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IN092 - VAT Registration - Using a Local Agent in the Isle of Man
VAT is a straightforward tax system, but with extremely complicated rules and variances (or derogations) between the countries of the EU.
VAT Legislation in the EU
VAT legislation within the EU is based on central European Directives, but each country can, and does, apply local rules regarding application and rates. VAT should be a neutral tax between businesses operating in the EU and is not intended to apply to individuals outside of the EU.
A non-EU resident company (IBC) has many issues to consider when evaluating the effects of VAT rules on its intended trading activities. Legislation and rules change on a regular basis, both EU-wide and in individual states, and therefore local specialist advice needs to be sought.
When it May be Appropriate to Register for VAT
There may be circumstances where an IBC would not need to register within the EU. For example, if it was providing services to a VAT registered business within the EU.
There are, however, circumstances where it would be advantageous to have an EU VAT registration in order to reclaim input taxes or indeed facilitate trading operations. For example, a non-VAT registered IBC that wished to purchase goods in Belgium and sell them in The Netherlands would need to export the goods physically out of the EU and then re-import them to the EU in order to avoid breaching VAT rules. On the other hand, an IBC that was registered for VAT within the EU could arrange for the goods to be sent directly from Belgium to The Netherlands.
Use of an Agency Company
Where it is important for an IBC to have a VAT registration within the EU, it is often useful for the IBC to conduct its business through an agency company. Such an agency company would frequently be a United Kingdom company registered in the UK for VAT. Such a VAT registration within the UK is comparatively simple. The transactions would be viewed, within the EU, as the transactions of the agency company, and VAT matters would be dealt with accordingly.
Sometimes use of an agency company is not suitable, and an IBC is then faced with the prospect of registering for VAT within certain countries of the EU, which can often be time-consuming and expensive. An alternative is to consider the use of a local VAT agent.
Provision of a VAT Agent in the Isle of Man
It is in the provision of a local VAT agent that the Isle of Man can offer a unique advantage. The Isle of Man has a customs union with the UK and is considered for all VAT purposes as if it were a member of the EU (through the UK) while remaining for direct taxation purposes an independent jurisdiction.
The Isle of Man Treasury has introduced a zero rate of corporation tax for all companies based in the Isle of Man.
Where appropriate, an IBC can appoint a “local VAT agent” in the Isle of Man. The agent will be responsible for the registration process and will provide the ongoing contact point between the VAT authorities and the IBC. The agent will be required to maintain copies of the IBC’s accounting records as well as the original purchase invoices and copy sales invoices at their offices. They will liaise with customs officials at the necessary VAT inspection visits and report back to the directors of the IBC as required.
It should be noted that in order to qualify for VAT registration within the UK, it is necessary that the company seeking registration undertakes an economic activity within the UK or has an establishment in the UK. Dixcart can offer advice on the measures that should be taken to best meet these obligations.
VAT Services from Dixcart Management (IOM) Limited
Isle of Man VAT officials are well used to offshore companies being registered for VAT and therefore work comparatively efficiently with local agents. The existence of a local agent is a requirement for VAT registration, and Dixcart Management (IOM) Limited are happy to be able to provide this service. This facility is offered to clients together with full accounting services and, where required, additional advice on VAT issues.
We are also happy to provide advice regarding the direct tax implications of any economic activities carried out within the EU.
Contact
For further information on using a local VAT agent in the Isle of Man please contact Simon Kelly in the Isle of Man Dixcart office.