19 Jul 2016
Q. My client is an estate agent. In the past his services have always been in connection with the sale of properties in the UK. However, he has recently entered into an agreement with a Spanish property developer to act as his agent in selling newly built homes in Spain. My client will receive commission from the Spanish property developer based on a percentage of the sales value of the property. Please can you confirm whether or not he should charge VAT on these commissions? A. As your client supplies services that relate to land or property, the place of supply of those services is where the land itself is located, irrespective of where your client or his customer belongs. As these properties are in Spain, the place of supply of your client’s services is also in Spain and therefore outside the scope of UK VAT. However, if the value of commission received by your client exceeds the VAT registration threshold in Spain (which for businesses that do not have an establishment in the member state where the supplies are made is usually nil) your client may be liable to register for VAT in Spain and charge Spanish VAT to the property developer. If your client does not wish to register for VAT in Spain, it may be possible to avoid registration if the Spanish VAT authorities exercise the extension to the reverse charge rule; this would allow the Spanish property developer to account for the VAT in Spain under the reverse charge mechanism. Do you have clients involved in selling services to overseas customers or buying from overseas suppliers? Are you confident that they are accounting for VAT correctly? Why not contact the VAT Advice Line on 0844 561 8101 to discuss the implications. Our team of experts have a wealth of experience in place of supply issues and can also provide a written consultancy service at £180 per hour plus VAT.
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