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UK and EU VAT question
The comment here https://lowendtalk.com/discussion/comment/3419577/#Comment_3419577 reminded me I still haven't found an answer to this...
Does anyone know what the current situation is with a UK non-VAT registered company buying hosting services from an EU company? My understanding is that the EU company shouldn't charge VAT as the service is being provided to a company outside the EU, but when I was googling it, lots of documents including the UK government ones didn't outright say it, but seemed to imply that the old system of VAT charge-backs was somehow still in place, but I'm not sure how that would even work now ...
I guess I'll be discovering this soon as my previous hosting was all purchased as an individual, but I will soon be needing some for my relatively new UK company, but if anyone already knows the ins and outs of this, it'd be useful to hear! (I'm not currently VAT registered and holding off doing so for now)
Comments
Morning @ralf
VAT arrangement differs based on country, which is why you are finding companies in Germany such as Hetzner & NetCup still charging VAT to UK residents. In Germany, VAT is payable regardless of where you are located, as the service itself is provided to the user in Germany. This is similar in countries like Australia, GST is charged if the servers being provided are located in Australia - but not if they are outside of the country.
As a rule of thumb, EU companies no longer have to charge VAT to UK residents or businesses for a service - but individual countries may have other arrangements depending on where the service is provided from.
Honestly, VAT between UK and EU companies was a bit of a mess even before Brexit and now it's even worse.
You're best off either asking your accountant (if you've got a decent one) or, better still, ask HMRC directly. They've always been surprisingly helpful around VAT questions (despite their reputation), plus if you've got their guidance in writing your ass is covered when the VAT inspector calls
Would it really matter if you are a non-UK business ? After all, the sole governing law is the local one, which in such case would not be UK one. It's the UK treasure chest missing out on funds, not the other way around after all ;-)
I was asking as a UK business though, so the advice to ask HMRC is relevant.
It seems if the foreign company charges my company VAT, I'll just have to suck it up and absorb it for now. Once I become VAT registered, it'll be less of an issue as I'll just figure out whatever charge-back thing is required.
The reason for the question is that I, clearly wrongly, assumed VAT law was harmonised across EU, just with different rates. In the UK at least, services provided to a non-UK company are considered to be provided in the customer's location, and so aren't subject to VAT, but services provided to a non-UK individual are considered to be provided in the supplier's location, and so are subject to VAT. Selling physical goods is different.
It doesn't matter to a non-UK business but I think OP is UK-based, in which case HMRC will have very strong opinions about it. When you're going across borders, the idea of "sole governing law" is ... inaccurate. You have to comply with rules on both sides, even when they directly contradict each other.
(which is why I avoid it like the plague
)
The UK thing and laws between is a very special one. Always time consuming when customers from UK think they dont have to pay it.....
After UK wasnt part anymore of MoSS-System, Businesses from EU had to register with HMRC and vice versa; UK Businesses had to register for EU VAT in one EU country to pay VAT for EU Customers. - At least thats how it works with digital goods such as hosting and related.
We are also in Germany and registered in UK and have UK VAT number now for the turnover we do there on this customers. Its all just extra work... all a mess...
As you are non-vat registered company i guess you arent able to deduct/refund it either and have to pay it - just like a non-business customer. You need to pay it.