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Does your company provide services to foreign customers, both European and non-European? This raises the question of the VAT treatment of these services:
- Should my invoice include VAT?
- How should multiple services be treated for VAT?
- How do I re-invoice certain costs to my client?
- My service provider charges me foreign VAT. Is this normal?
All these practical questions relate to the VAT rules applicable to supplies of services. These rules are set out in Articles 43 to 59 of the VAT Directive and determine the country in which VAT will be due. There are two general rules and a series of derogations. In short, the place of taxation will depend on the nature of the service and the status of the recipient (business or private individual).
Does my invoice have to include VAT ?
No. A supply of services between VAT-registered traders (B2B) is not subject to VAT in the supplier's country but is subject to VAT in the recipient's country of establishment. In this case, it is the buyer who declares the VAT and who must pay it to his tax authorities. Your invoice should therefore not contain any VAT.
This general rule is subject to a series of derogations: some services are not taxed in the country of the recipient but in the country where the service is physically performed. You should therefore pay particular attention to the VAT classification of the service you offer to your customers. These derogatory rules oblige your company to invoice foreign VAT and therefore to obtain a foreign VAT number.
Read our article : VAT on services: where to tax?
How should multiple VAT services be handled ?
When your company offers several services to its clients at the same time, the question arises as to whether these different services should be treated as one single VAT item or whether they should be treated separately. To determine this, the Court of Justice has developed two exceptions to the principle of independence of the service, namely, on the one hand, single complex services and, on the other hand, non-independent ancillary services. It is in the light of this European case law that you will be able to answer your question in practice.
How do I charge my client for certain costs ?
Most companies are confronted on a daily basis with difficulties relating to the need to re-invoice certain types of costs, regardless of the nature of the economic activity carried out.
The following expenses are particularly affected by re-invoicing:
- Hotel expenses
- Restaurant expenses
- Vehicle expenses (rental, fuel, maintenance, etc.)
- Aeroplane expenses
- Rent
- Insurance premiums
- Provision of staff
- Accounting and IT services
- Legal fees
There are two ways of re-invoicing these costs: identical re-invoicing or re-invoicing under a separate contract. It is important to be aware of the choice to be made in terms of re-invoicing and to analyse the appropriate solution to be adopted on a case-by-case basis.
My service provider charges me foreign VAT. Is this normal ?
In principle, VAT is due in your country. It is therefore your responsibility to collect the VAT on behalf of the Treasury and to declare it in your VAT return.
There are, however, specific situations where the service will not be taxed in your country but in the country where the service is physically performed. In this case, your company will have to pay foreign VAT, which will raise the question of possible methods of obtaining a refund of this foreign VAT.
Are you buying or selling services? Call on our VAT experts!
Our firm has extensive experience in providing legal advice on all VAT matters. We seek optimal, tailor-made solutions for our clients by systematically reviewing all the relevant material (our tax library contains over 20,000 documents). Our know-how allows us to articulate all this raw material to give you, in fine, the most accurate interpretation of the most difficult VAT questions you ask us.
How does it work in practice?
It's very simple for you: you explain your situation to us during a video conference or by email. From there, we take over:
- We carry out tax research to determine the exact VAT treatment of your services
- We write a briefing note summarizing our position
Our advice is structured to provide you with a clear, precise and rapid response. A summary is presented, in most cases, in the form of diagrams and tables in order to increase the readability and understanding of the legal study. It then allows you to take strategic decisions in full knowledge of the facts.