Spain - VAT laws
Thread poster: Stéphanie Denton
Stéphanie Denton  Identity Verified
United Kingdom
Local time: 11:20
French to English
+ ...
Dec 20, 2011

Hello all

I'm having issues getting a client to pay an invoice. Please read carefully, as it's not a case of them not wanting to pay the invoice, but a question of VAT.

I am VAT registered and based in the UK. The company is VAT registered, and based in Spain. I have their VAT number and all my invoices are done by an accountant with over 25 years of experience.

The company are asking me to put: « Exemption from VAT pursuant to Article 15(10) of Directive 77/388/EEC. Not VAT registered », however, my accountant is advising me to not put this as I shall get into trouble if HMRC come and look at my books/paperwork because I AM VAT registered.

Because we are both VAT registered, it automatically cancels out the VAT according to EU laws.

Payment was due on the 10th December, with a £25 late fee + 5% interest being due on the outstanding balance every 5 working days.

The company are refusing to pay the late fee and the interest as it is apparently my fault. The are also refusing to pay the invoice until I add the aforementioned term.

Advice anyone?

Thanks

Stéph



[Edited at 2011-12-20 16:36 GMT]


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Niina Lahokoski  Identity Verified
Finland
Local time: 13:20
Member (2008)
English to Finnish
+ ...
VAt number valid? Dec 20, 2011

Hi Stephanie,

asking you to add that statement in your invoice does seem odd.

Have you checked if the company's VAT number is actually valid?(http://ec.europa.eu/taxation_customs/vies/vieshome.do?selectedLanguage=EN)

If it isn't, you might be facing the same situation I had earlier this year. A (new) client gave me a VAT number which did not validate. After I told them, they sent me scans of several documents trying to "prove" the VAT number's validity. But since the number didn't validate in the system, I asked for a Spanish colleague's help in interpreting the documents, and it turned out none of them had anything to do with VAT, they were just about the agency's fiscal number. It seems they were trying to get away with not paying VAT. After having explained the situation (such as having to fill in a monthly VAT statement, which will be checked by tax officials) several times, in the end I actually got them to pay the invoice with VAT included. Haven't heard from them since.

[Edited at 2011-12-20 17:06 GMT]


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Alex Lago  Identity Verified
Spain
Local time: 12:20
Member (2009)
English to Spanish
+ ...
Look at the article Dec 20, 2011

Looking at the article they are quoting, the exemption they are asking for has to do with the type of company they are, they are claiming an exemption for

supplies of goods and services:

- under diplomatic and consular arrangements,

- to international organizations recognized as such by the public authorities of the host country, and to members of such organizations, within the limits and under the conditions laid down by the international conventions establishing the organizations or by headquarters agreements,

- effected within a Member State which is a party to the North Atlantic Treaty and intended either for the use of the forces of other States which are parties to that Treaty or of the civilian staff accompanying them, or for supplying their messes or canteens when such forces take part in the common defence effort.

So this does not have to do with them being VAT registered, if they do indeed fall within one of these cases, ask them if you can remove the "Not VAT registered" and just leave "Exemption from VAT pursuant to Article 15(10) of Directive 77/388/EEC." if they do I don't see any reason why you can't write that on the invoice.


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Parrot  Identity Verified
Spain
Local time: 12:20
Member (2002)
Spanish to English
+ ...
Only the first part applies Dec 20, 2011

Only the first part of their sentence applies, as you are VAT-registered. THEY expect to be exempted from UK VAT, that's all -- as I understand it.

They can look up your VAT number, just as you can look up their VAT number. They will be expected to pay VAT in Spain at the Spanish rate.


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Stéphanie Denton  Identity Verified
United Kingdom
Local time: 11:20
French to English
+ ...
TOPIC STARTER
General response Dec 20, 2011

Parrot wrote:

Only the first part of their sentence applies, as you are VAT-registered. THEY expect to be exempted from UK VAT, that's all -- as I understand it.

They can look up your VAT number, just as you can look up their VAT number. They will be expected to pay VAT in Spain at the Spanish rate.


Hi everyone

Thanks for your input.

I have looked up their VAT number and they are indeed VAT registered.

I have tried numerous times telling them that I am VAT registered, and that, by law, I cannot state that I am not VAT registered and can I put just the first part, and they're refusing to pay until I put exactly what they want.

I'm stuck as I don't know what to do. I can get my money, and risk getting a hefty fine from HMRC if they come and check me out, or I can just not get paid...


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Parrot  Identity Verified
Spain
Local time: 12:20
Member (2002)
Spanish to English
+ ...
I don't get it Dec 20, 2011

As long as you charged them 0% VAT and gave a valid UK VAT number, it's supposed to be okay.

At the end of January, they go to the tax office with your VAT number in their accounting of intracommunity transactions and that counts as the entry for their 349 declaration. (Tell them). (Of course, it'll have to square with their VAT accounts, but that's their problem).

The sentence isn't even necessary. All the tax office needs is to see the 0% and the UK VAT number.


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Jennifer Gray  Identity Verified
Spain
Local time: 12:20
Member (2008)
Spanish to English
+ ...
Agree with Parrot Dec 21, 2011

If it's any help, I have had the reverse situation, i.e., I am based in Spain and pay VAT (IVA) as a self employed worker. I have worked for clients in Ireland, for example, and also France, who ask for an invoice without VAT. I asked my tax adviser on this and he said it was standard practice - it is up to you to declare and pay the VAT in your country, and up to your client to declare and pay the VAT in theirs.

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Christine Schmit  Identity Verified
Luxembourg
German to French
+ ...
Article 15(10) of Directive 77/388/EEC Dec 21, 2011

As Alex said, read Article 15(10) of Directive 77/388/EEC carefully. If your client is neither a diplomatic mission, an international organisation nor related to NATO, then it does NOT apply to them. If they are a commercial company and they have a valid Spanish VAT number, then they can NOT claim to be exempt under this article and you risk getting in trouble with the VAT authorities in your country, and they risk getting in trouble with the Spanish authorities, if you put this on your invoice. Listen to your accountant!

I have one client who is exempted from VAT under this article, they are an EU body.
They have to forward my invoices, once they are paid, to the national VAT authorities, with a certificate confirming that they are indeed exempt from VAT under this article and I then receive a copy of it, stamped by the VAT authorities. In my VAT return, the income derived from this client goes into a separate field, as special rules apply to them. This is not the same as an intracommunity transaction between two entities who are registered for VAT.

My theory is that the end-client (the Spanish company's client) is an entity that is exempt under this article (EU institution or such) and that the end client has instructed the Spanish company to put this on their invoices to them (which would be correct). Your Spanish client probably does not have a lot of experience dealing with this (or a bad accountant), so they instructed you to do the same, which is absolutely wrong as your client is the Spanish company and not their end-client.

If I were you, I would tell the Spanish company that you need proof that they are indeed VAT exempt under the article they claim and that, if they can't provide this proof (which they certainly can't since they have a VAT number and are apparently not a diplomatic mission nor an international organisation), it would be illegal for you to put this on your invoice (which it is). You have to issue your invoice as you usually do for intracommunity clients who are VAT-registered.

As a very last resort, if they still insist that you have to put this article on your invoice, but they can't prove that they are exempted under this article, you could threaten to denounce them to the Spanish VAT authorities for tax fraud (although I don't think they are trying to commit fraud, they are probably just totally clueless as to their tax obligations.)


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Stéphanie Denton  Identity Verified
United Kingdom
Local time: 11:20
French to English
+ ...
TOPIC STARTER
Have read the article... Dec 21, 2011

Christine Schmit wrote:

As Alex said, read Article 15(10) of Directive 77/388/EEC carefully. If your client is neither a diplomatic mission, an international organisation nor related to NATO, then it does NOT apply to them. If they are a commercial company and they have a valid Spanish VAT number, then they can NOT claim to be exempt under this article and you risk getting in trouble with the VAT authorities in your country, and they risk getting in trouble with the Spanish authorities, if you put this on your invoice. Listen to your accountant!

I have one client who is exempted from VAT under this article, they are an EU body.
They have to forward my invoices, once they are paid, to the national VAT authorities, with a certificate confirming that they are indeed exempt from VAT under this article and I then receive a copy of it, stamped by the VAT authorities. In my VAT return, the income derived from this client goes into a separate field, as special rules apply to them. This is not the same as an intracommunity transaction between two entities who are registered for VAT.

My theory is that the end-client (the Spanish company's client) is an entity that is exempt under this article (EU institution or such) and that the end client has instructed the Spanish company to put this on their invoices to them (which would be correct). Your Spanish client probably does not have a lot of experience dealing with this (or a bad accountant), so they instructed you to do the same, which is absolutely wrong as your client is the Spanish company and not their end-client.

If I were you, I would tell the Spanish company that you need proof that they are indeed VAT exempt under the article they claim and that, if they can't provide this proof (which they certainly can't since they have a VAT number and are apparently not a diplomatic mission nor an international organisation), it would be illegal for you to put this on your invoice (which it is). You have to issue your invoice as you usually do for intracommunity clients who are VAT-registered.

As a very last resort, if they still insist that you have to put this article on your invoice, but they can't prove that they are exempted under this article, you could threaten to denounce them to the Spanish VAT authorities for tax fraud (although I don't think they are trying to commit fraud, they are probably just totally clueless as to their tax obligations.)


...and your post was a lot clearer than the article Christine, let's say that!

Apparently ALL their translators put this on their invoices, and that I am the only person to ever say anything about it.

I think the threat may have to be the only way...although I hope it won't come to that. But...if they're cheating the system, something needs to be done!


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Stéphanie Denton  Identity Verified
United Kingdom
Local time: 11:20
French to English
+ ...
TOPIC STARTER
Update Dec 22, 2011

They're now ignoring my e-mails. So I've given them till this afternoon to respond, and pay, including the late fee and the interest, otherwise I'll post on the Blue Board and the Hall of Fame and Shame, plus will inform the Spanish authorities. Hopefully this will get them moving.

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Cecile Trotin  Identity Verified
Spain
Local time: 12:20
English to French
VAT Dec 27, 2011

Jennifer Gray wrote:

If it's any help, I have had the reverse situation, i.e., I am based in Spain and pay VAT (IVA) as a self employed worker. I have worked for clients in Ireland, for example, and also France, who ask for an invoice without VAT. I asked my tax adviser on this and he said it was standard practice - it is up to you to declare and pay the VAT in your country, and up to your client to declare and pay the VAT in theirs.


As stated by Jennifer and Parrot, and as confirmed by my accountant some time ago, VAT should not be charged on the invoice if the customer can provide a valid European VAT number which seems to be your case. I did not know why but Jennifer's explanation seems reasonable. If the customer cannot provide this number, then the VAT should be charged.

Unless my accountant is wrong, your customer should not be charged the VAT.

However, I don't understand why they ask you to write « Exemption from VAT pursuant to Article 15(10) of Directive 77/388/EEC. Not VAT registered » on their invoice.

On such invoices where I don't charge the VAT because of what I explained above, I just include the customer's VAT number and that's it and it seems to be enough.

Hope this helps.


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Stéphanie Denton  Identity Verified
United Kingdom
Local time: 11:20
French to English
+ ...
TOPIC STARTER
Didn't put VAT Dec 27, 2011

ccely wrote:

Jennifer Gray wrote:

If it's any help, I have had the reverse situation, i.e., I am based in Spain and pay VAT (IVA) as a self employed worker. I have worked for clients in Ireland, for example, and also France, who ask for an invoice without VAT. I asked my tax adviser on this and he said it was standard practice - it is up to you to declare and pay the VAT in your country, and up to your client to declare and pay the VAT in theirs.


As stated by Jennifer and Parrot, and as confirmed by my accountant some time ago, VAT should not be charged on the invoice if the customer can provide a valid European VAT number which seems to be your case. I did not know why but Jennifer's explanation seems reasonable. If the customer cannot provide this number, then the VAT should be charged.

Unless my accountant is wrong, your customer should not be charged the VAT.

However, I don't understand why they ask you to write « Exemption from VAT pursuant to Article 15(10) of Directive 77/388/EEC. Not VAT registered » on their invoice.

On such invoices where I don't charge the VAT because of what I explained above, I just include the customer's VAT number and that's it and it seems to be enough.

Hope this helps.


Hi

I didn't charge VAT, we have software which auto;apically sets the VAT rate on an invoice according to the details we enter. I put the VAT number into the system, so 0% VAT was charged and the invoice was generated with no VAT...


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Spain - VAT laws

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