How to VAT code a Sales invoice for commission to an EU company

Hi there. I'd like to share some information on what VAT code to use for commission on sales invoices to a European company.

I want to verify first if you're referring to European Commission (EC) VAT codes.

If so, as the supplier and the one shipping goods to customers in an EC Member State, you shouldn’t charge VAT if they provide you with a valid VAT registration number. As their supplier, you need to use the reverse charge method to make the VAT nil. See this for more details: VAT codes in QuickBooks Online: A complete guide.

However, since your client's business isn't VAT registered in the EU, I recommend browsing the European Commission webpage to check further information on how to handle this.

For more guidance about VAT, visit the HMRC website.

Reach out to me again if you have additional concerns about taxes and QuickBooks-related activities. I’ll be right here ready to answer them for you. Have a good one.

Hi @Con24 

This is going to be a bit long-winded & without getting a bit more information from you is not going to give you a definite answer :-0 but I'll try to work through it so you should be able to figure it out.

Firstly, Commission is Service.

VAT on Export of Services is a bit of a dog's dinner - always has been.  Brexit, if anything, makes it slightly simpler by removing one set of ifs/buts/maybes - but, it's still a dog's dinner.

The fact that your EU customer is not VAT registered will mean that you should probably hold some evidence that they are, in fact, a business & not a (private) consumer.  This matters - see later.

In order to work out the VAT treatment, you first have to decide the Place of Supply.

You should read Place of Supply of Services (VAT Notice 741A) https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a  ... it's a hoot!

& then, for a bit of fun 😉 have a read through https://www.gov.uk/guidance/vat-how-to-work-out-your-place-of-supply-of-services 

If the Place of Supply is deemed to be the UK, you should charge UK VAT.

If the Place of Supply is deemed to be the customer's country you Zero Rate.  The customer being in the EU is, now, immaterial.

The customer will have to follow their country's rules about accounting for import VAT but that's up to them!

There is a general rule:

- business customer, the place of supply is the place where the customer belongs

- non-business customer, the place of supply is the place where the supplier belongs

but, for commission Section 11 of Notice 714A becomes relevant... https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a#sec11   

This says that B2B you follow the general rule but, for B2C, the place of supply is where the underlying arranged supply is made.

This is why the evidence of the customer being a genuine business (even though not VAT registered) is important.  If the customer is deemed to be a consumer, then you as the business are liable for accounting for VAT in their country.

See 11.5: If you supply B2C services of arranging a supply which is supplied in an EU member state and your customer is not EU VAT registered or otherwise in business, you may be liable to register for VAT in that member state.

All a lot to take in - like I said - a dog's dinner!

Hope this helps.