Friday, January 28, 2011

A billing question

I’m wrapping up a short contract job: it was pitched into my sweet spot, as the baseball analogy goes.  A bit of ECG signal processing: write a couple of algorithms, benchmark the performance, wrap it into a simulator and write a research report.

As Goldman Sachs says, every job is both a chance to make money and a chance to build relationships.   I brought in a couple of good people that I want to work with again, dividing the work between us.  The result has been gezellig: ‘nice to be coding and good to be working with sharp people.

So, here’s the question:  We are doing the work for a US company who will (hypothetically) pay us $10,000.  The three of us are dividing the work 4, 4, and 2; one partner is the US and the other two of us are in the Netherlands.

1) What is the most advantageous way to arrange the contracts, and 2) who must collect tax in their invoice?

1) I talked with my accountant, who suggests that the arrangement contract relationships is largely irrelevant.  So, I will be the lead contractor and the other two subcontract to me.

2) She further says that, with regard to taxes:

  -- I do not charge VAT on a US contract.

  -- The US subcontractor does not add VAT in billing me

  -- The Dutch subcontractor does add VAT when billing me, but I can claim it back.

I suspect that the US guy may have some local business tax as well – we’ll see.  And the lesson is to have good help before going into transnational business: it’s never simple, straightforward, or logical.


Textual Healer said...

The basic line is - you charge BTW to all Dutch clients (business offset it against their liability). You do not charge BTW to BTW registered clients in the EU (but outside the NL). But you need their BTW details and to give these to the tax office ayt the end of the quarter / year (a new requirement since 2010). Non-registered clients in the EU (e.g individuals) you do charge BTW. You charge BTW to all clients outside the EU.
Simple huh?

Dave Hampton said...

It's a good guide, slightly skewed from what my accountant recommended though:
-- yes Dutch to Dutch
-- No, Dutch to EU (all BV-equiv's are registered? I need to start checking...)
-- No, Dutch to US (different than what you heard)

At least, that's how she's had me doing it for the past year, and I had to refund one VAT collected from a Belgian client because I added it in error.

Textual Healer said...

Hi - probably Bv-equivs are registered - but I do much work for NG0s which are not always registered and some individuals who generally are not. Actually haven't done any trade with the USA so am not sure about those rules. But I was told to charge BTW to Swiss and Chinese clients.