A client of mine in the UK is developing a phone accessory. It has subcontracted part of the work to a company in Spain but the Spanish company said they need to charge VAT.
Shouldn't the reverse charge rules apply ?
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What is the work done by the Spanish company?
Indeed, what is a 'phone accessory?
Is it a gadget which the Spanish company will be making and shipping to the UK? Or is it a gadget for which the Spanish company will be providing design services? Or is it software - an App, perhaps - that the Spanish company will be designing?
No Spanish VAT
If the prototype is regarded as goods which are "removed" from Spain to the UK, the supply of the prototype is zero-rated in Spain, subject to evidence of the removal from Spain. The UK customer must account for acquisition tax in Box 2 of the VAT return - not strictly reverse charge, but the same result.
If the development of the prototype is a service, the place of supply is the UK where the customer belongs and he would account for UK VAT under the reverse charge rules.