My company is supplying some services to a Finnish non-profit organisation which is a private research instititute which has been in existence for many years.
In Finland the VAT number is derived simply from the business registration number (how joined up!) but there is no corresponding entry on the EU list.
I assume that the organisation has no VAT registration and is therefore VAT-exempt.
I will of course confirm this status.
How do I treat this? Are exempt supplies just not recorded in the EU Sales List?
VAT to EU non-profit organisations
Hi Loggy
I assume that when you refer to “EU List” you mean the “EU Sales List” or VAT 101 form? And that when you refer to “VAT-exempt” supplies you actually mean “services that are supplied where received”?
Technical stuff
Sorry to be so literal to begin with but it’s an important point and I just need to be certain that we're talking about the same thing! In the UK we have a class of supplies which are “exempt” from VAT (eg insurance, banking services) and supplies which are “zero-rated” (eg most groceries and children’s clothing). In both cases the supplier doesn’t charge VAT to the customer but there is a fundamental difference in that the supplier is entitled to recover VAT on the cost of goods and services used to make “zero-rated” supplies, but not on the cost of goods and services used to make “exempt” supplies.
In the EU VAT Directive, the term “exempt with credit” is normally used instead of “zero-rated”. Supplies made to overseas business customers who are required to account for VAT using the reverse charge are referred to as supplies that are “supplied where received”. Supplies that are “exempt” from VAT, such as insurance or banking services, aren’t “supplied where received” so wouldn’t go onto the EU sales list in any event. So to avoid confusion, in the UK we generally use the term “zero-rated” rather than “exempt with credit”.
Apologies for the technical lesson but I just wanted to be sure that you are referring to supplies that are “supplied where received” or "zero-rated" rather than supplies which are “exempt” under UK legislation.
Reverse charge services and EU sales lists
As you know, supplies of certain services to businesses in other EC countries can be “supplied where received” so you don’t charge UK VAT but the customer accounts for reverse charge VAT on their VAT return if they are registered. You have to be sure that the customer is a business or “taxable person” and receiving the supplies for business purposes, otherwise you have to charge UK VAT.
The normal way of verifying that the supplies are made to a business for business purposes is to obtain the customer’s VAT registration number but you are allowed to accept alternative evidence if the customer isn’t registered for VAT. Section 19 of HMRC Notice “Place of Supplies of Services” http://tinyurl.com/ylds7d4 says the following:
VAT registration numbers are the best evidence that the supply is not received for a wholly private purpose and should be requested. If your customer is unable to provide a VAT number, you can accept alternative evidence. This includes certificates from fiscal authorities, business letterheads or other commercial documents indicating the nature of the customer’s activities. Such evidence should be kept as part of your records. Where VAT numbers are available, they should be shown on your invoice.
So if you are satisfied that you don’t have to charge VAT but the customer isn’t registered for VAT, then you don’t include the value of the services on the EU sales list. This is explained in VAT Notice 725 “The Single Market”, section 17.27 http://tinyurl.com/yk4qee8 which reads as follows:
Should I record supplies to a ‘taxable person’ in another Member State if they do not have a VAT registration number?
No, you should only record on an ESL supplies to businesses in other Member States that are VAT registered and can provide a valid VAT registration number. If you make a supply to a business which is not registered for VAT in their Member State because it is below the registration threshold, but which has provided you with evidence that it is in business (for place of supply purposes), you should not include these supplies on your ESL. This is because the absence of a VAT registration number would cause it to be rejected. However, in some cases receipt of the supply will result in the business being required to register in their Member State. If this is the case and a VAT registration number is subsequently given to you, an amendment should be made to the ESL using form VAT 101B ESL Correction sheet. This form can be downloaded from the HMRC website or requested from the VAT Helpline (see paragraph 1.2).
I hope that is the information that you needed.
Marie