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bigduckontax
bigduckontax, Accountant
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VAT Number required? Selling Services to EU Companies

Customer Question

I am a UK Freelancer. I sometimes sell some digital consultancy to companies in the EU.

In my latest example, I sold some consultancy to a company in Romania. I'm not VAT registered - but they are asking for my VAT registration number so that I come up on the EU company database..... I don't want to register for VAT as I'm not going over the threshold - what should I do?

This is the site that they use to check: http://ec.europa.eu/taxation_customs/vies/. They say that I can appear on this site with a number without having to actually charge VAT....

Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question. I would be inclined to advise the Romanian company that you are not registered for VAT as you are below the registration limit. Most EU countries do not have turnover levels for registration, in Germany for example an one Euro invoice must bear their equivalent tax. The UK zero rating and no registration below 81K turnover regime is incomprehensible to most EU commercial organisations and viewed with deep suspicion!

The site you quote verifies the validity of VAT numbers across the EU. Naturally it does not work for you as you are not registered.

I do hope I have been able to point the way forward for you.

Customer: replied 2 years ago.

Thanks for the reply.

I've seen this site: http://articles.adelayde.net/finance/eurovat/

It specifies that I can send an invoices without charging VAT (i.e. setting VAT to £0.00) but I would still need a Intra Community VAT valid.

In this example, they set a VAT number which Spain will understand (prefix GB).

Is there such a thing as registering for Intra Community VAT only?

Expert:  bigduckontax replied 2 years ago.

Here is Accounting Web's advice on the subject; it is not good news:

'The CIF number is ***** Certificado de Identificación Fiscal number which is the Spanish VAT number which in part equates to a UK VAT number. The problem with Spain is that any business, however small, is required to register for VAT and companies can only trade with VAT registered businesses. A Spanish business is required to verify the VAT number of its' supplier and if the supplier doesn't have a VAT number the Spanish company is not allowed, under Spanish law, to trade with it.

The problem is that the Spanish do not recognise the UK registration threshold and I know from experience there are only two options.

1) Register for UK VAT

2) Lose the client. The Spanish company will not accept anything other than a valid VAT registration number.'

Sorry to have to rain on your parade. There is a solution, set up a separate company for such transactions and register it for VAT. That will avoid having to charge VAT to UK clients which may make you un-competitive.

Customer: replied 2 years ago.

Thanks for that.

I'm ok to setup a new company and have that VAT registered. However, when I invoice them can I set VAT as £0.00?

Apparently, I don't need to charge them VAT just be registered so that they can treat me as a valid business.

Expert:  bigduckontax replied 2 years ago.

Yes, it is an export, a zero rated supply, so you would charge VAT, but at 0%. A bit like Alice in Wonderland isn't it, but at least you will be quoting a VAT number to a Spanish firm which should be acceptable to them. You see what I mean about incomprehension.

You have it to a T. You may have to be a trifle firm with the VAT registration office. They don't like to register low turnover organisations, but if you emphasise that you are in an export business scenario you will probably find it easier; I did!

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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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