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VAT or no VAT? Intracommunitary invoice with non-VIES NGO
Thread poster: fr54ert
Apr 19, 2012

Hello EU tax experts,

This forum always seem to be my last hope Google, tax office phone call and prior experience aren't creating common sense, therefore my question here.

BACKGROUND
I work as an autonomo (freelancer) in Spain, I have a EU-VAT number -> I am in the VIES register.

Usually, for EU business clients (companies) I do not charge VAT if they can provide a valid EU-VAT number -> if their number is valid in the VIES.

PROBLEM
Now, I have an EU client, that is registered as a NGO (non-governmental organisation). They have a valid business registration number, but aren't registered in the VIES.

QUESTION
Do I have to charge VAT? Or does VAT exempt invoice in application to article 196 in CD 2006/112/EC as amended by CD 2008/8/EC still apply? So still a service subject to the VAT reverse charge or not?

Thanks a lot and sunny greetings from Spain,


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fr54ert
TOPIC STARTER
Further info on client biz number Apr 19, 2012

They have a valid business registration number, but aren't registered in the VIES


Client provided me a number BE0XXXXXXXXX. This is a valid number when checking the Belgian national business register, the client appears as

National No / VAT No: XXXXXXXXX (without BE, without the 0)
Name / Business name: XXXXX
State of the entity: Active company
Legal form: Non-profit association

However, when checking the number at the EU VIES, it appears as invalid.

Hope this helps. Thanks so much,


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Anne Pinaglia
Netherlands
Local time: 21:53
Member (2011)
Italian to English
+ ...
My guess Apr 19, 2012

Is that they are VAT exempt. I would double check with them to make sure so there is no confusion.

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fr54ert
TOPIC STARTER
VAT exempt? Apr 19, 2012

Thanks so much. What would it mean if they were VAT exempt? That I charge VAT? Or I do not charge and refer in my invoice to the Commission's Directive, reverse-charge?

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Emma Goldsmith  Identity Verified
Spain
Local time: 21:53
Member (2010)
Spanish to English
My guess Apr 19, 2012

is that you should charge VAT, but I definitely recommend ringing the Tax Office to see what they think (901 335533).

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fr54ert
TOPIC STARTER
I went to the Hacienda already, but Apr 19, 2012

I have received inconsistent information. It always depends on which colleague I ask (Madrid - I talked to at least 3 persons, 3 interpretations).

My understanding is:

EU-client, valid VIES VAT number, reverse-charge applies (=no VAT in my invoice to client).

Any other constellation requires me to charge VAT.


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Sheila Wilson  Identity Verified
Spain
Local time: 20:53
Member (2007)
English
+ ...
What do the NGO have to say? Apr 19, 2012

Anne and Paolo Boidi wrote:
Is that they are VAT exempt. I would double check with them to make sure so there is no confusion.


I imagine they are in the best position to know. What do their other invoices look like? Maybe they won't show you but they must know whether other EU service providers charge them VAT

Sheila


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fr54ert
TOPIC STARTER
ngo doesnt have a clue... Apr 19, 2012

...because they never dealt with international biz partners before.

To be on the "safe" side, I think I will charge VAT. Also, because I read somewhere else here that the Spanish Tax office also checks the EU VAT numbers I put in the so called 349 tax form that lists all EU-biz partners activities by putting the EU VAT number there. And if one number doesnt work, than the tax office will get back to me.

Thoughts?

Thanks everybody,


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Attila Piróth  Identity Verified
France
Local time: 21:53
Member
English to Hungarian
+ ...
Several possibilities Apr 19, 2012

Hi "fr54ert"

If you are VAT registered, then they would need a European or a national VAT number to be VAT exempt in cross-border service transactions. Otherwise the applicable rate depends on whether the client is a taxable person or not. Most probably they are - in this case the country of supply is their country, and the applicable VAT rate is the one in their country, and the reverse charge procedure applies. See a detailed description in this thread:
http://www.proz.com/forum/business_issues/148855-eu_customers_with_national_vat_numbers:_should_vat_be_charged.html

Best,
Attila


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fr54ert
TOPIC STARTER
reply to Attila Apr 19, 2012

Thanks Attila.

I agree, VAT exempt only if they have a EU VAT no, too.

However, this still does not clarify completely the issue, because the client provided a valid vat number, that has the same structure as EU VAT numbers. The provided no is valid if checked on their national biz register database, but not valid if checked on the VIES website.

This discussion shows that there are so many different interpretations of the Directives - and even Hacienda & Co do not have an unique answer - see my prior posts.

Anyway, thanks all for your support. As always, this forum is just the best when it comes to this kind of issues.

I will charge the client with VAT to avoid in the long run problems with Spanish Tax Office just in case they run validity checks on EU VAT numbers provided for intra-community biz transations.


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Attila Piróth  Identity Verified
France
Local time: 21:53
Member
English to Hungarian
+ ...
You should NOT charge VAT in that case Apr 19, 2012

Hi again,

This case is mentioned in the linked post. The expert from the European Commission DG Taxation and Customs Union 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.


If you make your client pay Spanish VAT (when they clearly should not), they will not be able to claim it on their tax return form.

Best,
Attila


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neilmac  Identity Verified
Spain
Local time: 21:53
Spanish to English
+ ...
No VAT, nada Apr 20, 2012

I'm based in Spain and I don't charge VAT to any clients from outside of Spain. In general, NGOs tend to be VAT exempt anyway AFAIK. I just keep a separate list of bills issued without VAT and declare them at the end of the year. Never had any problems so far (touch wood).

My advice is NOT to ask at Hacienda, because the information you get will vary depending on who attends your query. It is usually better to ask a gestor or tax accountant and even though you have to pay them, it still works out cheaper (and less enervating) for me than going all the way into the tax office and standing in queues only to be told I'm in the wrong place or need to go elsewhere for a form or stamp or some other thing I happen not to have with me...


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neilmac  Identity Verified
Spain
Local time: 21:53
Spanish to English
+ ...
Au contraire Apr 20, 2012

Emma Goldsmith wrote:

is that you should charge VAT, but I definitely recommend ringing the Tax Office to see what they think (901 335533).


My advice is exactly the opposite. I have NEVER managed to get any useful information by phone from Hacienda. They seem to specialise in complicating things and giving conflicting information, at least in my own case.


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neilmac  Identity Verified
Spain
Local time: 21:53
Spanish to English
+ ...
This is more like it Apr 20, 2012

Attila Piróth wrote:

Hi again,

This case is mentioned in the linked post. The expert from the European Commission DG Taxation and Customs Union 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.


If you make your client pay Spanish VAT (when they clearly should not), they will not be able to claim it on their tax return form.

Best,
Attila


This is the most helpful and detailed explanation I've seen do far.


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Paul Skidmore  Identity Verified
Germany
Local time: 21:53
German to English
Are NGOs taxable persons? Apr 20, 2012

Attila quotes the advice from DG Taxation and Customs.

On my understanding, from the perspective of EU law, what is crucial in that statement is that the reverse charge procedure applies if the customer in another Member State is a taxable person.

I am not sure why various posters are assuming that NGOs are necessarily taxable persons.

Under the heading, "What is a taxable person?" the Commission writes on its website:

"For VAT purposes, a taxable person is any individual, partnership, company or whatever which supplies taxable goods and services in the course of business."

This reproduces what is stated in Article 9(1) of Directive 2006/112.

My experience is that many NGOs, charities, think-tanks, universities, etc are not taxable persons because they are not businesses. Sometimes they have a trading arm which does operate as a business.

In addition, the fact that an organisation may have a legal (corporate) form which is registered on the companies register (or something similar in the relevant Member State) does not mean that they operate as a business and are thus a taxable person.

The information provided by the original poster does not make it clear whether his/her customer - although they have some sort of national registration number - is in fact a taxable person for VAT purposes.

I do not know how the Spanish authorities deal with this. However, from an EU perspective, I think it is clear that unless you are sure that your customer in another Member State is a taxable person for VAT purposes you should include VAT on your invoices as you will be liable for paying this tax.

HTH Paul


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