Should Spanish VAT apply ?

Should Spanish VAT apply ?

Didn't find your answer?

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 ?

Replies (4)

Please login or register to join the discussion.

Euan's picture
By Euan MacLennan
25th Jul 2014 13:32

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?

Thanks (0)
avatar
By Jim100
25th Jul 2014 14:04

should have expanded

The Spanish company is building a circuit for a phone that should recharge itself. 

Thanks (0)
avatar
By Jim100
25th Jul 2014 15:31

prototype

Its a prototype which the UK company will develop further in the UK and sell in the UK. The initial development is being undertaken in Spain.

Thanks (0)
Euan's picture
By Euan MacLennan
29th Jul 2014 18:25

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.

Thanks (0)