company in home country invoices Cyprus company to get the funds to home country?

[Tax Cow]

Part 3 of 3: Concluding

We discussed a lot of other examples. Among more interesting, for example, if the client is a Belgian financial institution, they are obliged to pay the full VAT tax on every single Reverse Charge invoice, without any input VAT relief. A 100K Reverse Charge invoice @ 0% costs them 121K, even if the supply is essential to their banking business!

Moral of the discussion, we are certainly not competent to discuss the outcome of Reverse Charge VAT across the EU. Maybe only in the very specific situations which are relevant to our own businesses we qualify. And neither is Avalara, it seems, because their article is generalizing what should not be generalized. It's not like my business is a rare mix of selling asthma inhalers, cigarettes and taking donations for charities. A mix of commercial and residential property lease is as common of as it gets!

 

[JustAnotherNomad]

Sorry, but you just don’t want to admit that you were wrong.

I also asked an accountant again if there ever was a case where reverse-charged VAT could be a net expense. And he said that yes, there is of course the potential that you will have to pay reverse-charged VAT: If you generally can’t claim VAT refunds (because your invoices don’t contain VAT), then obviously you wouldn’t be able to deduct reverse-charged VAT either.

For example, that may be the case for a medical doctor or a school, as they are typically exempt from charging VAT on their invoices. The downside to that is that a medical doctor cannot get VAT refunds either. Obviously in such a case there would be no refund for reverse-charged VAT either.

But that has nothing whatsoever to do with the reverse-charge mechanism. And obviously every regular business would be able to charge VAT. In all regular cases, reverse-charged VAT does not matter at all.

 

[Tax Cow]

Wrong to an extent! I'm not hiding it

I used word "may" not "will" regarding VAT liability which is a big difference and thus that particular answer I gave early is 100% correct. I made errors in other replies.

@JustAnotherNomad

All your examples are meaningless. They are not worth anything until the client's jurisdiction, more specifically VAT exemption rules, are known. Your examples 1, 2 and 3 can be completely wrong (client is a private Belgian bank or my real estate business) or completely correct (client is a Belgian software dev company). We're not just talking about public schools and hospitals here.

Admit that your examples are wrong or at least meaningless. Go ahead.

@NicolasMaduro

What do we mean by "correct" and "wrong"?

If you want to be 100% "correct" in that case, you do not claim 100% input relief, not even 1% because that fictional advertising invoice is not used for VAT-taxable supply. Then you also pay the Corporate Income Tax on that invoice because you are embezzeling funds out of a company.

My part 2 of 3, where your obligation is Nil assumes that you do not get caught! And that means you are "wrong" too.

 

[JustAnotherNomad]

We were this whole time talking about companies that are subject to VAT, that is the norm. Your claim was that if there is no VAT received, VAT can’t be deducted. And that’s simply not true.
Of course, in a case where VAT generally can’t be deducted, then you can’t deduct reverse-charged VAT either, but that’s so obvious that we don’t really have to discuss it...
Anyway, it’s no big deal, at least I hope it’s clear now for everyone.

 

[NicolasMaduro]

Wrong to an extent! I'm not hiding it

I used word "may" not "will" regarding VAT liability which is a big difference and thus that particular answer I gave early is 100% correct. I made errors in other replies.

@JustAnotherNomad

All your examples are meaningless. They are not worth anything until the client's jurisdiction, more specifically VAT exemption rules, are known. Your examples 1, 2 and 3 can be completely wrong (client is a private Belgian bank or my real estate business) or completely correct (client is a Belgian software dev company). We're not just talking about public schools and hospitals here.

Admit that your examples are wrong or at least meaningless. Go ahead.

@NicolasMaduro

What do we mean by "correct" and "wrong"?

If you want to be 100% "correct" in that case, you do not claim 100% input relief, not even 1% because that fictional advertising invoice is not used for VAT-taxable supply. Then you also pay the Corporate Income Tax on that invoice because you are embezzeling funds out of a company.

My part 2 of 3, where your obligation is Nil assumes that you do not get caught! And that means you are "wrong" too.

I have never seen a person being 100% wrong, and still trying to manipulate the truth to make it look like you were still not wrong. You were not "wrong to an extent". You were 100% wrong.

 

[NicolasMaduro]

@charlemagne


If you intend to pay CIT, keep in mind that you may have to reverse charge VAT too for purchasing those phony services. If meaningful sums are involved, I'm assuming that both entities are registered for VAT, and then reverse charge VAT must be paid on top of 0% rate invoice value in your home state.

Just to remind you @xzars

This is the only scenario we discussed. You brought up other scenarios, which was very manipulative, just to make it look like you were not 100% wrong.
In this scenario you were 100% wrong. And this scenario was the only scenario relevant.

 

[John Andrews]

VAT is a very complex topic and depends on a lot of factors. Let's stick to the actual question: is it a good idea to move money onshore by invoicing an offshore company?

The answer is no because invoices should always be legit, even if it's offshore to offshore (because a bank might ask you for an invoice).

The obvious solution here is to make the onshore company ("in home country") a shareholder of the offshore company (in Cyprus). So via dividends instead of invoices.

If you can't do this because the taxman will find out about your company in Cyprus, you've got waaay bigger problems.

 

[JustAnotherNomad]

Just to remind you @xzars

This is the only scenario we discussed. You brought up other scenarios, which was very manipulative, just to make it look like you were not 100% wrong.
In this scenario you were 100% wrong. And this scenario was the only scenario relevant.

LOL, I was too lazy to scroll back up, he actually said both companies are registered for VAT, so all the edge cases (doctors etc.) were off the table.

Anyway, no hard feelings from my side at all. Kudos to @xsar for checking this at least and agreeing in the end. I don’t care who was wrong or right, what matters is that we get the correct information out there.

 

[happyjohn]

Anyway, no hard feelings from my side at all. Kudos to @xsar for checking this at least and agreeing in the end. I don’t care who was wrong or right, what matters is that we get the correct information out there.

That's the spirit we need here, more of this please.