sole trader without VAT trading with europe

[nik24nik]

Hello everybody,
I am registered as a sole trader here in UK, and currently have some accounts in Italy.
Recently one of my customer (a firm) raised an issue because I don't result registered in the VIES (european register of VAT positions).
Although it is obvious that I am not registered there since I don't have a VAT position here in UK, they said it's a problem for them because they will have to pay a different tax in Italy called "ritenuta d'acconto".
Ritenuta d'acconto is a kind of replacement of VAT, but it's a real cost for the company, so obviously they would like to avoid it.

Anyone knows about it?
Do I need a VAT position to trade to europe?
What happen if I don't?

Thank you

 

[lesvatadvice]

Your customer is right - they do have to account for VAT on your services, even though you are not registered for VAT in the UK.
There is a risk that you should be registered for VAT in Italy. Recent changes to VAT Law mean that the registration threshold, below which a trader does not need to register, does not apply to taxpayers established outside of the country in which they are doing business.
You should check the relevant Italian VAT rules, to see whether you need to register there.
You could also consider registering for VAT in the UK - you are entitled to. This would allow you to recover VAT on your expenses incurred here.

 

[Mitchells Bristol]

Hello there

I'll take the easiesst question first...

No - you do not need to have a VAT registration in order to provide goods or services to European customers.

I haven't seen this for a while, but I think the tax they are referring to is a type of withholding tax. So if you invoice them for £1,000, they would withhold say 20% and pay it to the Italian Authorities. So it could be that if you cannot provide a VAT number they will withhold tax from your payment. You would need to check the double taxation agreement to see what, if any, provision is made to reduce the withholding (hopefully to zero) and if not claim relief against your UK tax liability.

I would check with your customer though to confirm what this is - as is is unusual to see withholding tax on intra-EC goods/services

 

[rik_rs]

Hiya,

I want to reply to this old thread because could be useful.

I'm an italian in UK and I'm looking for information quite similar to this case (shothread.php?t=310205)

The "Ritenuta d'acconto", also said RDA, is a way of billing a company when the person who sells a service can't issue a real/normal invoice.

One of the most common case is the "Prestazione occasionale" (that roughly translates to... occasional job).

E.g. a student of computer science in the freetime makes a website for a company but he can't issue them an invoice because without VAT in Italy you can't sell anything. So he gives them this kind of bill that looks like a normal invoice but with no VAT, a special phrase, and the RDA of 20% as a withholding tax so that the company pays the tax for the student.

But this is not your case: selling from UK as a sole trader without VAT I don't think can be treated that way. They basically are trying to treat you as the example of the student, but they can't because it's a EU dispatch + your are not in Italy + you are not italian.

Regards
Riccardo

 

[lesvatadvice]

Do note that VAT rules relating to cross-border trading have changed since these original posts, so anyone advising such clients must be careful.
In particular, when a non-UK trader does business here, there is no VAT registration threshold; he/she has to register immediately. The same is true for a UK person doing business elsewhere in the EU.

 

[rik_rs]

So you think it's not possibile for a UK sole trader without VAT to sell overseas. But is this also true when selling services?

 

[elraymonds]

Hiya,

I want to reply to this old thread because could be useful.

I'm an italian in UK and I'm looking for information quite similar to this case (shothread.php?t=310205)

The "Ritenuta d'acconto", also said RDA, is a way of billing a company when the person who sells a service can't issue a real/normal invoice.

One of the most common case is the "Prestazione occasionale" (that roughly translates to... occasional job).

E.g. a student of computer science in the freetime makes a website for a company but he can't issue them an invoice because without VAT in Italy you can't sell anything. So he gives them this kind of bill that looks like a normal invoice but with no VAT, a special phrase, and the RDA of 20% as a withholding tax so that the company pays the tax for the student.

But this is not your case: selling from UK as a sole trader without VAT I don't think can be treated that way. They basically are trying to treat you as the example of the student, but they can't because it's a EU dispatch + your are not in Italy + you are not italian.

Regards
Riccardo

Very informative reply cheers mate

Regards,
Evan Raymonds

 

[lesvatadvice]

So you think it's not possible for a UK sole trader without VAT to sell overseas. But is this also true when selling services?

The key is that VAT has to be accounted for somewhere in a transaction. A UK sole trader has a liability to register in another EU Member State if he sells goods or services.
If his customer is VAT registered, then the 'Reverse Charge' rule applies; the supplier does not charge VAT, but the recipient accounts for VAT and then reclaims it.

 

[rik_rs]

A UK sole trader has a liability to register in another EU Member State if he sells goods or services

What do you mean? Register for VAT in the target country?

If that is the case I'm wondering how.

Let's take Italy. First and foremost an italian guy cant's have VAT without being a company and can't sell anything without IVA (VAT) plus tons of many others registrations such as CCIIA (company house), Artigiani (I don't know an equivalent here), etc. if he "sells something" instead of only "being used for something". E.g., an independent programmer with only VAT could make a piece of software on commission, invoicing it as "X hours spent for company X making a piece of software", but he couldn't make a piece of software then invoicing as "software X" to any customer.

So it's clear that the problem of selling to non EU VAT customer, in Italy can be simplified saying B2C market (on the contrary of UK where it includes also B2B).

That said, I don't know any way to pay IVA in Italy (VAT) without being an italian company there. Do you know how?

If his customer is VAT registered, then the 'Reverse Charge' rule applies; the supplier does not charge VAT, but the recipient accounts for VAT and then reclaims it.

I've found the same info on italian official/important websites: in Italy the EU VAT is zero impact (theoretically) nonetheless has to be registered as IN and OUT. It's not clear however if that's valid for VAT seller or NON VAT Seller or both.

Thanks to anyone helping clarifying these problems.

 

[rik_rs]

PS: about selling to EU customers without VAT, as I quote here
ukbusinessforums.co.uk/forums/showthread.php?p=2321166
I got confirmation the info is still valid nowadays.