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When (and why) do I charge VAT ?
Thread poster: garrett higgins
garrett higgins
Local time: 08:37
Italian to English
Feb 6, 2006

I have recently returned to IRELAND where I work as a translator from home. My accountant says that if I go beyond a certain income threshold (c. €27,500), it is obligatory to register for VAT and I must charge VAT accordingly.
However, almost all (but not all) my work is currently billed in the USA. The rest (about 10-15%) is billed in Italy, England, Switzerland and Belgium.
I am not sure if it possible to charge these agencies VAT. If I cannot, do I still have to pay VAT? Who can I charge VAT?
Unfortunately, I have difficulty understanding these issues; any help would be appreciated greatly.
Thanks,
Garrett James Higgins (ram8555@iperbole.bologna.it)


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PCovs
Denmark
Local time: 09:37
Member (2003)
English to Danish
+ ...
Take a look at this. Feb 6, 2006

http://www.worldwide-tax.com/ireland/ire_other.asp

This should explain the rules further, otherwise you should try googling for [VAT +Ireland] or something similar.

As I see it, the same rules apply in Ireland as in Denmark; no VAT charged for clients in USA or member countries in the EU, but you must still register for VAT.

The good thing about this is (in Denmark anyway) that you can then deduct your VAT expenses related to your business (GREAT), and the not-so-good thing is that you need to submit VAT reports at certain intervals, which is a drag, but it will recover the VAT you have paid yourself, so you will do it.

But, don't take my word for it - look at the link, start googling, call your local tax office etc.

Hope this helps.


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RobinB  Identity Verified
Germany
Local time: 09:37
German to English
Speak to your accountant Feb 6, 2006

Garrett,

As a rule, VAT non-registration is linked to overall revenue, not VATable revenue, so it is irrelevant where your customers are located. There are particular rules attached to the provision of cross-border translation services to customers in other EU countries, and as you already have an accountant, this is the best source of information. Only a professional adviser will be in a position to provide you with the expert advice applicable to your particular situation.

VAT can be a complex issue for the uninitiated, so it is always best practice to let a tax expert handle these issues for you. In particular, the tax authorities will (rightly) not accept pleas of ignorance if you get things wrong.

Robin


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garrett higgins
Local time: 08:37
Italian to English
TOPIC STARTER
thanks. but who do i charge VAT? Feb 6, 2006

Thanks a lot. so I cannot charge VAT to my main client (in the US)? But do I still have to pay it myself? And can I then claim it back?
And so I only really charge VAT to irish clients?
thanks, garrett


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Ralf Lemster  Identity Verified
Germany
Local time: 09:37
English to German
+ ...
Talk to your accountant Feb 6, 2006

Hi Garrett,
I can only reiterate Robin's recommendation to discuss this with your accountant and/or tax advisor, in detail.

But do I still have to pay it myself? And can I then claim it back?

You should generally be able to deduct VAT paid on business expenses ("input tax") against your VAT liability (= VAT charged to clients, which you need to pay to the tax authorities).

And so I only really charge VAT to irish clients?

In most cases yes, but - and that's the risk - not necessarily.

Best regards,
Ralf


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Williamson  Identity Verified
United Kingdom
Local time: 08:37
Flemish to English
+ ...
In a simple manner Feb 6, 2006

VAT explained in a simple way (attempt to):
1. Irish->Irish : You charge VAT to your customer and pay the VAT the customer pays to you to your VAT-tax-office.
2. Irish-->EU : You don't charge VAT, but write down the legislation according to which you do not have to charge VAT.
Your end-customer pay VAT to his local VAT-office if situated within the EU.
3. Irish -->non-EU : export of a service to outside the E.U.: No VAT.
--
If you opt out of VAT:

1.Irish--->Irish: No VAT (opt out piece of legislation on your invoice)
2.Irish -->EU : same, but your end-customer has to pay VAT (this one I am not quite sure, check with an accountant).
3.Irish--->non-EU: No VAT, export of a service to a non-EU-member-state.

You can not claim VAT to your main client in the US nor get it back. The US doesn't have VAT. No, you don't have to pay it yourself. No VAT has been levied...


[Edited at 2006-02-06 11:06]


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garrett higgins
Local time: 08:37
Italian to English
TOPIC STARTER
thanks ralf Feb 6, 2006

but my main query (worry) is this:
if I cannot charge my US client VAT, do i still have to pay it i.e. lose 21%.
I hope not, and I doubt, but I just want to be sure.
thanks,
garrett


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Ralf Lemster  Identity Verified
Germany
Local time: 09:37
English to German
+ ...
What would you pay VAT on? Feb 6, 2006

Hi again,
Not sure if I understand your question...

if I cannot charge my US client VAT, do i still have to pay it i.e. lose 21%.

Why would you be paying VAT on a non-VATable service rendered?

Puzzled, Ralf


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garrett higgins
Local time: 08:37
Italian to English
TOPIC STARTER
Thanks Feb 6, 2006

Thanks Williamson and all of you... I'm beginning to understand now,
garrett


If you opt out of VAT:

1.Irish--->Irish: No VAT (opt out piece of legislation on your invoice)
2.Irish -->EU : same, but your end-customer has to pay VAT (this one I am not quite sure, check with an accountant).
3.Irish--->non-EU: No VAT, export of a service to a non-EU-member-state.

You can not claim VAT to your main client in the US nor get it back. The US doesn't have VAT. No, you don't have to pay it yourself. No VAT has been levied...


[Edited at 2006-02-06 11:06][/quote]


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garrett higgins
Local time: 08:37
Italian to English
TOPIC STARTER
particular situation Feb 6, 2006

You're right, it was a silly question. But I am in a particular situation. Almost all my work is through the US so I will have to register for VAT and may not charge any.
garrett


Hi again,
Not sure if I understand your question...

if I cannot charge my US client VAT, do i still have to pay it i.e. lose 21%.

Why would you be paying VAT on a non-VATable service rendered?

Puzzled, Ralf[/quote]


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Astrid Elke Witte  Identity Verified
Germany
Local time: 09:37
Member (2002)
German to English
+ ...
Just to make the matter clear Feb 6, 2006

Dear Garrett,

I am not sure if your questions have been answered by now, but just to make the matter clear:

You have to become VAT-registered if your total income exceeds whatever the threshold is (27,000, did you say?). It does not matter where in the whole world you get that income from.

You do not pay VAT to the tax office unless you have charged it to a customer! You "collect in" VAT for the tax office, you don't "pay" them anything. All you "pay" to them is what you have collected in, so you don't make a loss.

In fact, you actually make a profit, because, if you buy anything for your business (anything from stationery, ink cartridges, to a spinning round chair to sit on, the expenses of a business trip, and anything else you can justify) - you deduct the VAT that you paid on these items from the amount that you have collected in, and you send the tax office what is left. If they then appear to owe you money instead (which can happen in the beginning), then you tell them that, too!

You only pay what you have collected in, as you collect it in. So you do not pay it in the month you billed it, but in the month that your bill was paid. The VAT you owe them in a particular month (before deducting the VAT you paid for the things you use for your business) consists of the VAT on bills that you actually received in the previous month.

You charge VAT to:

All customers in your own country.
All customers in another EU country who do not have a VAT number.


You do not charge VAT to:
Any customers in another EU country who do have a VAT number.
Any customers in the rest of the world.
These customers are out of the picture entirely as regards VAT.

Hope this helps.

Astrid


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Williamson  Identity Verified
United Kingdom
Local time: 08:37
Flemish to English
+ ...
Depends Feb 6, 2006

Goods and services exported outside the E.U.: no VAT.
Goods and services imported in the E.U.are subject to Duties and taxes + VAT.
With regard to VAT and your situation : You loose nothing, you gain nothing. You export a service to the U.S. and your client imports it.
With regard to VAT-registration: It is your choice to opt-in or opt out if your turnover is below the Irish threshold.
Altough many on these forums claim opting in to be :
a) a sign of professionalism
b) to their advantage because they can claim back more than they pay...
I choose to opt out, because of :
a)the £60000 treshold.
b)saves a lot of hassle and fines if you or your accountant make a mistake in your VAT-declaration.
c)no paperwork.
Disadvantage: Explaining this to customers in Europe where the treshold is low and to those customers, who have to be VAT-registered in order to do business: example : French situation where everything is linked to taxes, social security etc....


[Edited at 2006-02-06 14:10]


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Ramon Somoza  Identity Verified
Spain
Local time: 09:37
Member (2002)
Dutch to Spanish
+ ...
Astrid is absolutely right Feb 6, 2006

Astrid Elke Johnson wrote:
You charge VAT to:

All customers in your own country.
All customers in another EU country who do not have a VAT number.

You do not charge VAT to:
Any customers in another EU country who do have a VAT number.
Any customers in the rest of the world.


I have a VAT number. I do charge my Spanish customers (as I am living in Spain). I deduce VAT from the goods & services I buy in Spain to perform my job as a translator.

BUT: Right now I've been working for a year for mostly European companies (with VAT numbers), and hardly for any Spanish ones. So I hardly charged any VAT.

So that means I have collected a few hundred euros as VAT from Spanish companies, but I could deduce almost twice as much from products and services. Since I did not collect so much VAT, I unfortunately cannot deduce the whole VAT amount to which I am supposed to be entitled... tough luck!

Bests,

Ramon


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Astrid Elke Witte  Identity Verified
Germany
Local time: 09:37
Member (2002)
German to English
+ ...
Are you sure you can't get a rebate from your tax office? Feb 6, 2006

Ramon Somoza wrote:

I have a VAT number. I do charge my Spanish customers (as I am living in Spain). I deduce VAT from the goods & services I buy in Spain to perform my job as a translator.

BUT: Right now I've been working for a year for mostly European companies (with VAT numbers), and hardly for any Spanish ones. So I hardly charged any VAT.

So that means I have collected a few hundred euros as VAT from Spanish companies, but I could deduce almost twice as much from products and services. Since I did not collect so much VAT, I unfortunately cannot deduce the whole VAT amount to which I am supposed to be entitled... tough luck!

Bests,

Ramon



Hi Ramon,

Normally you are supposed to get a rebate from the tax office if you pay out more in VAT than you collect in. At least, that is what happens here in Germany - and I suspect the rule ought to be the same for the other EU countries. You should check it out.
You have to fill in a form, and briefly explain how you come to be in the position of being due a rebate. Certainly, however, I do not think it is "tough luck" if you spend more in VAT than you collect in. You should find out how far back you can claim for what they obviously owe you.

Astrid


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Timothy Barton
Local time: 09:37
French to English
+ ...
Legislation is not the same in all states! Feb 7, 2006

You're getting advice from people living in different countries. You should really check with people living in the Republic of Ireland, since legislation varies between EU states. For example, a few have mentioned not needing to register if you're below the threshold, but in Spain there is no threshold; everyone has to charge VAT.

Others have said you actually make profit because you can offset the VAT you pay on other goods. This is not the case in Spain. In Spain you have a prorrata based on the percentage of your income that has had VAT paid on it. If only 10% of your income is with Spanish clients, you can only claim 10% of your VAT back. The unclaimed 90% can be added to your expenses to be reduced from your base rate for income tax.

For example:

Computer = 1000€ + 160€ VAT (16% in Spain)
Prorrata = 10%

VAT deduction = 10% X 160€ = 16€

Deduction from the base rate of income tax = 1000€ + (90% X 160€) = 1044€.


This information will probably be irrelevant to you, but the point is that you shouldn't base your actions on the advice given by someone from the United Kingdom, France, Germany etc.


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