B2B withholding taxes on commission and consultancy fees

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Hi everyone,

I'm seeking some clarity regarding withholding taxes for B2B transactions, specifically when paying commissions or consultancy fees. Here are my questions:

Withholding Taxes on Commissions/consultancy fees: When my company based in EU pays a commission and/or a consultancy fee to a foreign business entity let say in Europe (outside of my country) or outside Europe, do we need to withhold taxes?

Like for example - I need to pay a company in Turkey that brought me business a commission - 5,000 euros, I need to withhold taxes on this payment based on double taxation treaty between my EU country and Turkey?

As I am new to this world, and freshly opened a company in EU that will mostly deal with companies based in EU or outside (Turkey, UAE, Thailand, USA etc..) I would like to have some guidance.

Thank you!

 

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Withholding Taxes on Commissions/consultancy fees: When my company based in EU pays a commission and/or a consultancy fee to a foreign business entity let say in Europe (outside of my country) or outside Europe, do we need to withhold taxes?

No withholding taxes applicable for you.

If both parties are in different EU/EEA member states and are VAT registered, an invoice can be issued without VAT. Your accountants will take care of recording the reverse charge correctly.

If both parties are in the same EU/EEA member state, VAT probably has to be charged/paid, but can be claimed back. Your accountants should know what to do.

If the party you pay is not in an EU/EEA member state, it's up to the regulations applicable to the party you pay whether they (not you) have to pay any taxes. However, that should be none of your headache. Most consultancy agreements have a clause in them clearly stating that each party is responsible for its own taxes.

Like for example - I need to pay a company in Turkey that brought me business a commission - 5,000 euros, I need to withhold taxes on this payment based on double taxation treaty between my EU country and Turkey?

No withholding taxes and probably no VAT applicable in this case. I say probably for VAT because there are edge cases where it might be VATable.

As I am new to this world, and freshly opened a company in EU that will mostly deal with companies based in EU or outside (Turkey, UAE, Thailand, USA etc..) I would like to have some guidance.

If you want tax advice, you should speak with a tax adviser. This forum is a great resource but it is not a substitute for getting tax advice. We can give you some general tips and guidance. However, only a tax adviser qualified/certified under your applicable laws can actually answer your questions with certainty.

 

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Understood ! Thank you very much for your answer and help