When do we need VAT number?
Thread poster: IevaB

IevaB
Ireland
Local time: 21:18
Lithuanian to English
Sep 16, 2010

Just a quick question: did anyone ever had a problem when Translation agencies in EU refuse to pay for your services when/if you don't provide or don't have VAT number? If yes, how did you resolve this issue?

 

Williamson  Identity Verified
United Kingdom
Local time: 21:18
Flemish to English
+ ...
Self-employed. Sep 16, 2010

When you work as a self-employed/start a company and you surpass the VAT-treshold of your country. In Europe, this treshold differs from country to country, which at times causes problems with countries with a low treshold, like Italy and Spain.

 

Robert Rietvelt  Identity Verified
Local time: 22:18
Member (2006)
Spanish to Dutch
+ ...
Apply Sep 16, 2010

Just apply for a VAT- number, problem solved.

 

Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 22:18
Member (2005)
English to Spanish
+ ...
You have a business, apply for a VAT number! Sep 17, 2010

Solved.icon_smile.gif

 

Gillian Searl  Identity Verified
United Kingdom
Local time: 21:18
Member (2004)
German to English
According to this article: Sep 17, 2010

http://sallyramage.demonweb.co.uk/article%20p%20-%20EU%20enlargement%20and%20VAT.pdf

The VAT threshold in Lithuania is €29000
Gillian


 

Inga Petkelyte  Identity Verified
Portugal
Local time: 21:18
Lithuanian to Portuguese
+ ...
VAT in EU transactions ? Sep 17, 2010

As far as I know VAT is not applicable for cross-border transactions within the EU.

Ieva, just tell your client this and also tell you are not obliged to be subject to VAT unless you reach the fiscal threshold and ask on what legal grounds they are refusing to pay you (for there is no such grounds in any EU jurisdiction, as to my knowledge).


 

Dierk Widmann  Identity Verified
Germany
Local time: 22:18
English to German
VAT is currently a major headache (new reverse charge et al) Sep 17, 2010

Robert Rietvelt wrote:

Just apply for a VAT- number, problem solved.


I am not sure that solves anything.
Right now, I am having the mother of all bad times getting money out of a Spanish client.

Look at it this way: If I apply for a UK VAT Number, I then have to go through the rigmarole of extra accounting and inclusion of VAT in all my invoices, which would get me over the "payment threshold" of a few clients, to boot.
So, getting a VAT number for someone like me, who is wayyy below the VAT threshold for the country I reside in, could in effect result in me losing clients, and would definitely add to my admin workload, which, for a part-timer like me, is not really an option.

Maybe I am missing something here, but as I understand it, the client is paying VAT for me at their location, via the reverse charge system. However, according to EU web sources, non-taxable players like me ought not to be included in the reverse-charge thing, as they do not fall under the regulations anyway. So, getting a VAT number would make me taxable, and then I definitely am caught in the system.

Currently, I have sadly said good-bye to my Spanish client, who maintains that EVERYONE in Europe has to provide a VAT number right now (I refuse to believe this, but my days of understanding European Law lie a few years in the past), in order to be free at least of all the negatives that come with getting a VAT number here.
Needless to say, when I asked HMRC (our tax authority for VAT), they knew nothing of the whole business, and could not help me. So, unless I find a way of convincing the Spanish authorities that there is NO VAT due in my case, I have lost Spain as a viable source of income.

If anyone out there could explain it to me in such a way that I could reopen business in Spain without suffering the VAT headache in the UK, then I would gladly listen.

And Tomás, I know I can get a VAT number, but as stated above, that just causes more problems than it solves.

[Edited at 2010-09-17 12:29 GMT]


 

Charlie Bavington (X)  Identity Verified
Local time: 21:18
French to English
Some other threads Sep 17, 2010

Try these:
http://www.proz.com/forum/money_matters/153466-eu_vat_changes_as_of_1_jan_2010.html
http://www.proz.com/forum/money_matters/173296-vat_cant_issue_an_invoice_in_spain_without_vat_registration.html

Personally, I have opted to register voluntarily, but that suits my situation - if you have a lot of price sensitive, unregistered domestic clients for instance (who you will have to charge but who can't claim it back), then p'raps you can't.


 

JPW (X)  Identity Verified
Local time: 21:18
Spanish to English
+ ...
The rules changed back in January. Sep 17, 2010

Dierk Widmann wrote:

If anyone out there could explain it to me in such a way that I could reopen business in Spain without suffering the VAT headache in the UK, then I would gladly listen.


The VAT rules changed in January this year. This link has probably been posted elsewhere, but here it is again, from the horse's mouth, as it were. If the taxman himself don't know what's going on, then we're all snookered. Then again, the UK taxman has already screwed up recently with the P.A.Y.E. scheme, leaving a lot of people with unexpected tax bills to settle, so...don't hold your breath for too long, your lungs might pop.

http://www.hmrc.gov.uk/vat/managing/international/exports/services.htm

To quote one specific passage: "If you are in the UK and the place of supply of your service is in another EU country, the supply is outside the scope of UK VAT. However, for some supplies, you may need to register and account for local VAT in the country of supply. You will need to check with the tax authority in that country to find out how to treat the services you are supplying."

It all depends on how **place of supply** is defined.

Just because you are in one country and suuplying to another, you can't assume that the place of supply is your **own** office/living room/kitchen/bathroom/bedroom or whatever (delete as appropriate), 'cos it ain't that way at all no more. That's why the rules changed in the first place (sigh).

It may be the case that, as stated above, for some EU countries, you will need to register.

I agree it is causing a lot of (probably unintended) confusion, but when did they ever think of making it easy for us?

For the record, I am not VAT registered, but this is constantly under review. I am keeping an eye on things.

Hope this helps in some small way.

Regards,

JP.


 

Charlie Bavington (X)  Identity Verified
Local time: 21:18
French to English
Place of supply Sep 17, 2010

JPW wrote:
It all depends on how **place of supply** is defined.

Just because you are in one country and suuplying to another, you can't assume that the place of supply is your **own** office/living room/kitchen/bathroom/bedroom or whatever (delete as appropriate), 'cos it ain't that way at all no more. That's why the rules changed in the first place (sigh).



Place of supply for translation is, and was pre Jan 2010 AFAIK, the client's country (notice 741)

Being outside the scope of VAT, that meant (and means) that in fact in terms of turnover that counts towards the VAT threshold, supplies to the EU did not count, so you could earn well over 70k in total but as long as the non-EU portion was under 70k (or whatever the threshold is/was), you didn't have to register although did have to notify hmrc of the situation - there was a thread about this a year or two back.


 

Dierk Widmann  Identity Verified
Germany
Local time: 22:18
English to German
Resigned Sep 17, 2010


Hope this helps in some small way.


It depends on how you define the word "helps" here.icon_wink.gif

As I see it, I have the choice of registering in the UK and losing cash-sensitive clients, plus have the added admin, or of registering in Spain.
For a tiny business like mine, the latter is probably more hassle than it is worth, even if that client makes up about 15 % of my income... I should probably use past tense here.


 

Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 22:18
Member (2005)
English to Spanish
+ ...
What do the tax authorities say about it? Sep 18, 2010

Dierk Widmann wrote:
As I see it, I have the choice of registering in the UK and losing cash-sensitive clients, plus have the added admin, or of registering in Spain.
For a tiny business like mine, the latter is probably more hassle than it is worth, even if that client makes up about 15 % of my income... I should probably use past tense here.

But my friend, this situation is completely absurd. Having to give a customer away because of VAT sounds completely ridiculous. Why don't you actually go to the office of your tax authorities and chase them until they find a solution? There must be some way of doing things right. Maybe there is a certificate you can get from your tax authorities stating that you are below the tax threshold etc.


 

Thomas Pfann  Identity Verified
United Kingdom
Local time: 21:18
Member (2006)
English to German
+ ...
Links to similar discussions Sep 18, 2010

Tomás Cano Binder, CT wrote:
Why don't you actually go to the office of your tax authorities and chase them until they find a solution?


But why should my local tax authorities try and find a solution for a problem which is caused by my client (or their accountant) not knowing what to do?

There were a number of previous discussions on this topic. I myself am not yet 100% clear on it, but luckily I haven't had any problems so far. You may have seen those discussions already - but if not, they are worth having a look at as they contain some useful bits of information and some good pointers in the right direction:

This one focusses on the situation for UK-based translators: http://www.proz.com/forum/business_issues/178855-voluntary_vat_registration_in_the_uk.html

In this thread a number of colleagues who in the end opted for voluntary VAT registration describe their experience since registering. Apparently it is not much hassle at all. But of course, there may still be the risk of losing smaller, cash-sensitive clients, as pointed out by Dierk.

And this one should be similar to your situation, Dierk, as it is about a Spanish agency claiming not to be able to handle invoices from freelancers who are not VAT registered:
http://www.proz.com/forum/money_matters/173296-vat_cant_issue_an_invoice_in_spain_without_vat_registration-page2.html

It was suggested to add the following legal notes at the bottom of your invoice. I actually used this text in the one occasion where a client from Greece didn't accept my first invoice because there was no VAT. Once I had added this note and explained the situation the client checked with his accountant and was happy:

------------------------------------
- VAT exempt invoice in accordance with Article 196 of Council Directive 2006/112/EC. This service is subject to the VAT reverse charge.
- I do not have a VAT number in accordance with Article 214.2, Article 272.1 and letter d) of Council Directive 2006/112/EC.
- VAT exemption in accordance with UK law, HMRC Notice 700/1 (Apr 2010) Section 2 ff

------------------------------------

[Edited at 2010-09-18 09:36 GMT]


 

Ulf Samuelsson  Identity Verified
Mexico
Local time: 15:18
Member (2007)
English to Swedish
+ ...
VAT doesn't affekt your price level Sep 18, 2010

Dierk Widmann wrote:
"Look at it this way: If I apply for a UK VAT Number, I then have to go through the rigmarole of extra accounting and inclusion of VAT in all my invoices, which would get me over the "payment threshold" of a few clients, to boot.
So, getting a VAT number for someone like me, who is wayyy below the VAT threshold for the country I reside in, could in effect result in me losing clients, and would definitely add to my admin workload, which, for a part-timer like me, is not really an option."


It's true that a VAT registration does add some extra administrative paperwork, but it isn't anything that you could lose any clients for, unless you have normal citizens (not companies) as clients. The fact that you add VAT and a company pays that VAT to you doesn't signify any added cost for that company. The company just deducts that VAT amount from their total VAT payment to the tax authorities.

The fact that you add VAT only would affect any client who isn't a company, and those clients are really rare, I would think.


 

Tomás Cano Binder, BA, CT  Identity Verified
Spain
Local time: 22:18
Member (2005)
English to Spanish
+ ...
Makes total sense! Sep 19, 2010

Thomas Pfann wrote:
It was suggested to add the following legal notes at the bottom of your invoice. I actually used this text in the one occasion where a client from Greece didn't accept my first invoice because there was no VAT. Once I had added this note and explained the situation the client checked with his accountant and was happy:
------------------------------------
- VAT exempt invoice in accordance with Article 196 of Council Directive 2006/112/EC. This service is subject to the VAT reverse charge.
- I do not have a VAT number in accordance with Article 214.2, Article 272.1 and letter d) of Council Directive 2006/112/EC.
- VAT exemption in accordance with UK law, HMRC Notice 700/1 (Apr 2010) Section 2 ff

------------------------------------

Makes total sense to me! Thanks for the links and notes Thomas.


 


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