Spanish client has problems because I don't charge VAT
Thread poster: Bubo Coromandus

Bubo Coromandus

Spanish to English
Jul 12, 2014

An outsourcer I have been working with for years, based in
Spain just asked me: "¿Tu sabes si el regimen fiscal
inglés es el mismo que el europeo y cómo lo hacen
exactamente las otras empresas para las que trabajas? Es
decir, que fórmula usan para no contabilizar IVA de tus
facturas? Exento Unión europea?" It seems the question has
arisen as he's not sure whether he's doing things properly
when he pays me. I live in the UK but have an account in
Spain which is where he transfers the payments to. I can't
register for VAT in the UK as my income is below the
threshold, so I'm not registered. I do have a Spanish NIE
which I gave him a while back because he asked for it, his
gestor needed it. What can I reply to him that might help
him? I could just explain that I can't register for VAT in
the UK but that might not be enough. Thanks in advance!


 

Jack Doughty  Identity Verified
United Kingdom
Local time: 00:58
Member (2000)
Russian to English
+ ...
HMRC Jul 12, 2014

You can obtain a certificate from HMRC stating that you are not liable for VAT. I did that for one agency in Spain and it worked. But Spanish agencies and clients seem to have particular difficulties in interpreting this EU ruling. A German agency told me to include the words "VAT reversed", my social security number and the name, address and VAT number of the recipient in my invoice. So I now sent one meeting these requirements to EU clients and agencies and most accept it.
There have been several previous ProZ forum discussions of this subject.

[Edited at 2014-07-13 06:58 GMT]


 

Diana Obermeyer  Identity Verified
United Kingdom
Local time: 00:58
Member (2013)
German to English
+ ...
Yes you can register Jul 13, 2014

You can register for VAT voluntarily. The threshold does not mean that you have to reach it to be eligible, but that you MUST register, when you exceed it. Personally, I chose not to exercise my right to voluntary VAT registration, as I prefer not to deal with additional paperwork and I don't really see a great benefit from a registration.

The threshold is very different in different countries.
At £79,000 it's pretty high in the UK. I don't really know how it works in Spain.
In Germany it would be impossible to stay below the relevant threshold working full-time, plus the system works the other way around. There you basically charge VAT by default and then you have to apply for an exemption if your turnover is below the threshold and you would prefer not to have the VAT hassle. In the UK you start without and apply for the registration. Thus, my German clients often struggle to come to terms with the fact that I really don't need to charge VAT. They are quite often in utter disbelief about the UK figures. I do write on the invoice that I am not VAT registered and that no VAT has been charged on the invoice, at times it still takes quite a few emails to get through to a client that this is correct.


 

Kirsten Bodart  Identity Verified
United Kingdom
Local time: 01:58
Dutch to English
+ ...
voluntary VAT registration Jul 13, 2014

is only good if you buy a lot of stuff that is liable for VAT for your business (a plumber who needs to buy material or a factory that needs to buy machinery) which you can take off. They scrapped the reverse charge thing because it was a lot of hassle and was bad for the cashflow, so I've heard.

If you do not buy lots of stuff you can take off (translators don't buy cars all the time and VAT on lunch HMRC probably doesn't like because it's non longer a real business expense), you are just filling in papers for people not to look at at all.


 

Helena Chavarria  Identity Verified
Spain
Local time: 01:58
Member (2011)
Spanish to English
+ ...
My problem is the other way around Jul 13, 2014

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'.


 

Emma Goldsmith  Identity Verified
Spain
Local time: 01:58
Member (2010)
Spanish to English
NIE is only for residents in Spain Jul 13, 2014

Deborah Lockett wrote:

I do have a Spanish NIE which I gave him a while back because he asked for it, his
gestor needed it.


You shouldn't use your NIE for invoices if you're resident in the UK. This number is for foreigners living in Spain, and one of its purposes is to make sure foreigners pay taxes in Spain. So in your case, you really shouldn't be using it.

If you don't have to add VAT to your invoices, that shouldn't be a problem for an outsourcer in Spain. He/she pays your invoice without the VAT, exactly as you issue it. He doesn't need to register it in form 347 because that's only for operations between VIES registered parties.

And the fact that the money is being paid into a Spanish bank account shouldn't change things either.


 

Bubo Coromandus

Spanish to English
TOPIC STARTER
Thank you everyone who replied! Jul 13, 2014

Thank you so much to everyone for taking the time to share your knowledge, it's great that you all shed light from a different angle. Any one else who wants to comment will be very welcome. - Deborah

 

Val R.
United Kingdom
Local time: 00:58
English to Romanian
+ ...
Translators with European VAT number only are allowed to apply for jobs Jul 13, 2014

What do you think about a similar request made by a private client from Luxembourg in a recent job posting on Proz? No equal opportunities offered for this job, I reckon.

"Translators should hold a European VAT number that shows valid in the VIES platform, independent of the law in their country. Any applications from translators that do not hold a European VAT number will be ignored.
However competent the applicant may be, we CANNOT collaborate with anyone who is based within the EU and is not registered for an EU VAT number (independent of each country's specific law regarding the obligation to be VAT registered)."


 

Helena Chavarria  Identity Verified
Spain
Local time: 01:58
Member (2011)
Spanish to English
+ ...
Benefits from being registered? Jul 13, 2014

dianaft wrote:

You can register for VAT voluntarily. The threshold does not mean that you have to reach it to be eligible, but that you MUST register, when you exceed it. Personally, I chose not to exercise my right to voluntary VAT registration, as I prefer not to deal with additional paperwork and I don't really see a great benefit from a registration.


Try as I might I can't see any benefits from paying VAT. For every invoice you issue in Spain, 21% is withheld income tax, which is paid by the client, and 21% is VAT. This means that for every €100 you earn, when it comes to 'pay day' you can only actually spend €79 (you need to keep €21 in the bank for when it's time to pay VAT).

I admit that when you fill in your Tax Return, the Tax Administration gives you back the surplus income tax you've paid, or which has been paid on your behalf, but you have to wait until the summer of the following year to get it and by then, you've already paid income tax and VAT for the current year on two occasions (April and July).


 

Tamas Elek  Identity Verified
United Kingdom
Local time: 00:58
Member (2014)
Hungarian to English
+ ...
Benefits for VAT registration Jul 14, 2014

dianaft wrote:

You can register for VAT voluntarily. The threshold does not mean that you have to reach it to be eligible, but that you MUST register, when you exceed it. Personally, I chose not to exercise my right to voluntary VAT registration, as I prefer not to deal with additional paperwork and I don't really see a great benefit from a registration.



I am VAT registered and there is a great benefit. The UK has an optional "Flat rate Scheme", which effectively means that when you charge VAT, only part of it needs to be paid to HMRC. See here:

http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm

The percentage to be paid in varies for business categories, but translation comes under the "other" category, which has a rate of 12% (of the total invoice including VAT), and only 11% in the first year of registration.

The vast majority of my clients are VAT registered, so they do not care if I charge VAT, as they can claim it back. However I can keep part of it. It is also great that if you buy something from another member state, you do not have to pay VAT. It saved me a lot of money when I bought my memoQ.

One drawback is that I cannot claim back any VAT paid, but as translator I do not have much expense anyway, moreover, I could not claim it back either if I were not registered.

VAT registration is worth considering (at least in the UK), as it means free income.

[Edited at 2014-07-14 07:30 GMT]


 

neilmac  Identity Verified
Spain
Local time: 01:58
Spanish to English
+ ...
My 2 cents Jul 14, 2014

Val R. wrote:

What do you think about a similar request made by a private client from Luxembourg in a recent job posting on Proz? No equal opportunities offered for this job, I reckon.

"Translators should hold a European VAT number that shows valid in the VIES platform, independent of the law in their country. Any applications from translators that do not hold a European VAT number will be ignored.
However competent the applicant may be, we CANNOT collaborate with anyone who is based within the EU and is not registered for an EU VAT number (independent of each country's specific law regarding the obligation to be VAT registered)."


I think they should have used "regardless" or "independently" rather than "independent". Or maybe even a "notwithstanding"...

No, seriously, if they don't choose to employ me because I don't have an EU VAT number (or do I? AFAIK it's my Spanish NIE with the letters ES in front; however, it doesn't come up "valid in the VIES platform" and finding that fact out already took up ten minutes I could have spent on better things)... then it's their loss.


 

Ana Cuesta  Identity Verified
Spain
Local time: 01:58
Member
English to Spanish
Neil: You first have to register it through form 036, I think Jul 14, 2014

neilmac wrote:

No, seriously, if they don't choose to employ me because I don't have an EU VAT number (or do I? AFAIK it's my Spanish NIE with the letters ES in front; however, it doesn't come up "valid in the VIES platform" and finding that fact out already took up ten minutes I could have spent on better things)... then it's their loss.



Yes and noicon_smile.gif I seem to remember it's not automatic but you have to register it in the Registro de Operadores Intracomunitarios (register of intra-community operators) through form 036 of the Agencia Tributaria. At least that's how it works with Spanish NIF numbers. Hope that helps.


 

Kirsten Bodart  Identity Verified
United Kingdom
Local time: 01:58
Dutch to English
+ ...
Strange Jul 14, 2014

Helena Chavarria wrote:

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'.



because I seem to remember that not charging VAT on services/goods in principle liable for VAT only applied if the two EU parties to the transaction had a VAT number. If I as a translator in Spain (with VAT number) (seller) supply a translation to a customer in another EU country without a VAT number (mostly private, but not always) (buyer), this customer has to pay VAT, because the reverse charge mechanism of yore would not have applied as the buyer has no VAT number and someone has to pay VAT to the tax office (i.e. the seller by default). With the exception of course that certain organisations are exempt from VAT altogether, but that's a different matter.

It's the same idea as the small plumber who still pays VAT on his material, although he doesn't charge any to his customers, because his revenue is too small.


 

Michael Wetzel  Identity Verified
Germany
Local time: 01:58
German to English
also curious about UK VAT-exempt businesses Jul 14, 2014

As Kirsten mentioned, the business status of customers is usually demonstrated by their having a VAT number.
And VAT-exempt businesses aren't exempted from paying VAT, they are exempted from charging it (and "exempt" from having their paid VAT refunded to them). They can't refuse to pay the VAT on their receipt from the local computer store just because they are "VAT exempt" - and the same applies if they order a computer from Spain.
Actually, there is no reason for a VAT-exempt business to want a reverse-charge invoice unless they are trying (presumably unlawfully) to avoid paying VAT. It would just make their life unnecessarily complicated by having to report their purchases to the UK tax office and to pay their VAT to that tax office. With a normal Spanish invoice, they would just pay the Spanish VAT, which is then sent by the Spanish company to the Spanish tax office - and everything is settled.

The reverse-charge procedure does not just mean that UK customers of Spanish providers are exempted from Spanish VAT - it also means that they are required to report and pay VAT in the UK: That makes sense for a non-exempt UK business, because then it becomes very easy for them to claim back their paid VAT. It makes no sense for a VAT-exempt business in the UK, because it would just force them to carry out a lot of senseless paperwork for absolutely no benefit.


 

neilmac  Identity Verified
Spain
Local time: 01:58
Spanish to English
+ ...
El laberinto empieza aquí Jul 15, 2014

Ana Cuesta wrote:

neilmac wrote:

No, seriously, if they don't choose to employ me because I don't have an EU VAT number (or do I? AFAIK it's my Spanish NIE with the letters ES in front; however, it doesn't come up "valid in the VIES platform" and finding that fact out already took up ten minutes I could have spent on better things)... then it's their loss.



Yes and noicon_smile.gif I seem to remember it's not automatic but you have to register it in the Registro de Operadores Intracomunitarios (register of intra-community operators) through form 036 of the Agencia Tributaria. At least that's how it works with Spanish NIF numbers. Hope that helps.



I don't really need one anyway, as all my clients are in Spain - but my attitude to it is similar to the reason that I don't yet have an official electronic signature in Spain either. The hoops you need to jump through to get it are too complicated and time consuming.


 


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