k, which is a lot higher than most other European countries. So there are exceptions.


Forgive me if I'm wrong, but I believe it's specifically turnover from business counted as being done in the UK. In other words, within the new Place of Supply rules, if you do business for a French client, that now doesn't count towards you reaching the threshold in the UK (though I suppose it would count towards you reaching the threshold in France).


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Gillian Searl  Identity Verified
United Kingdom
Local time: 11:49
Member (2004)
German to English
That's right Jun 14, 2010

Neil Coffey wrote:

Forgive me if I'm wrong, but I believe it's specifically turnover from business counted as being done in the UK. In other words, within the new Place of Supply rules, if you do business for a French client, that now doesn't count towards you reaching the threshold in the UK (though I suppose it would count towards you reaching the threshold in France).


That's exactly what the Revenue told me. As I do 95% of my work with companies in Europe I'll never reach the limit in the UK. The Revenue told me I may need to be registered for VAT in the countries from where my work comes.
Gillian


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RobinB  Identity Verified
Germany
Local time: 12:49
German to English
No winners, no losers Jun 14, 2010

See my reply in this thread:

http://www.proz.com/forum/money_matters/173296-vat_cant_issue_an_invoice_in_spain_without_vat_registration-page2.html

Unless they're employing zombies in their accounts department, companies shouldn't bother one way or the other whether translators are VAT-registered or not. For example, when a US-based freelancer sends us an invoice, we have to add notional VAT to the invoice total and add that notional VAT amount to our VAT return. Provided that certain conditions are met (these vary from EU member state to member state), we can then reclaim the same amount on the same VAT return as input tax (the same procedure applies to local freelances claiming VAT exemption under local small business rules, incidentally).

So anybody who claims that not being VAT-registered gives them a competitive advantage over VAT-registered translators really ought to take a more detailed look at the (admittedly labyrinthine) VAT rules.

Robin


[Edited at 2010-06-14 20:09 GMT]


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Sergei Tumanov  Identity Verified
Local time: 13:49
English to Russian
+ ...
Great advice Jun 14, 2010


So anybody who claims that not being VAT-registered gives them a competitive advantage over VAT-registered translators really ought to take a more detailed look at the (admittedly labyrinthine) VAT rules.


And what makes you think they did not?

:0)))

[Edited at 2010-06-14 20:09 GMT]


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