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Non VAT registered UK writer contracting Spanish translator VAT?
Thread poster: HankCannon
HankCannon
United Kingdom
Sep 15, 2014

Hi everyone,

I've read a few of the posts on here about contracting of services in the EU, but I'm still unclear.

I'm a UK based writer, self employed but not VAT registered, and I would like to pay someone in Spain to translate my books for me. Apparently they need my VAT number before they can invoice me. Does anyone know whether I need to provide this, or whether there is something she can put on the invoice so she doesn't have to charge me VAT?

TIA

Hank


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Tim Drayton  Identity Verified
Cyprus
Local time: 17:18
Turkish to English
+ ...
I think you have to pay VAT Sep 15, 2014

I can't speak for Spain, but I am VAT registered in Cyprus, and my accountants here tell me that I must add VAT when billing non-VAT registered clients in other EU countries. I think you have to pay VAT.

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HankCannon
United Kingdom
TOPIC STARTER
in response Sep 15, 2014

Tim, thank you for your help. I need to know specifics about Spain and the UK as the UK has a threshold before paying VAT. Is anyone else in this situation or have specific experience? The Spanish authorities have told my translator that she needs a VAT number from me, so I know what they are asking for, but I'm not entirely sure this is the case with the threshold being as it is in the UK.

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Michael Wetzel  Identity Verified
Germany
Local time: 16:18
German to English
She shouldn't need a VAT number Sep 15, 2014

For the purposes of VAT, you count as a private inner-EU customer. The translator does not need a VAT number from you, but he or she does need to charge you Spanish VAT, just as in the case of any other private inner-EU (or Spanish) client.

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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
The Spanish business must bill Spanish VAT Sep 15, 2014

The EU has a long explanation about VAT on cross-border supplies on http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/vat_on_services/index_en.htm#supply_services but they carefully avoid the case where the buyer is a non-VAT registered business. The HMRC guides I found also carefully avoided the question of non-VAT registered businesses.

However, I found this on http://www.brighton-accountants.com/france/reverse-charging-uk/ :

"If the UK business is not registered for VAT, there is no reverse charge to apply. French TVA may be charged, and additionally the value of the service will be included in the turnover of the UK business in determining whether it needs to register for UK VAT."

In that case, the Spanish business does not need a VAT number. Quite obviously, they cannot get a VAT number for a non-VAT registered business. They cannot use the reverse charging procedure (that means that you'd have had to account for the VAT in the UK) when you have no way of accounting for the UK VAT.

Whether it is Spain or France seems quite irrelevant, as VAT legislation works at EU level, although there could be a few national options. The point is that VAT must be paid one place or another. Since you are not VAT-registered, you cannot deduct VAT; i.e. you have to pay VAT on all supplies.

When you decided whether or not to register for VAT, I presume you calculated that the cheapest option was to pay VAT on supplies and not having to collect VAT from private customers. If your customers, on the other hand, are mainly VAT-registered businesses in the EU or non-EU customers in general, however, it might have made more sense to register for VAT so you could recover VAT paid on expenses. The fact that you don't have to register for VAT below a certain turnover doesn't mean that it's always a good idea not to register for VAT.


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2G Trad  Identity Verified
Italy
Local time: 16:18
Member (2000)
English to Italian
+ ...
Reverse charge mechanism Sep 15, 2014

Michael Wetzel:
For the purposes of VAT, you count as a private inner-EU customer. The translator does not need a VAT number from you, but he or she does need to charge you Spanish VAT, just as in the case of any other private inner-EU (or Spanish) client.


Correct.

VAT registered EU businesses are not VAT charged directly by their EU suppliers, but are charged locally (in the client's member state, under the provisions of reverse charge mechanism).

Private (non businesses or non VAT registered businesses) clients are VAT charged based on the VAT rate of the supplier's member state.

Cheers
Gianni


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Helena Chavarria  Identity Verified
Spain
Local time: 16:18
Member (2011)
Spanish to English
+ ...
A previous thread Sep 15, 2014

This is what I posted in a previous thread:

I live in Spain and I had to invoice an agency in the UK that does not reach the VAT threshold. I'm copying and pasting what my tax advisor told me to include in the invoice:


De acuerdo Helena si en UK no le obligan a estar inscrito en el VAT, puedes hacerle la factura sin IVA-

Recuerda poner en la factura la coletilla.

De acuerdo con el art. 69 de la Ley del IVA no se repercute el IVA por ser el cliente un empresario residente en otro estado miembro del la U.E.

Which I translated as: 'Pursuant to Article 69 of Law 37/1992 (Spanish VAT Law), the transaction is not subject to Value Added Tax because the client resides in another member state of the EU'


http://www.proz.com/forum/translation_in_spain_la_traducción_en_españa/271924-spanish_client_has_problems_because_i_dont_charge_vat.html#2319691


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HankCannon
United Kingdom
TOPIC STARTER
continued Sep 15, 2014

Hi everyone,

Thank you for your rapid and informative answers. I'm still confused however.

1) I don't need to provide a VAT number, but I do have to pay VAT (this seems to be what Gianni, Thomas, Michael and Tim are suggesting - correct me if i'm wrong)
2) I don't need to provide a VAT number, and I don't have to pay VAT (Helena's post with advice from her gestor)

I must admit I have no idea about VAT - I'm not registered, simply because I haven't reached the threshold. I sell ebooks online and have customers for my business all over the world. Not sure how VAT would come into that.


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Tim Drayton  Identity Verified
Cyprus
Local time: 17:18
Turkish to English
+ ...
Not an expert, but ... Sep 15, 2014

HankCannon wrote:

Tim, thank you for your help. I need to know specifics about Spain and the UK as the UK has a threshold before paying VAT. Is anyone else in this situation or have specific experience? The Spanish authorities have told my translator that she needs a VAT number from me, so I know what they are asking for, but I'm not entirely sure this is the case with the threshold being as it is in the UK.


Point taken, but these are EU rules rather than national rules and I doubt if they vary from EU-member country to country. If I invoice a client in the UK, and they are not VAT registered, I have to add VAT at the rate applicable in Cyprus.

Quite a few countries have VAT thresholds, including Cyprus, but this is a voluntary matter. Your turnover can be below the VAT threshold, but you may nevertheless elect to register for and pay VAT. There are certain advantages and disadvantages to not registering, and one of the disadvantages is that you have to pay VAT on invoices from other EU countries (as far as I can see).

However, as I said above, I am not an expert and could be wrong. This is really information you need to get from the tax authorities or an accountant.


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
You're not VAT registered because you have chosen not to VAT register Sep 15, 2014

HankCannon wrote:

I'm not registered, simply because I haven't reached the threshold.


You're not VAT registered because you have chosen not to register for VAT. As others have explained, you always have the option of registering for VAT regardless of your reaching that threshold or not. Whether to do that or not is your own decision, either based on reducing paperwork or a calculation to find out which option is the cheapest for you. If you mainly sell to private customers, not registering may well be the cheapest.

But yes, the cross-border rules can be very confusing. I'd just found a VAT Guide written by the EU:
http://ec.europa.eu/enterprise/sectors/tourism/tourism-business-portal/documents/business/financing/european-value-added-tax.pdf

I haven't found the answer yet, but I may need to know myself one day, so I'm still looking.

By the way, since you said you sell e-books, you ought to be aware that the EU has recently changed the VAT rules for electronic services to the effect that the company selling such services (services requiring individual work, like translation and legal services, are not concerned) must now account for VAT in the countries where the customers are, even private customers (previously, VAT was accounted for in the seller's country). How non-VAT registered businesses must apply these new rules, I don't know, but you ought to get an accountant involved in this to avoid expensive mistakes.


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writeaway  Identity Verified
French to English
+ ...
Ring the VAT office Sep 15, 2014

or ask a specialized accountant. Imo it's the surest way to access (hopefully) accurate information.

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HankCannon
United Kingdom
TOPIC STARTER
chosen not to register Sep 15, 2014

thank you for clarifying that distinction Thomas. Thank for the attachment too. Another question - do i need to pay for the VAT for this service anyway, regardless of whether I am VAT registered? I'm not sure how the whole things works.

The ebooks are sold through Amazon - i'm not sure if that makes a difference to my reporting status.


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Thomas T. Frost  Identity Verified
Member (2014)
French to Danish
+ ...
Amazon Sep 15, 2014

I still haven't found any official information about how non-VAT registered persons are supposed to be handled. That EU Guide does not tell us.

The e-books sold on Amazon, are they sold by Amazon (and you get a cut of the sales as royalties), or are you the seller and Amazon an intermediary (like it is the case for Marketplace sellers)? You need to sort that out. Amazon has many explanatory articles about these things.


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Sheila Wilson  Identity Verified
Spain
Local time: 15:18
Member (2007)
English
+ ...
Choose your translator carefully? Sep 15, 2014

That could be the best option for you. I'm sure there are many EN > ES translators living in the UK and not registered for VAT themselves. Or look for a Spanish translator living in a Spanish-speaking country outside the VAT zone, though you'd have to be careful about variant (do you really need Spanish from Spain or would the Mexican or another variant be OK?). Then again, you could look for a translator here in the Canary Islands. Although we're part of Spain, and in the euro zone, we aren't in the VAT zone. Similar rules apply in the Channel Islands. It makes for a more complicated but less expensive life.

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HankCannon
United Kingdom
TOPIC STARTER
Thanks Sep 15, 2014

sold by Amazon and I get a cut of the royalties. I'm not a market place seller.

One thing I'm not clear about, if I register for VAT in the UK, do I have to pay VAT at all?
If I'm not VAT registered, and the translator can invoice me and adds the VAT and I pay it, is that amount tax deductible?

Thanks again for everyone's help


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