| Pages in topic: < [1 2] | When (and why) do I charge VAT ? Thread poster: garrett higgins
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RobinB 
United States
Local time: 06:20
German to English
| No profit on VAT!!! | Feb 8, 2006 |
There appears to be a substantial misunderstanding of the nature of VAT here.
Astrid Elke Johnson wrote:
In fact, you actually make a profit, because, if you buy anything for your business ... you deduct the VAT that you paid on these items from the amount that you have collected in, and you send the tax office what is left. If they then appear to owe you money instead (which can happen in the beginning), then you tell them that, too!
Being reimbursed cash expenses is not making a profit, as you are simply getting back what you paid in the first place. You only make a profit on a transaction if you receive more than it costs you.
Apart from criminals involved in "carousel" transactions, the only people who make a "profit" on VAT are governments. By its very nature, VAT is neutral for the business entities involved.
You only pay what you have collected in, as you collect it in. So you do not pay it in the month you billed it, but in the month that your bill was paid. The VAT you owe them in a particular month (before deducting the VAT you paid for the things you use for your business) consists of the VAT on bills that you actually received in the previous month.
That assumes that you use cash accounting, which will normally be the case for freelance translators in Germany. But in other countries, freelance translators may well be required to apply accrual accounting, meaning that output tax is based on invoices issued, and input tax is based on invoices received.
VAT regimes differ from country to country, and has already been pointed out, it can be extremely misleading to give advice based solely on the VAT regime in one EU member state to somebody operating in another one.
| | | | | Are you sure about the meaning of "income that has had VAT paid on it"? | Feb 8, 2006 |
Timothy Barton wrote:
In Spain you have a prorrata based on the percentage of your income that has had VAT paid on it. If only 10% of your income is with Spanish clients, you can only claim 10% of your VAT back.
Timothy, in Poland exist a similar mechanism, but only if the VAT was not paid from clients because of "selling free of VAT, inside Poland."
I mean there are many case in which VAT it's not applicated in transaction which occur inside the polish borders (but NOT translation, maily are "social" thigs). If i sell 50% of my goods/service in Poland and for the polish law, the income (of this 50%) "hasn't had VAT paid on it", i can claim olny 50% of my VAT back, buying somethings for my activity..
BUT! If i sell abroad, it's absolutely another question! I can claim 100% of my VAT in expenses related with word.
And it's logical!
"VAT" it's a tax imposed by state (in my case Poland) to ear and have to live (as a state) with a certain percent of transaction between residents. Sometimes the State, can DECIDE TO NOT EAR in some particular transaction (often regarding culture, education, healt). It's a "grace" of the State. So the state don't permit you to say "the VAT i payed buing something, it's not my business expence, are just money that i, entrepreneur, give back to you, State". The State would say: "In my Grace i permit you to sell free of VAT your goods/services and now you want to claim the VAT that u paid buying something? Then said the State: bind him hand and foot, and take him away, and cast the entrepreneur into outer darkness; there shall be weeping and gnashing of teeth."
One other case it's when the State has NO power about such a VAT. It's the example when you sell abroad, to one other entrepreneur. In this case the FOREIGN STATE has right to this VAT, not your one! So your State han nothing to do with this VAT. On other hand, the State is happy that you sell abroad your goods/services, because He (the State) become more rich, for the export! So the State say: "Well done, good and faithful servant: enter thou into the joy of your State: claim all your VAT in your expenses, because you helped the whole collectivity, selling abroad, and importing capitals in your State".
It's logical. And exactly in this way works in Poland. Are you sure that in Spain the State it's so ungrateful?
Daniele
[Edited at 2006-02-08 11:29]
| | | | Anne Seerup
Ireland
Local time: 12:20
English to Danish
+ ...
I live in Ireland and I am also VAT registered. As freelance translators we belong to group called "Fourth schedule or received services" which in effect means that you only charge VAT in the following cases:
If the customer is a business based in Ireland
If the customer is a private person based in Ireland
If the customer is non VAT-registered business based in the EU
If the customer is a private person based in the EU
If the customer is a VAT registered bus... See more I live in Ireland and I am also VAT registered. As freelance translators we belong to group called "Fourth schedule or received services" which in effect means that you only charge VAT in the following cases:
If the customer is a business based in Ireland
If the customer is a private person based in Ireland
If the customer is non VAT-registered business based in the EU
If the customer is a private person based in the EU
If the customer is a VAT registered business based in the EU, you have to make sure to get their VAT id and state this on the invoice, don't forget to check that it's valid.
VAT does not apply outside the EU, e.g. the states, so you don't have to charge any VAT in this case.
When you are VAT registered you are entitled to claim back the VAT on your business purchases, and beware because the revenue may give you the wrong information, like they did to me, (they don't really seem to have a clue when you ring them).
I finally got myself and accountant, who rectified this, and I am due loads of VAT for the past couple of years.
Reclaiming VAT incurred in Ireland is easy, but if you buy products outside Ireland be sure get this VAT free by informing them your VAT number, since this VAT is more difficult to claim back later (according to my accountant).
There is a guide at www.revenue.ie - sorry cannot give the link here as it's a PDF. But search for VAT (guides and leaflets, pick "Guide to Value added tax", Chapter 4 "Supply of Services", 4.8 "Fourth schedule (received) services".
Hopefully this helps
Anne ▲ Collapse
| | | | | It does help, thanks Anne | Feb 8, 2006 |
It does help, thanks Anne
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| Does this work? | Feb 10, 2006 |
Anne Seerup wrote:
if you buy products outside Ireland be sure get this VAT free by informing them your VAT number, since this VAT is more difficult to claim back later (according to my accountant).
Anne
Have you tried this? You mean that if I go into a shop when I'm at back in the UK at Christmas (I'm registered in Spain) they'll let me buy things VAT free just by my presenting my VAT no.? I've got a bad feeling most would tell me they haven't got a clue what I'm talking about and would charge me VAT. Should this method only be used for large purchases?
| | | | | VAT for translators in Ireland - Fourth schedule | Feb 10, 2006 |
Hi. With all your help (thanks again), I have now come to the conclusion that as a translator in Ireland, I belong to the group called "Fourth schedule or received services" which in effect means that I only charge VAT in the following cases:
If the customer is a business based in Ireland
If the customer is a private person based in Ireland
If the customer is non VAT-registered business based in the EU
If the customer is a private person based in the EU.
I ha... See more Hi. With all your help (thanks again), I have now come to the conclusion that as a translator in Ireland, I belong to the group called "Fourth schedule or received services" which in effect means that I only charge VAT in the following cases:
If the customer is a business based in Ireland
If the customer is a private person based in Ireland
If the customer is non VAT-registered business based in the EU
If the customer is a private person based in the EU.
I have to convince my accountant of this, so would anyone be able to link me up to the relevant Irish legislation?
I think it is based on the fact that "written translations" are considered to be "services of consultants" and therefore "Fourth schedule or received services".
Much obliged,
garrett ▲ Collapse
| | | | pcovs
Denmark
Local time: 13:20
English to Danish
| You may find it here. | Feb 10, 2006 |
http://www.revenue.ie/
It says:
Item: TRANSLATION SERVICES
Rate: 21.0
Sect/Sch: S11(1)(a)
Order:
Remarks: Fourth Schedule service.(Supply of information) Supply to E.U. can be zero rated subject to the necessary documentation.(Diplomatic Concession -Article 15.10)
Decision:
Ref:
So you could tell your accountant to... See more http://www.revenue.ie/
It says:
Item: TRANSLATION SERVICES
Rate: 21.0
Sect/Sch: S11(1)(a)
Order:
Remarks: Fourth Schedule service.(Supply of information) Supply to E.U. can be zero rated subject to the necessary documentation.(Diplomatic Concession -Article 15.10)
Decision:
Ref:
So you could tell your accountant to look at this Article 15.10 for clarification, perhaps. ▲ Collapse
| | | | Anne Seerup
Ireland
Local time: 12:20
English to Danish
+ ...
| Just a link to the VAT guide | Feb 12, 2006 |
I managed to get the link to the Revenue VAT guide, in case you haven't found it yet.
http://www.revenue.ie/leaflets/vatguide_03.htm
The chapter is "Services" and 4.8/4.9.
Best of luck
Ann
garrett wrote:
Hi. With all your help (thanks again), I have now come to the conclusion that as a translator in Ireland, I belong to the group called "Fourth schedule or received services" which in effect means that I only charge VAT in the following cases:
If the customer is a business based in Ireland
If the customer is a private person based in Ireland
If the customer is non VAT-registered business based in the EU
If the customer is a private person based in the EU.
I have to convince my accountant of this, so would anyone be able to link me up to the relevant Irish legislation?
I think it is based on the fact that "written translations" are considered to be "services of consultants" and therefore "Fourth schedule or received services".
Much obliged,
garrett
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