company in home country invoices Cyprus company to get the funds to home country?

[NicolasMaduro]

Presuming I´m a company based in EU Country A with 25% VAT and I bought‌ consulting for 100.000 EUR from EU Country B,
then my VAT declaration would look like‍ something like this:

VAT of services bought abroad with reverse charge: 25.000
Purchase VAT: 25.000⁠
Value of services bought in other EU Countries: 100.000

VAT to pay: 0

Presuming I'm⁤ a company based in EU Country B selling 100.000 EUR of consulting to a company⁣ based in EU Country A my
VAT declaration would look like this:

Value of Services⁢ sold without VAT to other EU Countries:
100.000

VAT to pay: 0 (No VAT to︀ deduct)

So where is this 20.000 EUR or 25.000 EUR bill you are talking about?︁

I´m not trying to troll. I just want to understand. What am I missing?

 

[JustAnotherNomad]

@NicolasMaduro is right on VAT.
If there is negative VAT, there will be a refund.‌ It’s the same thing as if a newly registered company bought equipment in its home‍ country, but didn’t make any sales that year. There will be a negative VAT balance⁠ and any VAT paid will be refunded by the tax office.

Also the invoice plan⁤ is high risk.The taxman is well aware that people have offshore companies and will try⁣ to do something like that to repatriate some of the funds. Also many countries have⁢ reporting requirements. The mere fact that he did not disclose his ownership of the CY︀ company to local tax authorities could already be problematic. Just don’t do it. Even if︁ not flagged automatically, it will create issues if you’re audited.

 

[NicolasMaduro]

So Xzars you still here? Im still curious to know

 

[JustAnotherNomad]

Maybe tax @xzars - that should make it easier for him to see the thread‌

 

[Tax Cow]

A Cypriot accountant can tell you the exact consequence, even help with entries. If the‍ matter is important, you should reach out to one.

Border line is that the VAT⁠ tax is a hot potato to be passed on to the end consumer. If you⁤ don't produce anything with your business to pass it on, then your business is burned⁣ by that VAT potato like Sarah and Bob buying actual potatoes on Sunday. The only⁢ difference is that a business can write it off as business expense, or request a︀ refund after some government formalities.

I do not not recommend the latter in your situation︁ because any requests for net VAT refunds elevate risks of an audit.

 

[JustAnotherNomad]

@xzars
There would be no VAT refund as @NicolasMaduro explained. There would simply not be‌ any VAT to pay. Nobody gets burned.

But of course invoicing in such a way‍ is still not a good idea.

 

[Tax Cow]

That's correct if buyer and seller are VAT registered in the same state. In his‌ case, they are not. Recipient makes a bank transfer to the tax office to pay‍ the reverse charge VAT, and later deducts the expense or seeks a refund - if⁠ he wants full compliance.

 

[JustAnotherNomad]

No. If they are registered in the same state, VAT needs to be paid and‌ there may be a refund later. Reverse-charged VAT exists only with cross-border transactions.

The case‍ you mentioned, where you apply for a refund is when (for example) a company from⁠ country A receives services in country B from a company registered in that country. For⁤ example, you have company-owned car (country A) and you drive it across the border to⁣ get it serviced in country B. In that case, VAT needs to be paid (services⁢ rendered locally in country B) and the customer can later apply for a refund from︀ his own tax office in country A. They will then ask for a refund from︁ tax office in country B and forward the money to their own taxpayer.
At least︂ that’s how it works in the EU.

 

[Tax Cow]

@JustAnotherNomad


So in the EU, there's an‍ incentive to buy from abroad? Buying locally apparently freezes up your work capital, but sourcing⁠ from i.e. Cyprus is free of VAT: reverse charges must not be wired to tax⁤ officials for compliance enhancement, tax officials by default assume that you're a good boy!

 

[JustAnotherNomad]

In a way, yes. Because when would the reverse charged VAT have to be paid?‌ Do you think that for every cross-border service invoice, you wire the VAT immediately once‍ the invoice is paid? You just put your VAT ID as the reference for the⁠ wire and hope the taxman will be able to guess what it’s for?

Obviously not,⁤ you submit monthly or quarterly VAT declarations and that’s when you’d have to pay. Conveniently,⁣ that’s also when you’d get your refund. If the balance is 0, there is nothing⁢ to pay, but you also don’t get a refund.

You can look at it the︀ other way: A company with local clients and no cross-border clients has an advantage because︁ they get the VAT as an interest-free short-term loan.

 

[NicolasMaduro]

Yes Xzars. As I also tried to explain you. But you refused to believe it.‌

 

[JustAnotherNomad]

And the reason for this is that they do it to make it harder to‌ run VAT carousels. So they’re not doing it to be nice, they’re doing it because‍ they think the alternative would be worse.

 

[Tax Cow]

For tax affairs your payment reference is your business tax ID. Nothing will be lost and‍ having some pre-paid balance which can be used for any future liability is completely normal;⁠ better than risking penalties for late payment.

Regards to the cross-border services and VAT compliance⁤ in the EU, I'll take a consultation very soon. Odds are that I've been milking⁣ dated evasion methods for too long to know that some steps are over-compliant. And odds⁢ are that you're talking BS. I'm doubtful but certainly not agreeing with @JustAnotherNomad and not︀ with you @NicolasMaduro

 

[NicolasMaduro]

I’m fascinated. You are wrong. And︀ you wont agree with the facts. Its like you saying cars dont exist and you︁ wont agree with the fact that they do.
Its okay to be wrong sometimes. It︂ Can be a little bit dangerous when you are so confident about it. You might︃ have mislead so many Forum users.

 

[Tax Cow]

I'll give you credit when confirmed.⁢ Hold on a few days.

 

[Crest]

This discussion is excellent. Looking forward to the next input

 

[JohnLocke]

This discussion has turned into something complex where most professionals have difficulties to agree. Let's‌ see how it will develop.

 

[JustAnotherNomad]

It really isn’t difficult at all. These are the very basics of international VAT. Anyone‌ who has ever had a business client from another country in Europe knows this stuff.‍
If you only do B2B transactions, you can simply say that VAT is never an⁠ expense for you. You either never have to pay it in the first place or⁤ you will get a refund

I also don’t think VAT refunds increase the risk of⁣ an audit, unless your company runs a
deficit. I own an EU business that doesn’t⁢ have a single local client. So all invoices are subject to reverse-charged VAT. As a︀ consequence, my company doesn’t receive any VAT. But of course from time to time, the︁ business makes purchases for which VAT needs to be paid. For those purchases, I apply︂ for a VAT refund. So there is always either a balance of 0 or a︃ refund.
That’s nothing suspicious, it’s just the way things are when you don’t have local︄ clients and you only deliver B2B services.
All tax stuff is handled by my accountant,︅ who I hope knows how this works. ;-)

Just to give a short explanation again,︆ though I think @NicolasMaduro already did a great job. Say you are a located in︇ country A.

Q1:
You buy some furniture for the new office.
20k + 25% VAT︈ = 25k.
You also bill a smaller local project, 10k + 25% VAT = 12.5k.︉
You have paid 5k VAT and received 2.5k VAT.
You put that in your VAT︊ declaration and receive a 2.5k VAT refund from your local tax office. It’s the equivalent︋ of you sending the 2.5k to the taxman and then applying for a 5k refund.︌ That would only be more complicated, so instead you get to keep the VAT and︍ only receive the difference.

Q2:
You send a 200k invoice to a business client in︎ country B. Country B has 21% VAT, but it’s reverse charged, so you receive the️ net amount only. No VAT. The VAT is the client’s problem.
You also buy 100k‌ of services from a company in country C. There is reverse charged VAT, so you‍ have to add your local VAT of 25%.
Finally you also buy a new laptop⁠ in a store in your country for €2000 + 25% VAT = €2500.

In your⁤ VAT declaration for that quarter, you write:
25k reverse-charged VAT on 100k services.
2.5k local⁣ VAT paid.
(I’m actually not sure if you even have to mention the 200k invoice⁢ here since it’s not relevant for local VAT.)
You would get a refund for the︀ 25k just like you got a refund for the 5k VAT you paid for the︁ furniture. But since you didn’t actually pay the VAT yet, there is nothing to be︂ refunded.
So you only get a refund of €500 for the computer.

Q3:
You buy︃ services from country D worth 10k. There is 25% reverse-charged VAT = 2.5k.
You also︄ receive local payments worth 50k + 12.5k VAT = 62.5k.
You pay 12.5k VAT to︅ the tax office (which your customers already paid you). You also declare the 2.5k reverse-charged︆ VAT. You would get a refund for the 2.5k reverse-charged VAT if you had paid︇ it. But you didn’t pay anything, you just write it in your declaration. So you︈ pay the 12.5k your clients gave you and that’s it.

 

[Tax Cow]

Alright boys. Two hours booked with company X in Belgium. I'm specifically interested in a‌ case where a Belgian company is the customer which buys services subject to BTW reverse‍ charge from Germany.

Absent the discussion about a supply originating from Cyprus specifically, I believe⁠ we can still make some pretty good conclusions about our disagreements. If we have time⁤ left, I'll add in some examples from here.

 

[Tax Cow]

It's a sad day. We're all clueless and generalizing from our own experiences. smi(&%smi(&%

Liability to‌ pay BTW (VAT in Belgium) upon receiving a Reverse Charge service invoice depends on what‍ the customer does for his customer. There is no universal outcome to Reverse Charge invoices⁠ for Belgian customers.

In my case, the Belgian company leases property, a mix of residential⁤ and commercial units out of which some produce VAT-inclusive revenue, and some VAT-exempt revenue.

Part 1 of 3: Cash payment liability arising from a Reverse Charge invoice. There's no refund⁣ for tax paid.

Part 2 of 3: Where Nil (no tax) is the outcome for the⁣ customer

This is what interested you @NicolasMaduro. You're partly correct. There is no VAT⁢ payment liability, given my generous assumption that you exclusively offer VAT-taxable software development services in︀ Belgium. What is not correct is echoing the opinion found on Avalara.com that a Reverse︁ Charge invoice will end in a cash nil/neutral position for the customer. Whether or not︂ there's a cash neutral end result depends on what the customer does for his customers.︃ Since that essential information is not available, and there is no reference to possible exceptions︄ arising from partial exemptions, the source is not credible and it could fool readers into︅ making false declarations.