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Service providers outside EU be aware
Thread poster: Kenji Yamaguchi

Kenji Yamaguchi  Identity Verified
Japan
English to Japanese
+ ...
Mar 4, 2015

I just come across that some companies try to charge service providers outside EU with European VAT. Please be aware that as a non-European resident service provider, you should not be charged European VAT if you don't have your own VAT number.

[Edited at 2015-03-04 13:15 GMT]


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564354352  Identity Verified
Denmark
Local time: 00:44
Danish to English
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Depends on the tax system in the individual EU country Mar 5, 2015

A blanket statement like this one is not helpful to those of us who are subject to different taxing systems...

In Denmark, most translators are VAT-registered, as the threshold is very low. The rules are not all that complicated, although even Danish translators discuss them from time to time.

However, if you provide translation services to a non-EU client, AND the end product (i.e. the translation) is to be used in Denmark, you HAVE to charge VAT.


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Samuel Murray  Identity Verified
Netherlands
Local time: 00:44
Member (2006)
English to Afrikaans
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@Gitte Mar 5, 2015

Gitte Hovedskov, MCIL wrote:
However, if you provide translation services to a non-EU client, AND the end product (i.e. the translation) is to be used in Denmark, you HAVE to charge VAT.


I think Kenji refers to clients who are in e.g. Denmark, who deduct VAT from the money that they pay translators in Japan... not translators who are in Denmark who charge VAT from clients in Japan.


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564354352  Identity Verified
Denmark
Local time: 00:44
Danish to English
+ ...
How is that logical in any way? Mar 5, 2015

Samuel Murray wrote:

I think Kenji refers to clients who are in e.g. Denmark, who deduct VAT from the money that they pay translators in Japan... not translators who are in Denmark who charge VAT from clients in Japan.


???


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Tina Vonhof  Identity Verified
Canada
Local time: 16:44
Member (2006)
Dutch to English
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Mar 5, 2015



[Edited at 2015-03-05 18:29 GMT]

Do you mean that European agencies withhold their VAT from the pay to a non-European translator? No, I don't think they should be able to do that. I have worked for European translation agencies and none of them has ever done that to me (but I would protest if they did).




[Edited at 2015-03-05 19:01 GMT]


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Kenji Yamaguchi  Identity Verified
Japan
English to Japanese
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TOPIC STARTER
VAT Mar 5, 2015

VAT is a tax on goods and services used in the EU, so if services are exported outside the EU, VAT isn’t charged.

If you are based in the EU and sell services to someone in another EU country, who isn’t VAT registered, you charge VAT in the normal way.

However, if you’re selling your services to someone who is VAT registered in the destination EU country, VAT isn’t charged.


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564354352  Identity Verified
Denmark
Local time: 00:44
Danish to English
+ ...
Still not correct in all cases Mar 6, 2015

Kenji Yamaguchi wrote:

VAT is a tax on goods and services used in the EU, so if services are exported outside the EU, VAT isn’t charged.


As I said before, this is not true in all cases. It is not true in Danish tax legislation, so it may also not be true in other EU countries' tax legislation. I have no knowledge of tax legislation in other EU countries, and I definitely wouldn't offer a blanket statement like the one above. The EU consists of quite a few individual countries, with the same number of individual legislative regulations beside common EU legislation.


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Samuel Murray  Identity Verified
Netherlands
Local time: 00:44
Member (2006)
English to Afrikaans
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Let's be more specific Mar 6, 2015

Kenji Yamaguchi wrote:
I just come across that some companies try to charge service providers outside EU with European VAT.


I agree with you, but for the benefit of those who don't: tell us, which countries?


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Thomas T. Frost  Identity Verified
Germany
Local time: 00:44
Member (2014)
French to Danish
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Very strange Mar 6, 2015

Gitte Hovedskov, MCIL wrote:

However, if you provide translation services to a non-EU client, AND the end product (i.e. the translation) is to be used in Denmark, you HAVE to charge VAT.



This sounds very strange, not least as all EU Member States have to apply the same EU VAT Directive, and I haven't seen anything like this in that Directive. My German accountant confirms that no VAT is due if the client is outside the EU's VAT area.

How is the translator supposed to control how the client uses the translation?

If you charge Danish VAT to a non-EU business client that isn't VAT-registered in the EU, how are they supposed to get that VAT back? And once the end product is sold in Denmark, Danish VAT has to be charged a second time. This makes no sense. Are you sure that's what the law says, or could it be either someone who has misunderstood the rules, or a Danish regulation that is violating the VAT Directive? As we both know, Danish tax officials are very creative when it comes to dreaming up taxes, and they often overstep their authority.


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Thomas T. Frost  Identity Verified
Germany
Local time: 00:44
Member (2014)
French to Danish
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Could you clarify your statement? Mar 6, 2015

Kenji Yamaguchi wrote:

I just come across that some companies try to charge service providers outside EU with European VAT. Please be aware that as a non-European resident service provider, you should not be charged European VAT if you don't have your own VAT number.

[Edited at 2015-03-04 13:15 GMT]


What you have written is that some clients are charging VAT to their suppliers. It is usually the suppliers that bill the clients, not the clients that bill the suppliers. Hence, I don't understand the scenario you describe. Could you be more specific?


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564354352  Identity Verified
Denmark
Local time: 00:44
Danish to English
+ ...
Straight from the horse's mouth Mar 6, 2015

Thomas Frost wrote:

Gitte Hovedskov, MCIL wrote:

However, if you provide translation services to a non-EU client, AND the end product (i.e. the translation) is to be used in Denmark, you HAVE to charge VAT.



This sounds very strange, not least as all EU Member States have to apply the same EU VAT Directive, and I haven't seen anything like this in that Directive. My German accountant confirms that no VAT is due if the client is outside the EU's VAT area.

How is the translator supposed to control how the client uses the translation?

If you charge Danish VAT to a non-EU business client that isn't VAT-registered in the EU, how are they supposed to get that VAT back? And once the end product is sold in Denmark, Danish VAT has to be charged a second time. This makes no sense. Are you sure that's what the law says, or could it be either someone who has misunderstood the rules, or a Danish regulation that is violating the VAT Directive? As we both know, Danish tax officials are very creative when it comes to dreaming up taxes, and they often overstep their authority.


Nonetheless, this is what the experts at SKAT have told me directly, given the specific details about translation work... twice: When I first went self-employed some years ago, and wasn't too sure about non-EU clients, and again last year, after a discussion with Danish translators who insisted I was wrong and that their American clients would refuse to pay VAT. (I have given up working with American clients for the same reason... it's not my decision, it's what the TAX people insist on...)

It's not that difficult to find out whether an end product is to be used in Denmark, though: You simply ask the client!


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Thomas T. Frost  Identity Verified
Germany
Local time: 00:44
Member (2014)
French to Danish
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SKAT does not write the law Mar 6, 2015

Gitte Hovedskov, MCIL wrote:

Nonetheless, this is what the experts at SKAT have told me directly, given the specific details about translation work... twice: When I first went self-employed some years ago, and wasn't too sure about non-EU clients, and again last year, after a discussion with Danish translators who insisted I was wrong and that their American clients would refuse to pay VAT. (I have given up working with American clients for the same reason... it's not my decision, it's what the TAX people insist on...)

It's not that difficult to find out whether an end product is to be used in Denmark, though: You simply ask the client!


I would ask SKAT to back this up with specific references in the law. It would not be the first time they are wrong. It makes no sense, and it is no wonder that foreign companies refuse to pay Danish consumption tax. VAT is a consumption tax on the end consumer, not foreign companies.

According to the EU's VAT Directive, there is no VAT to charge when the client is outside the EU's VAT area. End of story. Denmark has to apply EU law, not violate it.

So you ask the client, and they tell you it's not to be used in Denmark. How do you verify that? Ridiculous.


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564354352  Identity Verified
Denmark
Local time: 00:44
Danish to English
+ ...
Play nicely, now... Mar 6, 2015

Thomas Frost wrote:

I would ask SKAT to back this up with specific references in the law. It would not be the first time they are wrong. It makes no sense, and it is no wonder that foreign companies refuse to pay Danish consumption tax. VAT is a consumption tax on the end consumer, not foreign companies.

According to the EU's VAT Directive, there is no VAT to charge when the client is outside the EU's VAT area. End of story. Denmark has to apply EU law, not violate it.

So you ask the client, and they tell you it's not to be used in Denmark. How do you verify that? Ridiculous.


Be nice now, no need to get rude

But OK, I take your point... and I will go back to SKAT and ask for specific references. Which, by the way, I did the first time I asked (I'm not a complete twat), but Danish legislation has been updated since, and I will ask for new references. However, I think it is a question of seeing where the 'service' is delivered. I.e. I deliver translations electronically, they are converted into, say, a user's guide for a product, which is then sold in Denmark. There can be very little doubt that the Danish translation is to be used in Denmark...


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Thomas T. Frost  Identity Verified
Germany
Local time: 00:44
Member (2014)
French to Danish
+ ...
Not rude Mar 6, 2015

Gitte Hovedskov, MCIL wrote:

Be nice now, no need to get rude

But OK, I take your point... and I will go back to SKAT and ask for specific references. Which, by the way, I did the first time I asked (I'm not a complete twat), but Danish legislation has been updated since, and I will ask for new references. However, I think it is a question of seeing where the 'service' is delivered. I.e. I deliver translations electronically, they are converted into, say, a user's guide for a product, which is then sold in Denmark. There can be very little doubt that the Danish translation is to be used in Denmark...


I'm not rude, just direct, and I thought Danes were quite used to being direct . Nobody is suggesting you're a "twat", I'm just trying to point out that you cannot always blindly trust what some civil servant is telling you.

It's not so much a question of Danish legislation as it is about EU legislation, and that has not been changed recently what this type of service is concerned.

For 'intellectual' services such as translation and advice, the place of supply is considered to be where the client is domiciled. Hence, it's very simple to conclude that no VAT is due when that is outside the EU's VAT area, and that's what the VAT Directive says.

If it is used for a user guide for a product sold in Denmark, then consumers will pay Danish VAT on the whole thing when they buy it. There is no need to add a second VAT collection between businesses building the product, and no legal basis for doing so. You would end up with several layers of VAT on VAT on VAT if that's how things were done, and it would make no sense.


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Kenji Yamaguchi  Identity Verified
Japan
English to Japanese
+ ...
TOPIC STARTER
Correct Mar 8, 2015

Samuel Murray wrote:

I think Kenji refers to clients who are in e.g. Denmark, who deduct VAT from the money that they pay translators in Japan... not translators who are in Denmark who charge VAT from clients in Japan.


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