watch out: major and smaller EU clients dragging us (within EU) into illegality with VAT issues
Thread poster: Pascal Zotto

Pascal Zotto  Identity Verified
Austria
Local time: 13:58
Member (2009)
Dutch to Letzeburgesch
+ ...
Feb 15, 2014

Hi,

This one only refers to cross-border VAT invoices for so called reverse charge invoices within the EU.

I only realized (the hard way) a few months ago that major translation companies but also smaller ones do drag us as freelancers into illegality.

I would not say most of them do it on purpose, it's just because they do not seem to know it better and translators (freelancers) either.

What am I talking about?

To issue your invoice they supply you with a post address the invoice has to be issued to but this address is often not connected to the VAT number they supplied.

What most people do not know is that the address on the invoice has to be the same that is connected to the VAT number. According to European law you have to check this once per year and per client. Either using a link within your local tax office website or this one: http://ec.europa.eu/taxation_customs/vies/?locale=en
Tax offices recommend to print out each check with correct elements and keep them for 1 year, say until the next required check.

Why do you have to check this regularly?

Companies who are not allowed to work anymore or got they VAT number status withdrawn for whatever reason are still using their old number, a number of another branch of their company that was not closed down or maybe even of a completely different company in order to save money (the whole VAT) when paying invoices. The only way for us to know if these companies exist legally is the connection of the address with the VAT number.

The money they save can be far above 20% of the invoice amount, the fine you can get will be way higher.

VAT and address have to match in order to prevent tax fraud and to be enabled for reverse charge. If you issue invoices with non-matching elements you support such practices in the eyes of tax offices within the EU and get illegal yourself.

I only got to know this when a was picked for a random routine check from my tax office. I got a fine of several thousand euros and had to pay back the tax wrongly issued as reverse charge (which was another 20,000 EUR over 3 years of business with that company), if I could not prove the connection between the two named elements mentionned above, because one of my major clients had changed his company form and was given another VAT number that did not match the address he had provided.

In my case the company was more than willing to help me with providing the requested documents and I go no fine and had not to pay anything back. I still had an non material loss because I had to spend much time reissuing all the invoices with correct VAT number and correction tax reports for the last 4 years. Many hours during which I could not translate and earn money.

The problem was that the VAT check through any link resulted in non-matching elements and the client being a longterm client (more than 10 years of working together) where there had never been a problem or change of address, I had ommitted checking his status since 2010 and he had not really mentionned the change of VAT but only had changed it on his POs in the very small font part at the bottom.

In such a case you have to contact the client and request an official document (they nromally can request that one from their tax office free of charge) stating the VAT number and address they want you to have on the invoice. The document must be no older than 2 month (up to 6 months, depending on target (your) country) an state the correct address and the VAT number.
And even it the client says they do not need to provide you with such information: they are legally bound by EU and their own country's tax laws to prove these information to be correct by providing such documents upon request.

As long as the client cannot provide these information you HAVE TO issue the invoice to the address you got from your checking site (and not the one the client provided) in order to be entitled to reverse charge or to issue the invoice without using the VAT number and reverse charge thus charging the client with the full VAT appliable to your country for such services.

If they cannot or refuse to provide you with that information it is quite likely they are trying to drag you into illegality. So you should refrain from working with them, except if you want to risk fines and to pay the VAT for all invoices to that client. These invoices are still legally binding to the client even if they claim them to be wrong.


Kind regards,
Pascal

[Bearbeitet am 2014-02-16 10:24 GMT]


 


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watch out: major and smaller EU clients dragging us (within EU) into illegality with VAT issues

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