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Client thinks VAT was part of quote
Thread poster: Elizabeth Joy Pitt de Morales
Elizabeth Joy Pitt de Morales  Identity Verified
Local time: 07:02
Member (2007)
Spanish to English
+ ...
Nov 28, 2007

The other day I quoted on a job to proofread a paper for a class on the history of international law.

After doing a 200-word (unpaid) test, my quote (at a bargain student rate) was accepted with the following changes:

Despite the timelines outlined in the project description (to me by Sun 11:00 pm GMT and back to him by Mon 8:00 pm GMT), the client stated that the document would not be ready until Monday. So, we agreed that he would provide the source material of approximately 2,000 words by 6:00 pm GMT and I would have it back to him by 10:00 pm GMT (because he had to turn it in to his prof before midnight). He did deliver by his deadline, but there were 3,600+ words...but as he said, the professor wasn't going to mind!

Well, after consulting him several times to clarify what was written, I had it back well before 10:00, accompanied by a note that said he should feel free to contact me if he had any questions. He then informed me that he was at work and with a customer, so he couldn't get back to me other than to acknowledge reception until after midnight. I checked back repeatedly until the midnight deadline, just in case he had questions, but he was busy.

In any case, the next day I had an email from him sayig he was happy with the work, apologizing for the time problems, and that he wanted to pay right away to have a "clean mind".

Since then, we've been going back and forth regarding VAT; he lives in Holland, I live in Spain and I have to charge him VAT. He is absolutely resisting this.

His latest comment is that when one goes to the store, the VAT is already included in the price.

I am seeing a bright, angry red color at the moment and can't think of a civilised response.

One interesting point is the paper I proofed is just a draft; in five weeks, the final paper is to be proofed as well (according to the proz job posting).

The only thing I can think of to do is blow off the invoice (I have already wasted enough time/money on this mess) and just post on the Blue Board. On the other hand, I don't want him to get away with this behavior.

Can anyone help me out here?

Thanks for letting me get this off my chest!

TIA

Liz


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Daniel Šebesta  Identity Verified
Czech Republic
Local time: 07:02
Member (2007)
English to Czech
+ ...
Notification in advance Nov 28, 2007

Hi Liz,

I would say you should have notified the client in advance that VAT is not included in your quote. After all, could he have known that you are a VAT payer? Many (or most?) freelancers are not. He is right -- the VAT is already included in the prices indicated in European stores (unlike in Canadian stores, for example).

Daniel


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Elena Robles Sanjuan  Identity Verified
Local time: 07:02
English to Spanish
I don´t think you should charge VAT Nov 28, 2007

Hi Elizabeth,

There has been a lot of discussion about this issue in many forums, but, just to simplify your search, here´s a link that I reckon will help you.

http://www.proz.com/post/193586#193586

I believe you´re not supposed to charge VAT to a company within the EU territory for services. I asked that question in the Tax Office when I became an intracommunity operator and they said I shouldn´t do it. That doesn´t mean I don´t have to declare it, though.

[Edited at 2007-11-28 13:04]


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xxxMarc P  Identity Verified
Local time: 07:02
German to English
+ ...
Client thinks VAT was part of quote Nov 28, 2007

Liz,

Here in Germany, it is customary to quote prices without VAT to other businesses (whether they are VAT-registered or not) and with VAT to private customers. Having said that, estimates given over the phone are often exclusive of VAT, even if the caller is a private individual. But for a firm quotation given in writing (or in an e-mail), I would expect private individuals to be given the price inclusive of VAT, or to be informed that VAT is payable in addition.

This is just my experience, not the legal situation, and the situation may also be different in Spain.

Marc


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Marcelo Silveyra
United States
Local time: 22:02
Member (2007)
German to English
+ ...
With Daniel on this one Nov 28, 2007

Hi Liz,

Seeing things from a different perspective, I'm sure I would have never thought that VAT wasn't included in the quote in the first place (unless you specifically stated otherwise). Think about it this way - if you get private piano lessons from a teacher and she tells you that each lesson is 100EUR, would you expect her to put VAT on top of those 100EUR? I'm sure you would flip out at that moment, which is what this guy is doing right now. To be honest, I find this perfectly understandable (the other problems are a different matter altogether).

[Edited at 2007-11-28 13:03]


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Wolfgang Jörissen  Identity Verified
Belize
Member
Dutch to German
+ ...
Probably not a company Nov 28, 2007

Elena Robles Sanjuan wrote:


I believe you´re not supposed to charge a company within the EU territory for services.


And that may be the point. Since it is educational material, it might not be for a company.

Elizabeth, do you have general terms and conditions that state that all your services are excluding VAT? If so, you would have a good point to approach a collection agency in Holland (I can recommend you one that did the job for me).


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Elizabeth Joy Pitt de Morales  Identity Verified
Local time: 07:02
Member (2007)
Spanish to English
+ ...
TOPIC STARTER
Client thinks VAT was part of quote Nov 28, 2007

The client is a private individual (student). I quoted through the proz job posting little box thingie that you fill in with your quote.

I guess I am way off the mark here in thinking that when you quote a job, you quote your per-word or per-hour price before tax. When a outsourcer offers 0,0X euros per word, am I to assume that VAT is included in that price? I've always added VAT on (when applicable) to whatever price was offered by the outsourcer or whatever price I quoted to the potential client, when doing the invoice. To date, I've never had any problem with this practice, or at least no one has said anything yet, until this client.

Wolfgang, no I don't, but I will, very shortly. Thank you very much!

Thanks to all for your enlightening comments!

Live and learn.


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Chris Lancaster  Identity Verified
Spain
Local time: 07:02
Member
Spanish to English
What I've been told Nov 28, 2007

FWIW I have several clients in EU countries, including Holland, and I've sat down with people at AEAT (Local Tax Authority) and my Gestor and been told, quite categorically, that no VAT should be shown on my invoices.

But I can see that this is a contested issue judging from this and previous posts.


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Narasimhan Raghavan  Identity Verified
Local time: 10:32
English to Tamil
+ ...
It is always better to dot the i's and cross the t's Nov 28, 2007

Whenever I quote, I state firmly that my rates are exclusive of VAT.

Regards,
N.Raghavan


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Marie-Hélène Hayles  Identity Verified
Local time: 07:02
Italian to English
+ ...
In Italy, rates are taken to be exclusive of VAT Nov 28, 2007

But it is my understanding, as others have pointed out, that VAT should not be applied across country borders within the EU. That's certainly the case in Italy (or so my accountant tells me, and I don't apply VAT to my non-Italian customers), so I imagine it will be the same elsewhere.

So rather than getting worked up on whether you or your client are/is in the right, you need to check on whether you actually ought to be applying VAT in the first place. Because if not, end of problem!

[Edited at 2007-11-28 14:01]


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Erik Freitag  Identity Verified
Germany
Local time: 07:02
Member (2006)
Dutch to German
+ ...
Good point Nov 28, 2007

Marie-Hélène Hayles wrote:

So rather than getting worked up on whether you or your client are/is in the right, you need to check on whether you actually ought to be applying VAT in the first place. Because if not, end of problem!

[Edited at 2007-11-28 14:01]


Good point, and I also believe that in this case no VAT applies.
Apart from that, I think your customer is right: If you have doubts if a (potential) customer is VAT registered, you should quote a price including VAT. The best thing would of course be to always clearly state whether your rate includes VAT or not...

Regards,
Erik

Edit: Ok, other posts suggest that foreign clients who are not VAT-registered (private) do have to pay VAT. This is new to me (as this case never happened to me), so the assumption I've made above seems to be untrue...sorry.

[Bearbeitet am 2007-11-28 18:45]

[Bearbeitet am 2007-11-28 18:45]


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xxxMarc P  Identity Verified
Local time: 07:02
German to English
+ ...
Client thinks VAT was part of quote Nov 28, 2007

Christopher Lancaster wrote:

FWIW I have several clients in EU countries, including Holland, and I've sat down with people at AEAT (Local Tax Authority) and my Gestor and been told, quite categorically, that no VAT should be shown on my invoices.

But I can see that this is a contested issue judging from this and previous posts.


What you say is correct for VAT-registered businesses.

Private individuals in the EU pay VAT on translations from other EU countries (and of course from their own). That, as far as I know, is not contested.

Then there are businesses which are not VAT-registered. Whether they should be charged VAT is contested.

Marc


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RobinB  Identity Verified
Germany
Local time: 07:02
German to English
Charge VAT Nov 28, 2007

Liz,

If you're registered for VAT, you are correct that you must charge VAT to private customers (and, for some reason, to EU institutions) in cross-border transactions within the EU. Contrary to some opinions expressed, a majority of translators probably are registered for VAT, as it really makes sense from a cash flow perspective and of course there are no competitive advantages to not being VAT registered (you're not "more expensive" if you charge VAT than if you don't).

I quoted through the ProZ.com job posting little box thingie that you fill in with your quote.


Never having done that myself, I don't know whether there is a facility there to state that VAT, GST, or some other sales tax will be charged. If not, I think it can be presumed that all prices are quoted net of any taxes due. However, you might want to bring up this issue with ProZ if it's not absolutely clear in the electronic quoting platform that prices are quoted with or without VAT/GST/sales tax.

If you're giving a cross-border customer (business or private) a written quote, it's always best practice to state whether the price shown is net of VAT - over and above any statutory provisions that may require you to do so in your home country.

In this particular case, though, I don't think your cross-border customer can get away with not paying the VAT due on the transaction. Obviously you aren't going to take any legal action over such a small amount, so just chalk it down to experience and - if appropriate - take up the matter with ProZ.

Robin


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hickman126
Local time: 01:02
Swedish to English
+ ...
possible solution Nov 28, 2007

How about going half way. He wasn't expecting to pay the VAT you were expecting him to do so. Ask him to pay half the amount and you pay half the amount. This way you still recover the majority of your payment and he isn't stuck paying too much over the price he expected. I know it is not ideal for you but it is much better than not getting paid at all for that project.



[Edited at 2007-11-28 14:45]


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Samuel Murray  Identity Verified
Netherlands
Local time: 07:02
Member (2006)
English to Afrikaans
+ ...
And, how is his argument incorrect? Nov 28, 2007

Elizabeth Joy Pitt de Morales wrote:
His latest comment is that when one goes to the store, the VAT is already included in the price.


Yes... and... what is wrong with this point of his? I'm asking because I don't know anything about EU VAT, and in my country VAT is assumed to be included in the price, unless it is specifically mentioned separately.


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