Q:
I provide a consultancy services through a company in UAE to an agency located in UK.
The company located in UAE will issue an invoice to the agency in UK.
The company in UAE has a certificate number, the VAT does not exist.
When the invoice is issues from the UAE company to the UK agency, should the invoice include the VAT ?
What is the percentage?
If not what is the article code that is stating the VAT exemption between UAE and UK?
A:
Hi,
I can answer part of your question.
UAE is a no tax authority, which means if your company is supplying consultancy services to an agency in UK, then no tax needs to be charged, its works the same way other round, if a UK based based company is providing consultancy services to a company in UAE, no VAT is to be charged as it is out scope.
Regards
Nirmal
A:
Just to clarify – you talk about services being supplied to “an agency located in UK”. I assume that the agency is the recipient of your services, and is not obtaining the services for anyone else. And when you say that your services are being provided “through a company in UAE” I assume that the company doesn’t have any branch or other place of belonging in the UK or other EC country.
Nirmal is correct in saying that no UK VAT has to be charged on the invoice to the UK agent, but I should add a couple of provisos to that. As always with VAT you have to be certain that your situation falls within the rules that normally apply to international services.
The VAT rules relating to international services are covered by a complex set of provisions called the “Place of Supply” rules which apply to all businesses in the EC. The rules are complex and long, but they generally apply to consultancy services as explained below.
First of all, overseas suppliers aren’t required to register for VAT in the UK and charge UK VAT unless they are making supplies in the UK or supplies that are deemed to be in the UK.
Most services are deemed to follow the new rule relating to B2B transactions which says that the “place of supply” of the service is where the customer belongs. So if the supplier is outside the UK but the customer is a business in the UK, then the place of supply rule is in the UK. The way it works is that the UK customer pays UK VAT on the value of the imported service.
So you need to establish whether your consultancy services are services that qualify for the B2B rule. For this you need to see the guidance issued by HMRC in VAT Notice 741: Place of Supply of Services. Section 15 of the notice sets out the types of service that are normally covered by the B2B rule, here’s the link to the paragraphs that cover consultancy services: http://tinyurl.com/37s48bl. You’ll see that this VAT Notice is a long document and really you need to read most of it to understand how the rules work. But I’ve tried to paraphrase the relevant parts that will probably apply to your situation here.
If your services qualify as “consultancy”, you don’t have to quote any article number or legislative reference on your invoice but you do have to be certain that your customer is registered for VAT in the UK. ASK YOUR CUSTOMER FOR THEIR UK VAT REGISTRATION NUMBER TO BE CERTAIN.
If your customer is not registered for VAT then the B2B rule doesn’t apply and the situation would be covered by the B2C rule. In that case, the UAE company might be liable to register for VAT in the UK itself – see section 5 of VAT Notice 741 for more information. If you’re doing a lot of work for UK customers, I’d recommend taking formal advice about the VAT position to be certain that you’re dealing with UK VAT issues correctly.
Marie