Understanding VAT treatment never seems to get easier, and that’s why Saint & Co are here to help. We can translate the HMRC guidance into specific advice to your own circumstances – often the HMRC guidance is exactly that, just a guide where you are then left to make your own decision on whether to charge VAT or not. So when should you add VAT to your sales of services? When it comes to services, the place of supply is of importance. The place of supply being the place (country) where the supply is liable to VAT. Different countries also have different VAT rates.
If you are charging for services internationally, there are again different rules for selling Business to Business (B2B) and Business to Consumer (B2C). A Consumer for this purpose is someone not in business, and the best way to check this is by asking if they have a VAT/GST/Sales Tax number including the country code. If they are in a country with no VAT/GST/Sales Tax, then other evidence of them being in business such as their business website should be recorded.
For B2B services, generally the sales are deemed to have taken place (the place of supply) where your customer belongs (the general rule), however, there are some specific rules for some services, such as land related, transport, admissions, catering and commissions, to name but a few. If your customers business is in the UK, you would charge VAT as normal. Internationally (B2B), you generally wouldn’t charge VAT. However, if your international customers business has a UK branch, and you are invoicing the UK branch, you would again charge UK VAT. The full guidance is at https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a#sec6
The general rule for B2C for services is these are deemed to take place where your business belongs, i.e. UK place of supply (you would charge UK VAT on the sales at the UK rate of VAT appropriate to the services). There are different rules for some types of services however, such as professional, technical, financial or an intellectual nature, and care should always be taken to ensure VAT is charged at the correct rate. Depending on the annual value of services sold to different countries, this may mean your business has to register for VAT in different countries as some countries have a low registration threshold (e.g. France €34,400 for services or Germany €22,000) in comparison to the UK’s current £85,000, and some have a £nil threshold (e.g. Spain). Specific advice should be sought if you think you may need to VAT register abroad.
As ever, if you are ever unsure of the VAT treatment of your sales, please don’t hesitate to contact us for a more detailed guide for your own specific circumstances.
VAT Common Pitfalls – International Sales of Goods from a UK business – the basics
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