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Anglo-Spanish Chartered Accountants

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Archive for April, 2010

News: Services between EU countries

Following new changes to the localisation rules with regards to VAT, we are afraid to say that there are yet more compliance obligations arising from this change in legislation.

Traditionally, only companies that were acquiring or selling goods within the EU had to register with the EU traders list so that they were able to exchange these goods without charging VAT at source. In these transactions, the VAT was deemed to arise at the point of receipt, so it was the client who accounted for such VAT in their local return via the VAT reversal mechanism. This has not changed.

However, before the new changes very few services followed a similar treatment of accounting for VAT at the point of receipt. For the majority services, VAT was charged at source.

Now and as a consequence of these new changes in legislation, the VAT on the supply of all services between companies in the EU will also be deemed to have arisen at the point of receipt.

Consequently, all companies delivering or receiving services within the EU should now apply for registration in the EU traders list. Once on this register, the company will have to file an additional return, namely Modelo 349, declaring details of the clients/suppliers and the amounts exchanged in the period. These returns will need to be filed monthly, quarterly or annually depending on your volume of operations. As is so often the case, failure to comply with requirements may lead to penalties.

Unfortunately, when a company applies for registration in this register, the tax office usually carries our certain checks so it is likely that the company will receive a visit from a tax inspector who will ask for additional documentation such as rental contracts, EU supplier contracts or purchase orders.

Whilst there is nothing to panic about; this is yet another hurdle the tax authorities (not just the Spanish one) have set for you as a tax payer in business. We share your frustration with regards to the additional compliance requirements, and we will of course help you meet these new obligations accordingly, to safeguard your interests and avoid future problems with the tax office.

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