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European VAT Registrations for Offshore Companies
Our UK office (tax lawyer) is able to arrange a United Kingdom (European Union) VAT registration for your offshore company. There are no UK tax consequences with such an arrangement.
Alternatively, we can offer a special “all inclusive” offer to include an offshore company, a bank account and VAT registration. A very limited number of ready-made companies with existing VAT registrations are also available for urgent business opportunities.
Having read the following information, please fax back the application form enclosed and we can start work on your registration immediately.
EU VAT Main Rules
A general principle of European VAT law is that exports of goods are zero-rated. However, since the Single European Market was implemented in January 1993, trade between member states of the European Union has been classified as “internal trade”.
It is therefore necessary in most cases for a purchaser in another member state to provide proof of VAT registration in his own country, in the form of a registration number, if he is to avoid being charged VAT by the seller. The registration numbers of both parties must be shown on the invoice and declared to the authorities.
This can be a problem for a non-EU business which is trading within the Single Market. A typical case might be a Channel Islands company which is buying goods from Germany reselling them to Belgium, with delivery direct from the supplier to the purchaser. The EU’s free trade policies and the increasing use of legitimate tax shelter schemes means that non-EU entities are frequently involved in internal EU trade.
In the case of services, specific regulations define what particular services are taxable and where. However, a business in a member state will generally be expected to provide its VAT registration number when purchasing services from another member state, in order to claim exemption from VAT.
Furthermore, interpretation of VAT regulation differs from country to country. In some, VAT numbers are issued as a matter of course to all companies. In others, such as the UK, registration is in many cases optional and may even be refused to certain businesses (banks, for example, because banking business is not subject to VAT). This creates difficulties and unwarranted investigations of legitimate transactions between registered and non-registered businesses.
In all these cases, the tax can often be legally avoided without a registration. However, suppliers, customers and even VAT authorities are often unaware of the underlying law, so transactions and paperwork tend to run much more smoothly where a VAT number is provided - even if only for “cosmetic” purposes.
Possibilities for VAT Registration of Non-EU entities
Any entity may register for VAT in any EU country provided it establishes a suitable presence. There is nothing, for example, to stop a Bahamas company from registering for VAT in Belgium. However, most authorities generally require a substantial presence which will then lead to residency for the purpose of corporation taxes, which should obviously be avoided.
Irish VAT authorities, under pressure from the EU, have specifically stated that they will not issue VAT registrations to Irish non-resident (tax-free) companies. Some countries have also resisted granting registrations to European Economic Interest Groupings because of the way they are taxed.
In practice, there are three suitable areas within the EU for VAT registration of offshore or other non-EU entities. These are Madeira, the Isle of Man and the UK.
Madeira is a relatively new free trade zone and is not generally desirable due to the need to adopt Portuguese accounting standards and the Portuguese language when dealing with the authorities.
The Isle of Man (which is part of the UK for VAT purposes) is prepared to issue registrations to businesses which conduct some administration - such as invoicing or banking – and is resident for tax purposes on the island. This effectively involves setting up a physical presence in association with local professionals and paying a flat-rate corporation tax each year.
The UK has identical VAT legislation to that in the IOM but without a tax residence requirement. In our opinion, therefore, the UK is the most desirable option in the majority of cases.
Problem free VAT Registrations in the UK
After a few initial problems, the UK authorities now have clear guidance on what constitutes a “place of business” for VAT registration. This is much less onerous that the test of general tax residency.
For VAT registration in the UK all that is needed is a “place of business” which might be our office address. There is no permanent establishment with a sufficient presence to generate any tax liability. The UK address is given purely for VAT returns and nothing is done from the address beyond compliance with the requirements of the UK VAT authorities. VAT returns will be “nil” and this demonstrates that no trading is being carried on in the UK as it is all being conducted abroad.
VAT returns will be nil because the company’s entire turnover will be outside the scope of UK VAT, no trade will be carried on in the UK and no goods will enter or leave the UK.
Registrations may be obtained for non-resident:
- offshore companies
- non-EU trading companies
- individuals (physical persons)
- partnerships and professional practices
- unincorporated bodies e.g. charities, clubs
VAT administration in the UK is simple compared to that in many other countries. A return is usually required every three months, consisting of one single side of paper and eight figures. Inspections are carried out on average once every 3-4 years, and less often with companies that have no UK business, since the authorities tend to concentrate on inspecting books of riskier cash businesses such as shops and restaurants.
No records need to be maintained in the UK. However, it is possible that the VAT authorities will demand an inspection at any time, and in this case certain records would have to be sent to the UK and you would need to employ a representative to assist you. (We can provide that service).
Other benefits of UK VAT Registration
Where goods are being brought into the EU from other countries, if such goods are merely passing through the UK on their way to a customer in another EU country, then no import tax will be charged in the UK. The onward transfer of those goods to another EU country is of course tax-free since goods are arriving from within the Single Market. This exemption is useful where small, high-value items such as gemstones or computer chips are being traded.
The British Isles are of course famous for their seafaring tradition and are an ideal point of entry into the EU for yachts. Entry into the waters of any EU member state can result in a demand for payment of VAT unless proof can be supplied that VAT has already been paid in another member state. A UK company can be established which can immediately recover the full amount of VAT paid on the yacht, generating a substantial cash-flow advantage since VAT will only be payable by the user on hiring costs at a daily rate whilst the yacht is in EU waters. No VAT would need to be charged whilst the yacht was elsewhere, for example in the Channel Islands.
How to obtain a UK VAT Registration through our office
Initially please complete the attached application form and return it to us. We suggest you pay by credit card or bank transfer, in which case you can fax the form to us. Alternatively you can mail it with your cheque.
We will then send you an official UK government form VAT1 which must be signed by a director of the company (or a suitably-authorised person if the registration is not for a company).
You should return that form to our offices along with a copy of the Company’s certificate of incorporation, and a document confirming the identity of the signatory. The registration process then normally takes 14-21 days. You will be advised of your VAT number by fax, and the Certificate of Registration will follow in the mail.
Administration after registration
If you confirm to us that no business is being carried on in the UK, we will handle all routine VAT administration and bill you according to our attached fee schedule.
If you are doing business or invoicing from a UK address we will forward VAT returns to you for completion every three months.
It is essential that VAT returns (and therefore payments to our office) are kept up-to-date as otherwise penalties may be incurred, the registration may be cancelled, or you could be liable to criminal prosecution.
Our office will maintain full client confidentiality at all times, and if your company has nominee directors there is no need for the UK VAT authorities ever to know who is the ultimate beneficial owner of the company. If required, by negotiation, we can provide such nominee directors.
You are very welcome to contact us if you have any questions, whether now or in the future.
Schedule of fees for VAT Registration
Initial fees: (always payable)
Handling of registration formalities, submitting application to HM Customs & Excise, and sending you details of the registration £150
VAT address service for one year (renewable after one year) £200
Completing, signing and submitting "nil" VAT return (4 per year) £100 each
Special reduced rate for entire first year if paid at time of registration £300
Maintaining records, or completing VAT returns where amounts are not "nil", or assisting in VAT investigations, or other specialist services £ 50 per hour
UK VAT Registrations for Offshore Companies - Data needed:
- Address for correspondence - confidential
- Telephone and fax
- Name of entity to be registered for VAT
- Type of entity: company - trust - partnership - physical person
- Place, data and number of registration
- Does entity have a bank account in the UK?
- Is the entity already trading or is new?
- If new when will it commence trading?
- If existing, what date did it commence trading?
- Has any proprietor - director - partner been involved in any other business with a UK VAT
- Registration in the last 24 months?
- Other information - special instructions