Deal with International Indirect Taxes

**Old Greg** · 12 August 2020, 08:12

Originally posted by gatto254 View Post

Hi, I'd be very grateful if someone could enlighten me on a little legal tax issue.

I'm a UK sole trader, that's about to start a website, selling digital services online.

Anyone could enter the website and buy from anywhere in the world, so technically the sales could be international.

Now... I have to setup how much tax, and which tax will be charged automatically on the invoices based on the client's billing address. As far as I understand, if a UK based client buys from me and I'm below the 85000 UK VAT threshold that means that I do not register for VAT, and If I'm not registered I should not collect it. Does that mean that the UK client will have 0% Tax written on his invoice?

And what about international clients? I have no "nexus", in any other country, just the website. Should they pay 0% tax too? And if that's not the case, how do you figure out what to charge, and how do you transfer the money you collected on behalf of a State to them?

Am I overthinking this? Any help is appreciated

Is your client base other businesses or consumers? If the former, many may not want to deal with a sole trader. Also, you are personally liable as a sole trader. Why not set up a Ltd company?

**gatto254** · 12 August 2020, 12:10

Originally posted by Old Greg View Post

Is your client base other businesses or consumers? If the former, many may not want to deal with a sole trader. Also, you are personally liable as a sole trader. Why not set up a Ltd company?

The business is B2C, I understand the liability aspect of it as a freelancer but as an Ltd my costs would be higher, and my accountancy and legal obligations more complex. In the future that's what'll do but I need the revenue to be high enough to justify and cover that.

**NotAllThere** · 12 August 2020, 13:52

Originally posted by gatto254 View Post

if a UK based client buys from me and I'm below the 85000 UK VAT threshold that means that I do not register for VAT, and If I'm not registered I should not collect it.

This is correct.

Does that mean that the UK client will have 0% Tax written on his invoice?

No. You don't put anything concerning VAT on the invoice.

And what about international clients? I have no "nexus", in any other country, just the website. Should they pay 0% tax too? And if that's not the case, how do you figure out what to charge, and how do you transfer the money you collected on behalf of a State to them?

If you are not VAT registered in that country, you don't charge VAT to that country, and do not mention it on the invoice.

I used to invoice the UK from Switzerland - no VAT added, although my company was registered for VAT in Switzerland. IIRC, the EU (or some countries in it) has some funny rules regarding VAT cross border.

The only question you need to resolve is: do I need to charge VAT when supplying to country XYZ? If not, you don't mention it, you don't write 0%. You can say "All relevant taxes included".

**BlasterBates** · 12 August 2020, 14:28

If you do register for VAT you charge only UK VAT, and you need to check the rules for overseas customers as for services it is a bit more complicated. I would assume you do unless an accountant tells you otherwise.

**gatto254** · 12 August 2020, 14:45

Originally posted by NotAllThere View Post

This is correct.
No. You don't put anything concerning VAT on the invoice.

If you are not VAT registered in that country, you don't charge VAT to that country, and do not mention it on the invoice.

I used to invoice the UK from Switzerland - no VAT added, although my company was registered for VAT in Switzerland. IIRC, the EU (or some countries in it) has some funny rules regarding VAT cross border.

The only question you need to resolve is: do I need to charge VAT when supplying to country XYZ? If not, you don't mention it, you don't write 0%. You can say "All relevant taxes included".

You're right about not showing it if it's not due. My issue with the invoices is that I've put a lot of work into creating the website with E-commerce capabilities and used the platform Squarespace to do so. The thing I didn't know is that Squarespace forces all invoices to show the tax amount to the client (I guess to limit their responsibilities), so it would always show: subtotal + tax (even if zero) = total. I might have to totally destroy the website and change provider, shame I paid for the whole year of subscription already.

**BlasterBates** · 14 August 2020, 10:00

Originally posted by gatto254 View Post

You're right about not showing it if it's not due. My issue with the invoices is that I've put a lot of work into creating the website with E-commerce capabilities and used the platform Squarespace to do so. The thing I didn't know is that Squarespace forces all invoices to show the tax amount to the client (I guess to limit their responsibilities), so it would always show: subtotal + tax (even if zero) = total. I might have to totally destroy the website and change provider, shame I paid for the whole year of subscription already.

That shouldn't be a problem. It's irrelevant as to whether you display it as 0 or leave off altogether. It's just a formality, not worth a huge expense so that you can simply remove it from the invoice.

Deal with International Indirect Taxes