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Our company is based in United Kingdom and sells subscription based security software. We do not physically ship product, the end user(always a company not an individual) is required to download from our UK based website. We do not charge VAT to European Nations. When dealing with our Spainish Distributor, they withhold 10% for IVA but as we do not charge any tax, we cannot recover this cost in the UK. Does anyone now if this deduction is right in these circumstances.
is a big sum? maybe i can help , if you is interested asesorxxi@gmail.com
Thanks
Quote:
Originally Posted by Julie
Helo Julie and welcome to the belegal.com forums.
Under your circumstances (purchaser is located in Spain and seller in an EU country) software distribution is exempt from VAT as per Article 70.4 of Ley 37/1992, de 28 de diciembre, del Impuesto sobre el Valor Añadido, provided both parties are registered for European VAT (or IVA Intracomunitario). Before issuing an invoice, you should check whether the purchaser's VAT number is registered with the VIES system. In such case, no VAT should be charged. If the purchaser is not registered for European VAT, you must charge ON TOP of the selling price the normal VAT rate you would charge to someone buying from within the UK. Under no circumstances the buyer can withold anything for VAT purposes. It is always the sellers responsibility to make sure the correct VAT is applied, and not the buyer's.
As an example, when we pay our yearly license for the software which runs these forums, we get an invoice from an UK company where no VAT is applied (as we have a valid European VAT).
I don't think this is a VAT/IVA issue but related to income/corporate tax.
It's somewhere in the DTA but in most cases it's ignored. It only applies to certain professional services.
If it's deducted insist on a withholding tax certificate and you can recover against your UK corporation tax.
The other alternative is that your UK tax office will issue you a letter in Spanish in an agreed format between both jurisdictions which confirms your company is tax resident in UK and then the paying party in Spain does not need to withhold tax.
The tax office in the UK used to issue a general letter but a few years ago it became necessary to get one for each transaction.
Call your tax office and they will tell you the procedure etc