VAT on services purchased from other EU countries

[stefkomato]

Hi there,

I have received an invoice for 150 EUR + 20% VAT for a software subscription (service) bought online. Upon receiving the invoice, I noticed the supplier is from Germany.

We are a UK based business and UK VAT registered.

Is it correct for the German supplier to charge 20% VAT from their end?

If so, am I correct to enter the invoice in the accounts as "20% (VAT on expenses)" and reclaim from HRMC in the VAT Return?

The invoice only includes German company details and a German VAT number.

(I have also received a similar invoice from Belgium)

Thanks,
S

 

[Philip Hoyle]

No, you can't claim other EU country VAT on your UK VAT return. The correct way to avoid it is to give the supplier your UK VAT number and they should then re-invoice without the VAT added. You then "reverse charge" the VAT on your UK VAT return, i.e. charge it to yourself as output VAT and reclaim it as input VAT.

 

[TheCyclingProgrammer]

The supplier should not have charged a UK business VAT. They appear to have treated this as a B2C transaction so have charged UK VAT which is the correct treatment for B2C digital services (they won’t necessarily have a UK VAT number as they will probably be using their local MOSS registration).

You need to contact them and make it clear you are making a business purchase and provide your VAT number as evidence. They should be invoicing you without VAT and as Philip says above, you would then account for VAT at your end under the reverse charge system.

 

[stefkomato]

Thank you both.

This makes sense however I am slightly puzzled by the guidance from HMRC which states the below:

"Refunds of VAT for UK businesses buying from EU countries

You may have to pay VAT on goods and services bought for your business in an EU country. If you’re registered for VAT in the UK you can use the VAT refund scheme to reclaim the VAT you’ve paid in the EU country you’re claiming from if:

• you are not, cannot be, or do not have to be VAT registered in that EU country
• you do not have a place of business or other residence there
• you do not make any supplies there, unless:
  • they’re transport services for the international carriage of goods
  • the person you’re supplying pays VAT on them"

Can you please clarify this?

Thanks,
S

 

[Spur Support Services]

I think that this supplier may well be accounting for UK VAT under the "MOSS Scheme", so you just reclaim the UK VAT in your VAT return as normal.
Check whether this is UK VAT, because the place of supply rules are normally based on the location of the customer, with a few exceptions (and also current German VAT rate is currently 16%, 19% prior to 1 July 2020) .

If the above doesn't apply then, up to 31 December 2020. EU businesses can issue you with Reverse Charge invoice if they are not registered for VAT in the UK, so make sure that they have your VAT number prefixed by "GB".

 

[stefkomato]

Thanks - it looks like MOSS only applies to B2C however we are B2B?

Nonetheless, I will provide our GB VAT number to the supplier!

Thanks,
S

 

[TheCyclingProgrammer]

If the above doesn't apply then, up to 31 December 2020. EU businesses can issue you with Reverse Charge invoice if they are not registered for VAT in the UK, so make sure that they have your VAT number prefixed by "GB".

This should still continue past 31 December - the place of supply will still be the UK and under the B2B place of supply rules the supply will be outside the scope of EU VAT.

 

[The Byre]

The only problem being that they won't bother reissuing the invoice and jump through hoops for customers who in effect change their staus AFTER making a purchase. We have a German and a UK company and people who come whining about being registered businesses AFTER they have made an order are a royal PITA.

Sometimes they even want the VAT or MwSt back - yer, like we've got nothing better to do than revise our books, sometimes after VAT and/or MwSt has been handed on. T&C - "If you are a business, this must be stated and the VAT or MwSt number included with the order."

Fortunately, I do not do the books here, so if people like that call and complain, they don't get my explanation, but someone who is more sympathetic - but just as unyielding!