I have a limited company client where the director has moved to the EU and is now resident in an EU country for tax purposes. As the director works from home, providing services, there is no company presence in the UK other than the registered office.
The company provides consultancy services to two main customers, one in the EU and one in the UK.
What is the position for VAT registration? Does the company have to register in the EU country (Spain, in this particular case) as the turnover is over the Spanish threshold of Euro 35,000? Or does the UK distance selling threshold of £70,000 apply?
By far the larger of the two customers is in Spain so the turnover on that job would certainly be over Euro 35,000.
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Replies (7)
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Where did you get the 35,000 from? I understood the threshold was nil.
I suggest they get local advice and set up a new entity if required. They will need to address the direct as well as the indirect tax implications.
Agree no threshold.
Leave it to someone who knows. VAT is the easiest tax to get very seriously wrong
VAT is the easiest tax to get very seriously wrong
It's easy to get any tax wrong. What you mean, I think, is that VAT errors can very easily leave you seriously out of pocket.
I'll tell you something I don't understand. Matrix alludes to it. People (accountant people) surely know that if I set up a company overseas (in a tax haven or no) to channel my business through, the business is still taxable in the UK - not because of some clever anti-avoidance (though my actions could trigger such charges), but because the company is resident in the UK under the management and control test.
Yet we get question after question in here about cases where the set-up is reversed. A UK company is managed and controlled overseas. Some of these questions are from non-accountants, but even many accountants seem to think the tax would be in the UK and not in the overseas territory. And they seem to think the UK tax would be on the worldwide income, at that.
The UK is a corporate tax haven, for some. Such as Spain.
As is not unusual, it is a client who has done something and told us later. When the company was set up, the director was UK resident.
Indeed. (And CH01 shmeeH01!)
My comment was about direct tax, your OP didn't mention direct tax, my comment wasn't a direct criticism of you. And I thought it might be helpful to expand a bit on Matrix's point: if the company has become tax resident in Spain and ceased to be tax resident in the UK then there are of course tax consequences - including a possible exit charge.
To be within the charges to UK VAT, a supply must be made in the UK. The supply must also be made by a taxable person (a person who is required to be registered for VAT).
Supply for services to Spain, depend on the VAT registration requirements in Spain.
Sounds like he is running operations from a branch and needs to take general advice in spain re corporate taxes, payroll taxes and personal taxes too.
Get a Spanish accountant or someone who knows both sides