When should I not be charged VAT for a translation?
The application of VAT can lead to confusing cases in countries of the EU. Translation services may be exempt from VAT depending on the type of translations we do.
In general, the application of tax legislation at European level may give rise to certain doubts. Paying for a translation service as an individual is not the same as paying for it as a company, although there are circumstances that will not discriminate between companies and private individuals.
When do you have to pay VAT for translation services? Can I recover the VAT paid for translation? What types of translations are exempt from VAT?
In this blog, I answer these and other questions that may arise around the application of VAT for translation services.
Índice de contenidos
Index of contents
Index du contenu
- Do I have to pay VAT if my translation provider is a foreign EU company?
- Do I have to pay VAT if my translation provider is a foreign company from outside the EU?
- I am a non-profit organization: Do I have to pay VAT for translation services?
- What happens to the VAT I am charged for my translation?
- VAT exemptions for translation work in Spain
In the event that you –an individual or company with legal address in a country of the EU– have requested the services of a translation company whose legal address is also in a country of the European Union , there will be cases in which they will have to charge you VAT and cases in which they will not.
The application of VAT by an intra-community supplier, this is the term used for a company located in the European Union, will be different depending on whether you have purchased the translation as an individual or as a company.
1.1 I am a private individual who has purchased translation services from a company or freelance translator in Europe
If, as a private individual, you have contracted the services of an intra-community translation agency, you will have to pay VAT. In general, both in translation services and in other types of services or purchase of products, individuals are subject to VAT.
In any case, the VAT you will have to pay as a private individual will not be the VAT % applicable in your country, but the VAT applicable in the country of residence of the company or freelance translator who has offered you the service.
For example, the VAT rate applied by French translation companies is 20%, which is lower than the Spanish rate of 21%. However, the applicable VAT rate for translation services in Germany is 19%.
1.2 I am a EU company that has purchased translation services from a translation company or freelance translator with legal address in another country of the EU
If you are a company buying translation services in Europe, the situation is somewhat more complex than if you were a private individual.
As individual you will have to pay the VAT applicable in the tax residence country of the contracted translation provider.
As we have seen in the case of private individuals, you will have to pay 20% VAT if the translation company is French and 19% if the company is German. Click here to see the VAT rates applicable according to the country of the European Union.
In any case, even if your company is not exempt from VAT and you do have to pay this VAT, you can always declare it and recover it. You can visit this page to see how to recover all this input VAT depending on which country you work.
However, it is most likely that if you are a company that works at a European level, your company is registered in the register of Intra-Community suppliers.
If this is your case, you do not have to pay VAT for your translations, as long as the company doing the work is in Europe.
Be aware that the foreign translation company you work with may not be aware of this and may routinely charge VAT on the invoice.
If your language service provider is a translation company or freelance translator with tax residence abroad outside the European Union, you may or may not be liable to pay VAT depending on the tax rules of each country, whether you are a translation company or a freelancetranslator.
If you are a company, it will be possible to recover the VAT paid in a foreign country outside the European Union if your country has signed a bilateral agreement with that country, such as Canada, Japan, Monaco, Switzerland, Israel or Norway, among others.
In most countries of the EU, the fact that you are a non-profit organisation does not exempt you from the obligation to pay VAT on the services you hire or the products you buy.
Non-profit organisations have the same VAT obligations as other businesses , so even if you have to pay VAT, you can still deduct it and recover or offset it.
The tax advantages for non-profit organizations lie in other fiscal aspects. Non-profit organizations are not subject to a profit tax as other businesses are.
What happens with the VAT charged on your invoice for translation services depends entirely on whether you have purchased as a private individual or on behalf of your company.
If you are a private individual, whether you are charged VAT by an intra-community company or a translation company in your own country, your money will end up in the Treasury's coffers to help meet the State's expenses.
On the contrary, you may not know it, but in most EU countries there is a way to get this VAT returned, companies present to the Treasury both the VAT paid and collected, with a final result that will come out to pay or to collect.
Therefore, the VAT you pay on your translations will be refunded to you or offset against other VAT you have charged your clients.
If your company makes a profit, it is normal that you need to transfer money to the Treasure for the VAT you have been paid. Only if your company is making a loss or if you do not charge VAT to your clients because they are foreign companies, you will get a positive return for your VAT.
That means that you will be able to ask the Treasury to refund it.
In the event that you have had to pay VAT to an intra-community company because your company is not registered in the intra-community supplier register, you should also be able to recover the VAT, as it happens in most EU countries. Here you get info on how to do this, depending on the country were you have your legal address.
In the case of Spain, there are some specific cases in which translation work is exempt from VAT. In other words, whether you are a private individual or you represent a company and hire an individual, the freelance translator who does the translation work for you is not obliged to issue you with a VAT invoice. If you contract with a translation agency, they are obliged to charge VAT.
Translations that are exempt from VAT are both literary works and scientific works. In other words, if you are a publishing house translating Faust from German into Spanish, you are not obliged to pay VAT for this translation work.
It is also true for work of a scientific nature, such as the translation of an article that you want to publish in a foreign journal.
Josh Gambin holds a 5-year degree in Biology from the University of Valencia (Spain) and a 4-year degree in Translation and Interpreting from the University of Granada (Spain). He has worked as a freelance translator, in-house translator, desktop publisher and project manager. From 2002, he is a founding member of AbroadLlink and currently works as Marketing and Sales Manager.