European agency does not provide VAT number
Thread poster: Anne Goergens

Anne Goergens  Identity Verified
Sweden
Local time: 03:02
Member (Oct 2019)
English to German
+ ...
Nov 5

Hi,

I am registered as a sole trader in an Sweden (EU country). I did a translation for an agency, the billing address is in the EU. They could not provide a VAT number, neither any kind of documentation that they are not subject to VAT. As they don't want to pay VAT, their suggestion is that I deduct the VAT percentage (25 %) from my rate and then add VAT,meaning I will pay the VAT myself.

I am still pretty new to all of this but I thought all legit EU companies had
... See more
Hi,

I am registered as a sole trader in an Sweden (EU country). I did a translation for an agency, the billing address is in the EU. They could not provide a VAT number, neither any kind of documentation that they are not subject to VAT. As they don't want to pay VAT, their suggestion is that I deduct the VAT percentage (25 %) from my rate and then add VAT,meaning I will pay the VAT myself.

I am still pretty new to all of this but I thought all legit EU companies had a VAT number (or if it is an organization or similar, instead some document to prove they are not subject to VAT anyway).

Does anybody know more or had a problem like this before?

Thanks for your help
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Samuel Murray  Identity Verified
Netherlands
Local time: 03:02
Member (2006)
English to Afrikaans
+ ...
@Anne Nov 5

Anne Goergens wrote:
As they don't want to pay VAT, their suggestion is that I deduct the VAT percentage (25 %) from my rate and then add VAT.


Yes, some companies in the EU do not have VAT numbers (e.g. in the UK, the VAT registration threshold is quite high). When that happens, in my own country of residence (the Netherlands), I'm required to charge VAT.

Rules are rules, and if they're not registered for VAT, then they (or someone) must pay VAT.

However, I often do what the agency is suggesting, in order to keep things simple for everyone: I simply consider the agreed-upon price as the VAT-inclusive price, and then write the invoice accordingly. This does mean that I end up getting less, because the VAT must still be paid to the tax man.

Google for "how much vat did i pay" to get online calculators.


 

Sheila Wilson  Identity Verified
Spain
Local time: 02:02
Member (2007)
English
+ ...
As Samuel says; but this time don't do as Samuel does Nov 5

Anne Goergens wrote:
As they don't want to pay VAT, their suggestion is that I deduct the VAT percentage (25 %) from my rate and then add VAT,meaning I will pay the VAT myself.

As Samuel says, the situation can indeed arise, and one solution is to quote them a rate that incorporates VAT. But on this occasion you've already quoted your "normal" rate and done the work. There's no way you can now reduce you rate by 25% to cover the VAT, IMHO. They weren't born yesterday, I imagine? Even if it is a new agency, there's no way you should be obliged to pay for their learning curve.


Christel Zipfel
Thomas Pfann
Michele Fauble
neilmac
Niina Lahokoski
Philip Lees
Gitte Hovedskov
 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
They tried that with me Nov 5

I was probably in touch with the same company, which claims to have offices in Ireland, the UK and the US, a couple of weeks ago.

The service agreement they wanted me to sign included, 'Since {company} is not subject to any VAT Linguist agrees on covering such Fees on his/her behalf without claiming any VAT upon submitting the invoice to {company}.'

I initially thought it implied their billing address was in the US, but after I had asked them a number of times, they sai
... See more
I was probably in touch with the same company, which claims to have offices in Ireland, the UK and the US, a couple of weeks ago.

The service agreement they wanted me to sign included, 'Since {company} is not subject to any VAT Linguist agrees on covering such Fees on his/her behalf without claiming any VAT upon submitting the invoice to {company}.'

I initially thought it implied their billing address was in the US, but after I had asked them a number of times, they said their billing address is in Ireland, which means it would be illegal for me not to charge VAT if they didn't supply a VAT number. They also asked me to reduce my net price to include their VAT in the agreed rates.

As I refused such unreasonable terms, I didn't sign their agreement, but if you did, then you effectively signed yourself up for paying their VAT. If you have already worked for them, you can report in the Proz Blue Board that you were effectively scammed. At paymentpractices.net, you can also write feedback about outsourcers even if you haven't worked for them.

There is no obligation to be VAT registered if the turnover is below the VAT threshold. According to revenue.ie, the threshold for service providers is €37,500 in Ireland. It does not seem realistic that a translation agency has such a low turnover.

I can find neither the company name nor number in the Irish company registry at cro.ie.

The whole thing is fishy.
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Nikki Scott-Despaigne
Sheila Wilson
 

Alexander Onishko  Identity Verified
Russian to English
+ ...
why Nov 5

Anne Goergens wrote:

Hi,

I am registered as a sole trader in an Sweden (EU country). I did a translation for an agency, the billing address is in the EU. They could not provide a VAT number, neither any kind of documentation that they are not subject to VAT. As they don't want to pay VAT, their suggestion is that I deduct the VAT percentage (25 %) from my rate and then add VAT,meaning I will pay the VAT myself.

I am still pretty new to all of this but I thought all legit EU companies had a VAT number (or if it is an organization or similar, instead some document to prove they are not subject to VAT anyway).

Does anybody know more or had a problem like this before?

Thanks for your help



But why do you wish to pay vat on your side? Are you registered as vat-payer? Why for? As far as I know sole traders like you and me usually do not registrer as vat payers.

[Edited at 2019-11-05 16:35 GMT]

[Edited at 2019-11-05 16:36 GMT]


 

Samuel Murray  Identity Verified
Netherlands
Local time: 03:02
Member (2006)
English to Afrikaans
+ ...
@Alexander Nov 5

Alexander Onishko wrote:
As far as I know sole traders like you and me usually do not register as VAT payers.


The Ukraine is in Europe but not yet in the EU. The issue here is EU VAT. In most EU countries, all "businesses" (including sole traders) must be registered for VAT.


Anne Goergens
neilmac
Teresa Borges
Sheila Wilson
 

Anne Goergens  Identity Verified
Sweden
Local time: 03:02
Member (Oct 2019)
English to German
+ ...
TOPIC STARTER
Thanks! Nov 5

Thank you all for your kind replies.

I have already done the work so I will probably have to follow their instructions now, it is not a high amount so I will not lose a lot of money.

I will definitely report them to the Blue Board, though, and look at the other page you suggested, Thomas. They had something like this in their Service Agreement but much more legally written, so I did not quite understand it. Will learn from it and read the service agreements more thoro
... See more
Thank you all for your kind replies.

I have already done the work so I will probably have to follow their instructions now, it is not a high amount so I will not lose a lot of money.

I will definitely report them to the Blue Board, though, and look at the other page you suggested, Thomas. They had something like this in their Service Agreement but much more legally written, so I did not quite understand it. Will learn from it and read the service agreements more thoroughly!!!

@Alexander, there is a threshold for VAT in Sweden but it is much lower than in Ireland. Also, I can save the VAT when buying things like software or pens, or anything that has to do with my business. So it is definitely worth for me even if I won't come up to the threshold.

Thanks again for sharing your knowledge with me! Good to know ProZ community is there when needed.
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RobinB  Identity Verified
United States
Local time: 20:02
German to English
Not "unreasonable" but "illegal" Nov 5

Thomas,

It seems to me that the Irish agency you refer to isn't behaving unreasonably, but illegally. This looks very much like tax fraud, pure and simple. If the agency has a business address in Ireland, it is required to pay VAT on all supplier invoices, irrespective of whether it is VAT-registered or not.

Very fishy!

Robin


neilmac
writeaway
Nikki Scott-Despaigne
Teresa Borges
Sheila Wilson
 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Maybe illegal Nov 5

RobinB wrote:

It seems to me that the Irish agency you refer to isn't behaving unreasonably, but illegally. This looks very much like tax fraud, pure and simple. If the agency has a business address in Ireland, it is required to pay VAT on all supplier invoices, irrespective of whether it is VAT-registered or not.



It may be technically legal to ask the supplier to reduce the net price and include VAT in the agreed rate, but it's unethical to wipe off the company's taxes on their suppliers like that. If they were VAT registered, they wouldn't pay VAT (reverse VAT procedure). When they chose not to register for VAT, they knew very well they would have to pay VAT on supplies, so they want to have their cake and eat it while hard-working translators are paying for their party (except for those who are not VAT registered). It's utterly disgusting.

I have asked the Irish Revenue how it is possible for them to operate this way, as I also suspect they may be evading tax. I wouldn't normally do this, but when they demand that I pay their taxes, it's only fair to return the favour.


Chris S
 

Enrique Bjarne Strand Ferrer
Norway
Local time: 03:02
Member (2017)
English to Norwegian
+ ...
Perfectly legal Nov 6

As long as they charge their own customers VAT, it is perfectly legal for them to operate this way. The freelancers pay the VAT in their home country, so all taxes get paid.

However, it is highly unethical, unless they explisitly state that they consider the rates offered by freelancers to be inclusive of VAT. For any freelancer, the response is off course to quote inclusive VAT, i.e. about 20% higher rates. But this agency is probably constantly shopping around for new freelancers,
... See more
As long as they charge their own customers VAT, it is perfectly legal for them to operate this way. The freelancers pay the VAT in their home country, so all taxes get paid.

However, it is highly unethical, unless they explisitly state that they consider the rates offered by freelancers to be inclusive of VAT. For any freelancer, the response is off course to quote inclusive VAT, i.e. about 20% higher rates. But this agency is probably constantly shopping around for new freelancers, who in turn offer their normal rates.

The strange thing is that the agency isn't really gaining anything from this, it is actually the taxmen who benefits. If the agency simply registered into the VIES, their freelancers would earn more. The whole puporse of VIES is to avoid the situation where VAT is paid twice by the end customer. If their freelancers rise their pricing to compensate for the local VAT, the agency gets to loose as they purchase price increases.

Basicly, this is very poor business management.

I would highly recommend affected people to post a detailed review on Blueboard.
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Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
No VAT Nov 6

Enrique Bjarne Strand Ferrer wrote:

As long as they charge their own customers VAT, it is perfectly legal for them to operate this way. The freelancers pay the VAT in their home country, so all taxes get paid.



If they are not VAT registered, they cannot collect VAT from their own customers. So their annual turnover in Ireland would have to remain below €75,000. For a translation agency, that's very little.

If they were VAT registered, they wouldn't actually pay VAT on translations from elsewhere in the EU, as they would record the transaction VAT as both input and output VAT, and any Irish VAT would be refunded. Only customers that are consumers would pay VAT. So what's the idea not being VAT registered? Do they have that many consumer clients?

They wanted to pay in USD. I said fine if they can pay by domestic US wire or ACH to my TransferWise USD account. They didn't reply. Why would an Anglo-Irish company not pay in EUR or GBP?

The whole thing is murky.

I wonder if they also demand their domestic suppliers of office equipment in Ireland to reduce their prices because this outsourcer refuses to pay VAT. I'd like to see that on Candid Camera.

That is, if they actually have any presence in Ireland at all.

By the way, Anne Goergens and I have confirmed that we are talking about the same company.


Anne Goergens
 

Nikki Scott-Despaigne  Identity Verified
Local time: 03:02
French to English
Fishy indeed Nov 6

Thomas T. Frost wrote:

I was probably in touch with the same company, which claims to have offices in Ireland, the UK and the US, a couple of weeks ago.

The service agreement they wanted me to sign included, 'Since {company} is not subject to any VAT Linguist agrees on covering such Fees on his/her behalf without claiming any VAT upon submitting the invoice to {company}.'


The whole thing is fishy.
[/quote]

An agency, or any business for that matter, that describes VAT as "fees" is either stupid or downright dishonest. I'd vouch for the latter.


Thomas T. Frost
Teresa Borges
writeaway
Anne Goergens
Sheila Wilson
Josephine Cassar
 

Nikki Scott-Despaigne  Identity Verified
Local time: 03:02
French to English
Inform your ocal tax office. Nov 6

Anne Goergens wrote:

Thank you all for your kind replies.

I have already done the work so I will probably have to follow their instructions now, it is not a high amount so I will not lose a lot of money.

I will definitely report them to the Blue Board, ...


A message to the tax authorities would probably be helpful too.


 

Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Sweden Nov 6

Nikki Scott-Despaigne wrote:

A message to the tax authorities would probably be helpful too.


The Swedish ones probably don't care as long as no Swedish VAT fraud takes place. I've contacted VAT {at} revenue (dot) ie. It would probably help if I'm not the only one.

If the head office is in the UK, why is the billing address in Ireland, and why can't the company number mentioned in the service agreement be found in the Irish company registry?


Anne Goergens
 

Gareth Callagy
United Kingdom
Local time: 02:02
Member (2018)
French to English
+ ...
Where is the customer really located? (EU or outside EU) Nov 6

Thomas T. Frost wrote:

I was probably in touch with the same company, which claims to have offices in Ireland, the UK and the US, a couple of weeks ago.

The service agreement they wanted me to sign included, 'Since {company} is not subject to any VAT Linguist agrees on covering such Fees on his/her behalf without claiming any VAT upon submitting the invoice to {company}.'

I can find neither the company name nor number in the Irish company registry at cro.ie.

The whole thing is fishy.


The whole thing is fishy indeed. I think I know the company in question as I looked into them out of curiosity some time ago. Their website claimed them to be located in the "Republic of Ireland" (unusual in itself as "Ireland" is the usual name), but I couldn't find any record of them as registered in Ireland. They had a recently registered a UK company under the same company name, and according to UK Companies House the company directors were connected to Moldova.

If the customer is a legitimate EU customer located in Ireland or the UK, then Anne would need to pay VAT to the Swedish tax authorities. If the customer is located in a non-EU country, there would be no VAT due.

It is incredibly easy to register a company in Ireland or the UK online (takes less than 10 minutes). It is also easy to get a phone number from any country through Skype and to create a shiny website. Therefore, initial impressions of where the agency is located can be deceiving. The only difficult thing would be arranging a bank account for that company in Ireland or the UK. Do they pay money through an Irish or UK bank account?

Anne is ultimately answerable to the Swedish authorities as to whether she needs to remit VAT for this transaction. Perhaps it would be useful for Anne to contact the Swedish authorities and explain her suspicions of the company, and to confirm what evidence the Swedish authorities would require as proof of where the customer is actually located (EU or non-EU).

I would imagine it would be where the money is paid from and where that bank account is located.

It could also be useful to ask the company why the company asserts in their agreement that they are "not subject to any VAT" and see what answer they give...

One other useful thing could be to check who registered the agency website on whois.domaintools.com and see what information comes up.


 


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European agency does not provide VAT number

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