Client´s VAT when he is moving from one country to another
Thread poster: Cristina Fernández

Cristina Fernández  Identity Verified
Spain
Local time: 03:32
Member (2008)
English to Spanish
+ ...
Jun 13, 2012

Hello everyone!

One of my regular clients has recently moved from Hungary to the United Kingdom. He has asked me to amend the last invoice I sent him with the new address details, but he has also asked me not to use his usual VAT number anymore because he is currently waiting for a tax code in the UK and, according to him, he doesn´t need to have a VAT number as yet. He´s asked me to send an amended invoice without VAT number.
What do you think?
Should I charge him VAT or not?

Thanks in advance!

Cristina


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The LT>EN Guy  Identity Verified
United Kingdom
Member (2007)
Lithuanian to English
Yes. Jun 13, 2012

In many EU countries VAT numbers are not obligatory until you reach a certain threshold in turnover, so your client is right about not having to have a VAT number. Actually, even if a client does have a VAT number, as far as I know, there is not a universal obligation for clients to provide their VAT numbers to suppliers. However, if a client does not have a VAT number or chooses not to report it to you, they should not be surprised that they will have to pay VAT out of their own pocket without any possibility to have it refunded (of course, this is assuming that you have a VAT number yourself).

If an intracommunity client has a VAT number and reports it, the place of supply of services is that client's country, which makes the VAT the client's problem (they have to apply the reverse-charge mechanism). In this case, you verify their number on VIES and write it on the invoice. This part, I am sure, you are familiar with. Now, if an intracommunity client does not have a VAT number or they do not report it to you, the place of supply of services is your own country. This being the case, you charge your country's VAT to the client, and dealing with the VAT becomes your problem.


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Cristina Fernández  Identity Verified
Spain
Local time: 03:32
Member (2008)
English to Spanish
+ ...
TOPIC STARTER
Thanks! Jun 13, 2012

The thing is he´s founded a new company in the UK and, although he has always reported his VAT number for invoicing purposes, now he´s asking me to invoice without VAT (his) number and not to charge him VAT because he´s waiting for a new one in the UK. Once he gets the new tax code he would report it to me.

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Attila Piróth  Identity Verified
France
Local time: 03:32
Member
English to Hungarian
+ ...
Earlier thread Jun 13, 2012

Hi Cristina,

Take a look at an earlier relevant thread that may contain useful details: details
http://www.proz.com/forum/business_issues/148855-eu_customers_with_national_vat_numbers:_should_vat_be_charged.html

It seems to me that your client already has the status of "taxable person" in the UK, in which case either the reverse charge procedure applies, or he is exempt of VAT. In either case, he should not pay any VAT to you.

But perhaps the easiest is to wait with issuing the invoice until he has sorted out the administrative issues. If he is a good client of yours, and if you can afford waiting for the money, sparing him the extra administrative hassle may be a step that he will particularly appreciate.

Charging an extra VAT when it is most probably unjustified would certainly not enhance his customer experience...

Best,
Attila


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The LT>EN Guy  Identity Verified
United Kingdom
Member (2007)
Lithuanian to English
... Jun 13, 2012

He is asking you to not charge VAT? He should ask the Hazienda! Perhaps when he goes to the store, he should also tell them to not charge him VAT...
On a serious note, however, you can't do that. You are the provider of the service, and you have a VAT number. End of the story. The only exception is VAT-exempt clients such as embassies, etc. Also, clients outside of the EU are not subject to VAT. Whether an intracommunity client has or does not have a VAT number makes no difference. The transaction is still taxable.

Here is one possible solution, though. If Spanish accounting law permits this, you could simply not invoice him immediately. Invoice him on a later date once he has gotten a VAT number. The fact that you already issued an invoice, however, is probably a bit of a legal problem. To make sure you do it correctly, you should check with an accountant regarding regulations for cancelling invoices.
Of course, you are under no obligation to go to such lengths for your client. His international relocation was poorly planned, and this is in no way your problem. Why should you be bending over backwards to solve his VAT mess?

Also, from your initial post, it seemed to me that your client is waiting for a general taxpayer ID, but is not even intending to apply for a VAT number for now.

If I were in such a situation, I would reply to him explaining that VAT must always be paid (his status only makes a difference with regard to whether and how he can reclaim the said tax), and suggest to him to consult a British tax adviser to see if there is anything at all he can do to reclaim the VAT that he has to pay to you. The fact that he has to pay it is not something that can be negotiated. This is imposed by the government. Either he pays it, or you will pay it yourself and also get fined for improper accounting.


[Edited at 2012-06-13 22:51 GMT]

[Edited at 2012-06-13 22:57 GMT]


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The LT>EN Guy  Identity Verified
United Kingdom
Member (2007)
Lithuanian to English
not quite Jun 13, 2012

Attila,

Being a taxable person does not necessarily make you liable to charge VAT. Pretty much everyone is subject to direct taxation. Whether a business (or a self-employed person) is obliged to have a VAT number depends on the country. In some of the Member States, a you must have a VAT number. In others, there is a threshold in turnover during the last 12 months. Once you hit the limit, you must get a VAT number. If you don't, you don't have to (but you can) get it.

My point being that if the client doesn't apply for a VAT number and get it pretty soon, he absolutely must pay Spanish VAT. Otherwise, yes, Cristina could wait until he sorts his stuff out before invoicing him.

[Edited at 2012-06-13 22:54 GMT]

[Edited at 2012-06-13 22:59 GMT]


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Annamaria Amik  Identity Verified
Local time: 04:32
Romanian to English
+ ...
Must charge VAT now or wait Jun 14, 2012

TransLithuanian wrote:

My point being that if the client doesn't apply for a VAT number and get it pretty soon, he absolutely must pay Spanish VAT. Otherwise, yes, Cristina could wait until he sorts his stuff out before invoicing him.


Absolutely. Cristina as a VAT taxpayer in her own country is obliged to charge VAT unless the other EU client provides a valid VAT number verifiable in the VIES, in which case the place of performance is the client's seat and that's where VAT shall be paid. There's no way you can bypass this based on promises or earlier experience with the client. The law is the law, and a tax control will impose a fine on her and force her to pay VAT on those services that were not exempt from VAT at the time she provided them.

Moreover, the law here (Romania) states that one must apply for an EU VAT number BEFORE requesting or providing services/products to clients in other EU states. Over here, you can get it in a few days, a week or ten days tops, so it is not that much of a hassle.


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Niina Lahokoski  Identity Verified
Finland
Local time: 04:32
Member (2008)
English to Finnish
+ ...
Client location at the date of issuing the invoice? Jun 14, 2012

I find it a bit odd that the client did not inform you of their change of country beforehand. When does/did the move officially take place?
As far as I know, if the client was still registered to the previous country at the time you issued the invoice, there is no reason to amend the invoice now, because the old VAT number was still valid at that time.

If the move happened before you issued the invoice, then, like others already suggested, it might be best to wait until the client has sorted things out.

[Edited at 2012-06-14 11:42 GMT]


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