| Pages in topic: < [1 2 3 4] > | Effect on translators of upcoming changes to EU VAT laws? Thread poster: JRM (X)
|
|---|
| Non-issue for translators, solicitors, notaries, consultants, advisors ... | Sep 18, 2014 |
RobinB wrote:
because if you’re not registered for VAT, no changes in the way VAT is charged are going to affect you, period.
Entirely agree with RobinB, translators need not worry.
Someone who does sell such electronic services (there was a guy in another forum who said he sold e-books to other EU member states but it turned out that it was actually Amazon that sells and he gets royalties - so he's not concerned) and who is VAT exempt in the UK may not necessarily be VAT exempt in for example Spain if selling to Spanish customers - meaning Spanish VAT will be due. As each country has a different threshold, he could be liable for VAT in Spain while being exempt in the UK - unless there is a rule saying the domestic VAT threshold applies for it all. Someone in that situation would be wise to get this checked through by an accountant.
| | | | Tom in London
United Kingdom
Local time: 00:28
Member (2008)
Italian to English
Thomas Frost wrote:
..... Someone in that situation would be wise to get this checked through by an accountant.
Although of course, your accountant is not infallible
| | | | | Do you have a better alternative? | Sep 18, 2014 |
Tom in London wrote: Thomas Frost wrote:
..... Someone in that situation would be wise to get this checked through by an accountant. Although of course, your accountant is not infallible
When you are dealing with things that could cost you a lot of money if you get them wrong, it may be a good idea to double-check them, for example get an explanation from the accountant that you or someone else can verify. I could fill a page or two with examples of accountants, solicitors etc. having gotten things wrong in matters concerning me, but let's not waste the space.
Or you can just trust one accountant, and if he or she gets it wrong, then it doesn't exonerate you from your tax liability and any penalties, or - in the extreme - a criminal record for tax evasion (or in an even more extreme case extradition to the country you owe taxes), and then you can waste your time taking your accountant to court to clear up the mess.
I prefer understanding and/or double-checking things up front to avoid such trouble. Each one is free to choose.
| | | | JRM (X) 
Italian to English
TOPIC STARTER | Thanks again everyone | Sep 18, 2014 |
Thanks too Tom for sharing the professional advice you received on the issue.
I think we're all agreed it is not an issue for the kind of services a straightforward translator would normally provide.
Clearly, anyone who provides services outside the norm for our profession would still need to take individual advice as to whether they're covered by the changes (or not) in respect of those services.
[Edited at 2014-09-18 15:52 GMT]
| | |
|
|
|
| As a point of clarification | Sep 18, 2014 |
John Mifsud wrote:
....Whereas up till now the supply was deemed to have taken place where the service was performed, that is now about to change, so that the supply is deemed to have been made at the location of the customer.
In my case, operating as I do from the UK as a sole trader providing translation services to customers principally in Italy, up till now this has meant my service supplies have been deemed to be made in the place where I perform the service - i.e. the UK, irrespective of the whether the client is a business or private individual.
My understanding has always been that the place of supply for translation services is where the customer is.
This understanding is based on VAT notice 741A, section 8.1.3 which specifically states "written translation services which do not take place at an event" are not supplied where performed, and are consultancy services dealt with under section 5 for B2B services. Section 5 basically says these are deemed performed where the customer is located.
Although this does not alter anything else you have said about the need for VAT registration (including in foreign countries) or the conclusion reached by this thread in terms of the new rules being irrelevant for translation (and fear not, you were far from alone in wondering the same thing - the issue was raised on the CIoL Transnet forum, for example), I just wanted to added this info in case anyone searches the forum for "place of supply" for example.
I'm happy to be corrected, but this is how I have always understood the situation.
| | | | JRM (X)
Italian to English
TOPIC STARTER | Further clarification | Sep 19, 2014 |
Charlie, your post on VAT notice 741A has created some confusion in my mind regarding the VAT position as it currently applies to translators.
Taking as a given that the imminent changes to EU VAT laws do not affect translators (in the ordinary course of providing a non-automated translation service), what precisely are you saying regarding the VAT registration obligations of translators?
You would seem to be suggesting that, in the case of B2B transactions at least (w... See more Charlie, your post on VAT notice 741A has created some confusion in my mind regarding the VAT position as it currently applies to translators.
Taking as a given that the imminent changes to EU VAT laws do not affect translators (in the ordinary course of providing a non-automated translation service), what precisely are you saying regarding the VAT registration obligations of translators?
You would seem to be suggesting that, in the case of B2B transactions at least (where translation services are deemed to have been performed in the jurisdiction in which the customer is located), a translator would up till now have been (and - with the current law unaffected by the imminent changes - will continue to be) required to register for VAT in the country of their customer where that country's VAT registration criteria are met. This is irrespective of the fact that a translator is not required to register for VAT in the jurisdiction from which s/he operates. Is that the case? Or, by classifying non-event-based translation services as "consultancy services", does some other arrangement apply?
Thanks for any further light you can shed on this. ▲ Collapse
| | | | | Short answer | Sep 19, 2014 |
John Mifsud wrote:
Is that the case?
Potentially, in general, according to the following....
http://www.hmrc.gov.uk/vat/managing/international/exports/services.htm#1 says
"If you are in the UK and the place of supply of your service is in another EU country, the supply is outside the scope of UK VAT. However, for some supplies, you may need to register and account for local VAT in the country of supply. You will need to check with the tax authority in that country to find out how to treat the services you are supplying."
We have established the first sentence applies to translation.
(Note, as an aside, this turnover, being outside the scope of VAT, does not count towards the UK VAT threshold for registration - http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm#4)
However, the remainder of the hmrc guidance I've found on this topic tends to talk about the rules for distance selling, which do not apply to services, just goods. Frankly, at this point I've found the trail goes cold. The threshold for goods varies widely across the EU, but is generous for France (€100k) where most of my EU customers are located. As I say, if there is a threshold or set of thresholds for the intra-EU B2B supply of services, I've yet to find it....
| | | | |
|
|
|
| Quite so, quite so.... | Sep 19, 2014 |
Yup, I probably should have said I was (and am!) aware of the reverse charge mechanism, although I never have to use it so it tends to slip to the background. But yes, it is certainly germane!
Where I feel there is an information gap, which it could be worth filling, is for the various authorities to explicitly state, if such is the case, and given that the situation then differs from the case for goods, that there is no level of turnover at which the Bulgarian supplier (in your link) has to take an Austrian VAT number and start declaring its Austrian turnover to the Austrian VAT people.
This especially applies to us in what is still the United Kingdom (!), given what hmrc say about the potential need for service providers to register in foreign countries; they could probably explain that whole situation more clearly. After all, if the reverse charge mechanism always and completely removes any need for any British service provider to ever register for VAT in a foreign country, why mention it at all?
| | | | RobinB
United States
Local time: 18:28
German to English
| What’s the problem? | Sep 19, 2014 |
Charlie,
I’m not entirely sure what the problem is here. Reverse charge applies to B2B intra-Community* translation sales, provided the recipient of the service is VAT-registered (if they’re not, they get charged home country VAT in the same way as private customers). If the seller of the service isn’t VAT-registered because they fall below the national threshold, they note this on the invoice so that the recipient can still reclaim input tax to offset the output tax they have... See more Charlie,
I’m not entirely sure what the problem is here. Reverse charge applies to B2B intra-Community* translation sales, provided the recipient of the service is VAT-registered (if they’re not, they get charged home country VAT in the same way as private customers). If the seller of the service isn’t VAT-registered because they fall below the national threshold, they note this on the invoice so that the recipient can still reclaim input tax to offset the output tax they have to apply to the invoice total.
For those people following this discussion who can read German, the excellent uepo.de German T&I news aggregator site published an article just the other day about why it makes sense to register for VAT (at least in Germany where the threshold is very low, but the basic principles apply everywhere):
http://uepo.de/2014/09/16/berufseinstieg-warum-es-keine-gute-idee-ist-als-uebersetzer-fuer-die-kleinunternehmerregelung-zu-optieren/
This article stresses yet again the fact that not registering for VAT doesn’t make you any cheaper for your clients (except for private customers), and of course it has adverse cash flow effects that may be significant.
Robin
* plus Switzerland, which also operates a reverse charge mechanism ▲ Collapse
| | | | | Lack of complete and clear guides | Sep 19, 2014 |
I have found the same as Charlie, that all the VAT guides I have read so far always lack some information or are unclear about something.
The page I linked to says, about sale of goods:
"where the goods are located when the dispatch or transport to the customer ends for distance saleswhen the supplier's annual sales are above the threshold pdf(25 kB)applied by the customer's Member State [Article 33 of the VAT Directive]
Example 4: A UK company is selling CDs via ... See more I have found the same as Charlie, that all the VAT guides I have read so far always lack some information or are unclear about something.
The page I linked to says, about sale of goods:
"where the goods are located when the dispatch or transport to the customer ends for distance saleswhen the supplier's annual sales are above the threshold pdf(25 kB)applied by the customer's Member State [Article 33 of the VAT Directive]
Example 4: A UK company is selling CDs via the internet to private customers throughout the EU. When CDs are sold to customers in Denmark, Danish VAT must be charged when the Danish threshold is exceeded while Dutch VAT must be charged to customers in the Netherlands when the Dutch threshold is exceeded."
You see the effect of this when you buy from Amazon, a Luxembourg-registered company, in the sense that their VAT number mentioned on the invoice corresponds to the customer's country, and the VAT charged is to the customer's country (unless it is a tiny country with little Amazon sales). When I buy from Amazon UK as a German customer, for example, the prices I end up paying are slightly less than what is shown on the UK site because German VAT is 19%, whereas the prices are shown including UK VAT of 20% (different for books and certain other goods). On the other hand, if I buy from a smaller retailer in the UK (or from a tiny country), UK VAT is charged (unless it is a B2B transaction to a VAT-registered business; Amazon's Marketplace system can't handle the non-billing of VAT necessary for the reverse charge in such a case, though).
It is impossible to write a simple paragraph about VAT without stuffing it full of exceptions, and that is what makes VAT so immensely complicated; it is a hybrid system where VAT is sometimes due in the seller's country and sometimes in the buyer's country (or in a few cases somewhere else or not at all). The EU VAT Directive is also full of national exceptions and options.
But there may not be such a threshold for the type of services we provide. In fact, I don't think there is, as I've never come across it, but I could be wrong. ▲ Collapse
| | | | JRM (X)
Italian to English
TOPIC STARTER | Still confused! | Sep 19, 2014 |
RobinB wrote:
Reverse charge applies to B2B intra-Community* translation sales, provided the recipient of the service is VAT-registered ... If the seller of the service isn’t VAT-registered because they fall below the national threshold, they note this on the invoice so that the recipient can still reclaim input tax to offset the output tax they have to apply to the invoice total.
Robin - are you essentially saying that where reverse charge might otherwise apply and a translator isn't VAT registered (because they're under the turnover threshold for registration in their country of operation), as long as they indicate this on their invoice the matter ends there for the translator? Is it that the obligation then falls on the VAT-registered business customer to calculate and claim a credit for notional VAT (not otherwise appearing on the invoice in question)?
And what happens in the case of non-VAT registered business customers or private customers? Is there any impact on what needs to be included in the translator's invoice?
[Edited at 2014-09-19 11:04 GMT]
| | |
|
|
|
| German VAT trap described in that article | Sep 19, 2014 |
I managed to get through the article with my fairly basic German. I think this trap they described is worth highlighting:
"Die betreffenden Kollegen hatten offenbar innerhalb eines Jahres ihren Umsatz mehr als verdoppelt und die 50.000-Euro-Grenze durchstoßen. Deshalb mussten sie dann auch rückwirkend für das Vorjahr die gesamte Mehrwertsteuer nachzahlen. Das kann eine Summe von bis zu 3.325 Euro ergeben".
In Germany, you may remain VAT exempted if your annual turnover remains below €17,500, or if it doesn't go beyond €50,000 in an exceptional year. What this paragraph describes is that if you do go through that €50,000 limit in year B, then you suddenly have to pay not only all the VAT due for the entire year B (also before the date where the €50,000 threshold was reached) but also all the VAT due for year A where you remained below €17,500. That means for just year A alone, you may have to pay up to €3,325 (19% of €17,500) in VAT with little chance of recovering the VAT from your past customers. In that amount is not included the VAT suddenly due of the €50,000 of sales without VAT in year B; that could cost an additional €9,500.
This problem could be specific to Germany, but it is worth being aware of such ruinous traps.
[Edited at 2014-09-19 11:17 GMT]
| | | | | The problem summarised | Sep 19, 2014 |
RobinB wrote:
Charlie,
I’m not entirely sure what the problem is here.
When HMRC describes the sale of goods for UK-based business where the place of supply is elsewhere in the EU, it goes into quite some details, and provides links for the thresholds at which the suppliers of those goods need to register for VAT. In other words, HMRC explains how it works for individual transactions, and then explains some extra factors to bear in mind for cumulative transactions (or indeed one large one, if it hits a threshold) in terms of needing to register with the VAT authorities in those countries. For goods.
When HMRC describes the sale of services when the place of supply is elsewhere in the EU, it does indeed talk about the reverse charge mechanism, as applies to individual transactions. Bearing in mind that people reading this stuff do have to plough through various documents and get referred to various sections of this and that (not least, merely to establish where the place of supply actually is!), you can hardly fail to be aware that there are rules applying to goods that do not seem to apply to services. Obviously how VAT is applied (and the rates, and indeed whether it is applied at all) is one such difference between the goods and services. And that being the case, there would appear NOT to be any cumulative threshold to worry about when providing services to EU business customers. But if there isn't, given we're all going to be at least vaguely aware that such thresholds apply to goods, it might be helpful to explicitly state somewhere that there is no such threshold.
And yet HMRC's opening remarks when talking about the exporting services include "However, for some supplies, you may need to register and account for local VAT in the country of supply". So they basically warn you at the outset that you, as an exporting service supplier, might need to register for VAT elsewhere in the EU, as you do for goods at certain thresholds of turnover, and then seemingly fail to mention it ever again.
I think that would encapsulate the problem
FWIW, given that the general rules applying to VAT tend to be fairly convergent, and given that no non-UK-based translator has ever popped up saying, yup, there is a threshold for services where you need to register in the foreign country, I'm inclined to think there probably isn't one. Perhaps the guidance in other countries *is* explicit on this point...
Edit again - come to think of it though, IF there was the possibility that a service provider were registered for VAT in the place of supply as well as domestically, presumably the rules and guidance for reverse charging would mention it (e.g. you'd expect to have to mention your non-domestic VAT number). So I guess that, apart from HMRC's opening remarks, the whole thing is a non-issue.
A splendid weekend to one and all
[Edited at 2014-09-19 13:07 GMT]
| | | | RobinB
United States
Local time: 18:28
German to English
John,
Perhaps a quick VAT primer from the client perspective might help explain things. If you buy a translation service from a supplier in another EU member state who is registered for VAT, that supplier notes on their invoice that the reverse charge mechanism applies, and doesn’t charge VAT on the invoice amount.
The client then calculates what the (output) VAT would be at their local VAT rate and adds that amount to their regular VAT return (e.g. here in Germany, t... See more John,
Perhaps a quick VAT primer from the client perspective might help explain things. If you buy a translation service from a supplier in another EU member state who is registered for VAT, that supplier notes on their invoice that the reverse charge mechanism applies, and doesn’t charge VAT on the invoice amount.
The client then calculates what the (output) VAT would be at their local VAT rate and adds that amount to their regular VAT return (e.g. here in Germany, the monthly VAT return unless you’re a very small business with a low turnover). At the same time, they can reclaim that same amount as input tax by adding it to the input tax column of their VAT return, in effect cancelling out the VAT amount they’ve entered - *provided* the supplier shows a VAT ID on their invoice.
The only exception to this rule is if the supplier can claim the small business exemption in their home country. The supplier then notes this on the invoice (including any tax authority reference number if applicable), and the client can then treat the invoice in the same way as a normal invoice.
So, in answer to your questions:
Robin - are you essentially saying that where reverse charge might otherwise apply and a translator isn't VAT registered (because they're under the turnover threshold for registration in their country of operation), as long as they indicate this on their invoice the matter ends there for the translator?
Yes, except possibly for clients in some “Club Med” countries such as Spain and Italy (maybe Portugal?), which have their own, often quite weird interpretations of the VAT rules.
And what happens in the case of non-VAT registered business customers or private customers? Is there any impact on what needs to be included in the translator's invoice?
No, if the translator isn’t registered for VAT, then no VAT is charged in either of those cases.
Before I forget, I think there is one major exception to the normal cross-border VAT rules: EU institutions. Although I haven’t personally written an invoice to one of those institutions for well over twenty years, I seem to remember that VAT is levied on the face of invoices to EU institutions (although not of course by non-VAT registered translators). Maybe somebody else can confirm or deny that. ▲ Collapse
| | | | | Pages in topic: < [1 2 3 4] > | To report site rules violations or get help, contact a site moderator: You can also contact site staff by submitting a support request » Effect on translators of upcoming changes to EU VAT laws? | Protemos translation business management system | Create your account in minutes, and start working! 3-month trial for agencies, and free for freelancers!
The system lets you keep client/vendor database, with contacts and rates, manage projects and assign jobs to vendors, issue invoices, track payments, store and manage project files, generate business reports on turnover profit per client/manager etc.
More info » |
| | TM-Town | Manage your TMs and Terms ... and boost your translation business
Are you ready for something fresh in the industry? TM-Town is a unique new site for you -- the freelance translator -- to store, manage and share translation memories (TMs) and glossaries...and potentially meet new clients on the basis of your prior work.
More info » |
|
| | | | X Sign in to your ProZ.com account... | | | | | |
Login to reply/comment 
Translation news
