Sabotai
8811
There are a couple of new articles every day:
Yeah but it’s the Guardian, which every one knows is Fake News Project Fear Central :S.
On a more serious note, this is one of the times I wish I had been wrong.
Sabotai
8813
Yes, don’t believe the experts. The lie the Brexit politicians got away with is humongous.
Small silver lining for some EU countries, I work in Amsterdam and we see quite a few British companies investing in an EU location of their business, which means investment and jobs.
But overall, it’s a sad story.
I’m not even sure how this works. Why doesn’t every manufacturer around the world do this? Simply set up an EU company and then transfer all their products into the EU? I guess it must be something to do with the EU / UK trade agreement?
The cost to the client would be less.
You buy outside of the EU -> product enters the EU -> client has to pay VAT on final price + a fixed processing fee. And incur a delay in the shipment.
You import inside the EU. You pay VAT on costs and a single processing fee (which is spread between all the shipment). -> client buys from within the EU, paying the VAT to you and with a single transaction. Shipment does not suffer additional delays.
For low cost items having an EU company avoids the processing fee (20 euros per shipment or something similar), an additional step the client has to go through (paying the VAT to customs) and the shipment delay.
Cost of the product remains similar for the client since you avoid the processing fee (you also paid VAT before Brexit).
An additional wrinkle is that many times in the UK VAT is included in prices when you buy from outside, so in those cases the client is paying VAT twice.
But what’s killing these businesses is the added bother of the customs step and the added perceived price increase (because you pay extra beyond what you originally saw at checkout).
Aceris
8816
That’s … what they do. Manufacturers outside of a customs area tyically either have a subsidiary within so that all the imports go from the parent company to the EU company in a small number of large deliveries (which are subject to customs rules), or they work with a distributor and don’t have large numbers of direct customer relationships.
The problem is UK companies have been able to develop large direct customer bases within the EU thanks to the single market, and that business model suffers very serious problems once you have import paperwork and VAT charges, even without tariffs. The obvious solution is to set up an EU subsidiary for distribution within the EU.
Great post, thanks for explaining.
Sabotai
8818
Yes, but setting up a new location in a different country, even in the EU, creates a lot of hassle: completely different legal system, different taxation, a lot of extra overhead (office etc), and I’m not going to dive into the problems with transfer pricing.
This is simply not feasible for smaller manufacturing businesses in the UK.
Enidigm
8819
I’m just worried that eventually every person in Ireland will be nabbed at some point to do voice over work in EU based studios. It seems every game with a “generic British Isles accent” is Irish at this point already. The UK needs to get this straightened out so that even the Queen in some future game doesn’t have a Galway lilt.
If this is an issue it’s just because of labor cost. It’s the same hassle for me to hire a VO studio and talent in the UK, in the US or in the EU, specially now that you don’t do in-person sessions. If anything doing it outside of the EU eliminates the VAT overhead (which is minimal, but does impact short term cash flow).
Sabotai
8821
It does not eliminate VAT issues, but moves it to the country outside the EU, which can become even more complicated because the VAT law of this third country applies (there are some countries that don’t have VAT, but most do). But as VO is a digital service, most companies don’t file for VAT taxes and digital services are really difficult to enforce by tax authorities.
In my experience (Spain), VAT in general for B2B service transactions is only applicable to buyers/clients of the same VAT regime. Services in the UK or the US carry no VAT when purchased from within the EU, for example. As well as EU services don’t need to file VAT when the payee is from outside the EU. I don’t doubt there might be territories where it’s more complex, but US, UK, EU service transactions are devoid of any VAT hassle.
I do service transactions both ways (with legal counsel) and there is no VAT issue whatsoever, at least in the cases I’m familiar with (and the case in discussion, VO outsourcing from the EU to US/UK, is one of them). Other countries within the EU might behave differently, though.
But Brexit = good according to the Telegraph… so thanks Angela?
I’ve read the article, and it makes good points that you need to torture until they are in the vicinity of influencing Brexit.
An article going all “She didn’t give us what we asked for, the Teutonic meany” would accomplish the same with fewer words.
I imagine it’s akin to “It’s Joe Biden’s fault that he won the election that we’re inciting insurrection!”
Sabotai
8826
I work for a SaaS company and we sell our services worldwide.
I’m pretty sure there is VAT on UK or US services purchased from within the EU, because Spain complies with the same EU VAT Directive as my country (Netherlands).
But EU companies that are VAT liable (for what they sell), they can get the paid VAT on these bought services back. So it’s mostly paperwork and tax filings, net VAT cost is usually zero for the buying company, as is probably the case with your company.
But there are a lot of customers who are not VAT liable (private consumers, banks, insurance companies, all governments branches, all education, most medical institutions, sport and cultural businesses, stock brokers etc etc). Companies outside of the EU selling to these customers need to file VAT in the EU country the customer lives in. This is a big hassle, so usually an EU-subsidiary is established.
How it works here (for B2B in no special sector, so VAT liable) is that you don’t ever pay the VAT. You just declare the operation as extracommunitary and money never changes hands. Basically because you would get it reimbursed, it never gets charged. It gets filled and “reimbursed” in the same declaration.
Since you have to declare all operations anyway in your fillings, the net overhead is zero. Which is not the case if you actually charge or pay VAT (if VAT money does change hands).
For intra-EU services (with companies in the EU but out of Spain) you can also do the same if both companies are EU VAT registered (no VAT money changes hands). It has come to pass that due to cash flow concerns we made operations with non-Spanish EU businesses rather than with Spanish businesses to avoid the hassle of paying VAT and having to wait up to a year for reimbursement (because most of our payments come from outside the EU we are always due significant VAT reimbursement once the fiscal year is over, up to 20% of our cashflow, so we don’t really want to increase this ratio).
Aceris
8828
Yep! I have a lot of issues with German decisionmaking around the EU, but on brexit I think it is fairer to say Merkel either didn’t see keeping the UK in the EU as worth spending political capital on, or grossly underestimated the risk of brexit (or both!). I don’t think that makes her responsible for Brexit.
If I had to pick one person I’d pick Blair. He should have said “This Lisbon treaty thing is all very nice, but I promised a referendum and I can’t get it through, sorry.” Farage obviously was the big driver, but he was riding a wave that already existed. The electoral calculus left Cameron with little choice (while it made internal party management easier that was never the true motivation). But Blair could have stopped it merely by sticking to the spirit of his promises to the country, rather than merely the letter.
Even many Liberal Democrats (the most pro-EU party in the UK) denounced it as an antidemocratic stitch up at the time.
Sabotai
8829
As we debated in earlier posts, the British Government is advising UK companies to invest in EU location:
