Withholding Tax - Invoicing Ecuador

Withholding Tax - Invoicing Ecuador

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Hi,

My company - UK registered are invoicing an Ecuadorian company for sponsorship of an event. In order that they pay us the correct amount, they want us to add the 23% withholding tax that they will have to pay on our invoice to them?

Apologies, my knowledge of taxation is limited - however are we able to put this tax on our invoice (we have charged no VAT as not applicable - event is outside of UK and EU) I am advised that we are no able to put any form of tax on an invoice if we are not charging it, however they have shown me an invoice from another company they work with who were able to do this?

Any advice appreciated.

Replies (4)

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By thehaggis
29th Sep 2014 21:33

It seems to me that..

...the Excuador company wants to give you an agreed sum, but are required to deducted a withholding tax.

If they agreed to give you £100, then they want you to invoice them for £130.  They will deduct 23% tax from that and pay you the net amount of £100.  You are not accounting for the tax, they are.

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By claudialowe
30th Sep 2014 12:49

Eh?

I don't follow you Haggis - in your scenario the UK company invoices £130 but only receives £100.  They are then out of pocket by £30.00..............

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Replying to leshoward:
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By evey2k
30th Sep 2014 15:20

Essentially, yes. The example being we have agreed that the company in Ecuador pay us £77 for services. So they want us to invoice for £100 so that when they pay that amount - we still get the agreed 70.

They want us to put on to our invoice "23% withholding tax" and then add it to the total. However this isn't tax that we are charging, so surely we cannot put this on our invoice....? Is there a work around here?

Thanks - appreciate it!

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By claudialowe
30th Sep 2014 16:07

Can't think of one...........

You would invoicing for something that wasn't true, and unless you know about Ecuadorian withholding tax you could find yourself liable to pay it.  Also you would also be declaring a profit (and paying tax on) money that you had never received.

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