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Where Taxpayers and Advisers Meet

Commission received from a NL company

Mark101
Posts:1
Joined:Thu Dec 19, 2019 7:50 am
Commission received from a NL company

Postby Mark101 » Thu Dec 19, 2019 8:14 am

I run a UK based LTD company - VAT registered. I have an Agency contract from a large NL company. We will shortly start to receive quarterly commission payments on sales of goods manufactured in The Netherlands, to their customer in the U.K. The commission payments will be automatically generated, so no invoice has to be raised.

In addition we receive a quarterly retainer payment. An invoice is requested for this.

Question:
Are we liable for VAT for the automatic commission payments received? Ie. Do we need to invoice the VAT element?

Should I charge them VAT for the quarterly retainer agency payment?

Thanks

Trevor S
Posts:108
Joined:Tue Jan 01, 2019 12:37 am

Re: Commission received from a NL company

Postby Trevor S » Thu Dec 19, 2019 11:47 pm

I'm assuming that (as agent) you don't have ownership of the goods at any stage. You simply supply your services to the NL company, assisting in arranging their sales to their UK clients. The consideration for this service comprises two elements, one is fixed (the retainer) and the other is variable (the commission).

If so, and the NL company is registered for VAT in the NL, you are making a B2B supply of services where the place of supply is the NL. Your retainer invoices should not show any VAT, however they should show the NL company's NL VAT registration number and note that it is a supply of services subject to the reverse charge. Your NL customer will be required to calculate VAT at the NL rate, which they will both pay to and reclaim from their tax authorities on their NL VAT return. You don't need to account for VAT on your income, and you are still entitled to input tax recovery on related costs in the normal way.

The VAT accounting for the commission element should be the same, as it is just further consideration for the same supply of services. The difficulty is that you don't currently raise invoices. Presumably this is because it's the NL company that has the information needed to calculate the amount due. When such circumstances arise within the UK, the customer would get agreement to send "self billing" invoices (invoices raised by customers on their suppliers' behalf) with the payment. I've not come across self billing between organisations in different EU member states before - but equally I'm not aware of any reason why it couldn't be done, and it would allow both parties to account correctly.

If the self billing isn't an option, you could always issue receipted invoices for the commission, with the same details as on the retainer invoices.

In both cases, as this is a supply of services subject to the reverse charge, it's likely that you will be required to complete an EC Sales List. If you don't already do these, there's more information here: https://www.gov.uk/guidance/vat-how-to-report-your-eu-sales


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