Billing in Germany on 3-6 monthers

[moorfield]

Yes I know this has been discussed many times before and I am trawling through the boards for further info, but a very quick question for those billing in Europe
(specifically Germany, but the question also applies to Benelux)

- for short assignments (3-6 monthers) can I get away with billing through a UK ltdco or would I need to sort out a local umbrella / tax arrangement from day 1.

I'll shutup now and do some proper research ... Any linkys appreciated. Thanks.

[BlasterBates]

If you bill a UK company no problem, if you bill a German company, then it's complicated, might need to be taxed in Germany. You'd need to check. It would certainly be a cross border transaction with VAT "implications". I presume because you're there for less than 6 months it should be treated as exporting to Germany. But I don't know what you do with VAT.

[ASB]

As BlasterBates says they are (or may be) vat implications. It depends upon the place of supply (and this does not actually mean the place where the supply is made ). For certain sorts of services the place of supply is defaulted according to what the service may be.

A search for "place of supply" might help. Also the same search on HMRC should point you to the relevant fairly tortuous guidance.

FWIW we never charged VAT on software services for our non UK clients irrespective of whether they were performed locally or in the destination country. This was the correct decision for us - but may not be for you.

Also, if you are on the UK FRS you need to consider this. If your services are not outside the scope of UK vat then you need to account for them in the FRS turnover - thus losing your FRS %age of the turnover with no possibility of reclaim. In our case I believe the situation was such as they were outside the scope of UK vat, however 1 international specialist from HMCE said "yes" the other said "no" - thus we avoided the FRS just in case.

[contractreviews.co.uk]

Yes I know this has been discussed many times before and I am trawling through the boards for further info, but a very quick question for those billing in Europe
(specifically Germany, but the question also applies to Benelux)

- for short assignments (3-6 monthers) can I get away with billing through a UK ltdco or would I need to sort out a local umbrella / tax arrangement from day 1.

I'll shutup now and do some proper research ... Any linkys appreciated. Thanks.

Hi moorfield,

There would be no reason in the world for you not be able to bill your German client using your UK limited company. The freedom for european companies to trade within the EU is one of the fundamental commercial rights of the European Union.

You can therefore work and have your limited company invoice the German Gmbh.

As for the tax implications they are twofold:
a) Corporation tax -As you are a UK limited company who has its place of establishment in the UK and normally trades in the UK, you will be liable to pay corporation tax in the UK, not Germany.

b) VAT - there is a piece of EU legislation called the 6th directive of the European Union. This has been incorpated into the national law of every member states. This establishes that VAT should be charged at a rate of 0%:
a) should the services
b) be between two undertakings
c) which are established in seperate Member States,
d) and the services be immaterial ones,

thenVAT shall be charged at a rate of 0% in the country where the services are provided.

Hope that this helps.

Regards,

Mardi

[ASB]

b) VAT - there is a piece of EU legislation called the 6th directive of the European Union. This has been incorpated into the national law of every member states. This establishes that VAT should be charged at a rate of 0%:

http://customs.hmrc.gov.uk/channelsP...yType=document

[cantankerous hat]
But is the 6th directive applicable? I don't think it's that simple (but what do I know ).

2.1 states:

where the place of supply of services is in a Member State of the European Community (EC), that
supply is liable to VAT (if any) in that Member State and in no other country. If the Member State is not
the UK, such supplies are said to be “outside the scope” of UK VAT;

[Outside the scope of is important from a point of view of the FRS]

2.4 states:

Services are made where the supplier belongs, under what is known as the basic rule (see section 5),
unless any of the special place of supply rules apply. Services covered by the special rules are detailed in
the table below.

4.2 states:

If the place of supply of the international services is the UK and certain conditions are met, zero-rating may
apply to the following types of service:
• work on goods for export from the EC. See paragraph 7.6; and
• intermediary services. See section 11.

Now assuming that the services are capable of being received either in the UK or in the other EC country (as laid down by the legislation - and it is likely the case though it is not possible to actually know from the information given):

The flowchart at 12.9 should tell us that the place of supply is in fact the EC menber state and the customer accounts for any vat. [i.e. they end up outside the scope of UK vat].

The points are therfore:

Can't say with absolute certainty what the services are and therefore whether the exemption applies.

In any event if the exemption does not apply they they are almost certainly zero rated.

Although these both result in the same vat being charged - nil - they have a substantially different impact if the FRS is in use by the supplier.

In the first case the supplies will not need to be included in the FRS turnover, thus not requiring the percentage to be handed over.

In the second case then they do need to be included in the FRS turnover, thus losing 13.5% (or whatever) of the supplies as payment to HMCR which has never been charged.

It was really this point I was trying to highlight. If you are NOT on the FRS then it doesn't really matter if the supplies are zero rated rather than exempt. If you are on the FRS then it does matter. And that comes down to exactly what those supplies are.

Of course there are still a load of implicit assumptions in this. e.g. the poster doesn't have an establishment anywhere other than the UK.

I could also pick a few holds in your point a). That being that is is possible for the place of establishment to move from the UK to Germany as a result of where the central management may be. Futher the posters individual tax positions may well depend upon whether this happens, how long the spend in the UK and how long they spend in Germany.

[/cantankerous hat]

It's likely from the OP's description that none of the above will apply, but the fact remains that dependant upon their circumstances it could.

[moorfield]

Hope that this helps.

Regards,

Mardi

THanks Mardi, helpful stuff. Haven't quite got my head round the VAT stuff yet but will persevere.

[contractreviews.co.uk]

THanks Mardi, helpful stuff. Haven't quite got my head round the VAT stuff yet but will persevere.

Hi Moorfield,

Do you need a thourough explanation?

Mardi

[Turion]

Why is this deemed so difficult to understand. in simple terms it works like this:

You do not add VAT on the invoice to the foreign client when working through a UK ltd.

Can you understand that? If you cannot, try this instead

[moorfield]

Why is this deemed so difficult to understand. in simple terms it works like this:

You do not add VAT on the invoice to the foreign client when working through a UK ltd.

Can you understand that? If you cannot, try this instead

Thanks Turion. Some of the words in that sentence have more than one syllable, which I'm struggling with a little, but I get the gist.

So to sum up, invoice through your ltdco (despite what the pimps will try and tell you you can or can't do) and don't put VAT on your invoices.

[BlasterBates]

Thanks Turion. Some of the words in that sentence have more than one syllable, which I'm struggling with a little, but I get the gist.

So to sum up, invoice through your ltdco (despite what the pimps will try and tell you you can or can't do) and don't put VAT on your invoices.

We've clarified that you don't collect UK VAT, but what about German VAT?

I don't think you can just ignore that.

Normally if you've paid UK VAT then the German authorities wouldn't expect German VAT. But if not?

Basically they'll be presented at some point with an invoice, devoid of any VAT.