Selling software licenses to Indian customer

Will VAT apply

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I have a client based in UK selling software licenses to Indian customer

The Indian customer then sells the licenses to their customer in UK which is a school.  The Indian does have a large subsidiary in UK and my client does have a Indian subsidiary

I think the reason the customer is using the Indian company rather than the UK Company is that the Indian company does not end up paying corporation tax on the export to UK. From VAT the school will need to account for VAT under reverse charge so from HMRC perspectie there is no loss of VAT since the school cannot recover VAT

While the Indian company will sign the contract with my UK client.  Back of my mind is thinking HMRC may say there is no export as the licenses have not left the UK so VAT should be charged

The Indian customer is saying as well withholding tax should apply but don't think since the services is being supplied from the UK and not in India.

 

 

Replies (4)

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By Matrix
07th Jun 2019 16:20

The school would only account for VAT if their taxable supplies, including reverse charge, exceeded the VAT threshold, I doubt this would be the case but I am no expert on schools.

What do you think of the UK corporation tax position for your client if the work is done in the UK? Is the Indian company paying the UK sub for this?

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panda ketteringUK
By ketteringUK
07th Jun 2019 16:55

sounds like the OP is a brexit party supporter? What's wrong with saying 'selling software to a company outside EEA' ??? I'm not from the Indian subcontinent (just so can't be accused of bias) but surely there is no need to highlight this 6 times!

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Replying to ketteringUK:
By Tim Vane
07th Jun 2019 18:32

ketteringUK wrote:

sounds like the OP is a brexit party supporter? What's wrong with saying 'selling software to a company outside EEA' ??? I'm not from the Indian subcontinent (just so can't be accused of bias) but surely there is no need to highlight this 6 times!

Let me get this right.

You seem to be objecting to the use of the words "Indian company" instead of the less exact "a company outside the EEA". You then seem to be implying that being precise is an indicator of a Brexit supporter? Or maybe the use of the word "Indian"?

I want to be clear that is what you mean before I call you a stupid loony nutjob, just in case I've misunderstood.

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chips_at_mattersey
By Les Howard
08th Jun 2019 10:23

The VAT position seems clear; the arrangement seems to relate to where profits are taxed.

There is no 'export,' since the supply is one of services, not goods. As long as the grant of the licence from UK company to Indian company, and back to the school are genuine contracts, there is no problem.
Presumably the school is registered for VAT; it accounts for Reverse Charge VAT and then does not recover the input tax. This is where the loss of tax occurs.

But you should really invest in some paid time with specialists.

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