| Pages in topic: [1 2 3] > | Unilateral deductions from the due amount imposed by a client (translation agency) from Portugal Thread poster: MariusV
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MariusV 
Lithuania
Local time: 03:02
English to Lithuanian
+ ...
I have quite an absurd situation:
I got a job from a client from Portugal (also got their PO, i.e. Purchase Order). Did and sent the job. Issed and sent them my invoice. Never worked for them before and they have a good Proz BB rating (that is why I trusted them). Now it is time to pay, I reminded them, and their accountant sent me a huge PDF form (with many pages, in Portuguese language which I do not understand), they demand me to fill it in, sign, then send by post, then, "if all... See more I have quite an absurd situation:
I got a job from a client from Portugal (also got their PO, i.e. Purchase Order). Did and sent the job. Issed and sent them my invoice. Never worked for them before and they have a good Proz BB rating (that is why I trusted them). Now it is time to pay, I reminded them, and their accountant sent me a huge PDF form (with many pages, in Portuguese language which I do not understand), they demand me to fill it in, sign, then send by post, then, "if all is OK", I will get their payment. If I do not sign it, they said they will pay, but then they will reduce the payment by 21.5%.
They are explaining to me that they have to pay taxes for self-employed persons (i.e. natural persons) who are residents of other countries (i.e. who provided services to them NOT from Portugal). I have tried to explain to them that I am citizen and permanent resident of my own country, duly registered and carrying my "business activities" in my country and I (from the legal point of view and even from any common sense point of view) cannot be subject to another country taxation or any laws. Moreover, nothing was mentioned about these formalities and possible deductions when negotiating the rates/prices for the job, nothing was mentioned about it in the PO. They are explaining that the laws of Portugal changed during the time (in 3 weeks???) and that "all their translators sign it". Well, I'd still understand that their translators, if they hire local freelancers (i.e. from their own country), they might need to sign some documents and that some taxes might be due for this. But can it really be so that me, who is subject of my own country laws (incl. tax and other laws) have to pay THEIR taxes on the basis of THEIR laws? Let alone that I will still have to pay taxes from the amount received (after their unilateral deductions) in my country.
How can I be subject to the laws of all possible countries where my clients are? How can I fill in and sign any formal documents, forms, etc. in the language I DO NOT understand...? And finally, a week ago I got payment from one of my "permanent clients" from Portugal - we have been cooperating with them for over 3 years and they never ever asked for such formalities, never ever deducted anything from due amounts to me, nor mentioned any deductions nor changes of the laws or regulations.
Don't you think this agency is simply lying when the due payment date approached and when they need to pay - being inventive about some "changes of the laws and new formalities" as to postpone, reduce the payment, or even to find all possible reasons not to pay at all? Any experiences about that?
[Edited at 2010-10-15 13:02 GMT]
[Edited at 2010-10-15 13:03 GMT]
[Subject edited by staff or moderator 2010-10-15 19:22 GMT] ▲ Collapse
| | | | David Wright
Austria
Local time: 02:02
German to English
+ ...
| Slight comfort | Oct 15, 2010 |
Although this doesn't really solve the problem, there is bound to be a double taxation agreement between Lithuania and Portugal since both are EU members, which means that any tax you pay in Portugal will be taken intoa ccount when you pay tax in Lithuania.
[Edited at 2010-10-15 13:13 GMT]
| | | | MariusV
Lithuania
Local time: 03:02
English to Lithuanian
+ ...
TOPIC STARTER
David Wright wrote:
Although this doesn't really solve the problem, there is bound to be a double taxation agreement between Lithuania and Portugal since both are EU members, which means that any tax you pay in Portugal will be taken intoa ccount when you pay tax in Lithuania.
[Edited at 2010-10-15 13:13 GMT]
David,
Yes, there is that taxation agreement. But I do already pay my taxes in Lithuania (where I am registered as a tax payer)...So I do not quite understand why I should pay the Portuguese taxes...And what do they actually want from me. I think that taxes of the two parties are "by default" their "own issues"?
| | | | Andrea Quintana
Argentina
Local time: 21:02
Member (2006)
English to Spanish
+ ...
Hi Marius,
In such a case, I'd request the client to send me the forms in a language I can understand immediately, I'd tell them that I'd pass the forms on to my attorney for review, and that, if applicable, they'd have to pay interests for the delay caused by the process. All this after expressing my -strong- disagreement, of course.
Paying less than what has been agreed -for any reason, including taxation- is always unfair, and may even be a breach of contract.
... See more Hi Marius,
In such a case, I'd request the client to send me the forms in a language I can understand immediately, I'd tell them that I'd pass the forms on to my attorney for review, and that, if applicable, they'd have to pay interests for the delay caused by the process. All this after expressing my -strong- disagreement, of course.
Paying less than what has been agreed -for any reason, including taxation- is always unfair, and may even be a breach of contract.
Andrea ▲ Collapse
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XX789 (X)
Netherlands
Local time: 02:02
English to Dutch
+ ...
Tell them you won't fill in any forms and will send a lawyer if they don't pay the full amount within 7 days net.
Oh, and advise them to fire their accountant. What they state is absolute nonsense. You are operating as a company from another country and there's no way you can fall under the laws of another state.
[Edited at 2010-10-15 17:21 GMT]
| | | | Simone Linke
Germany
Local time: 02:02
Member (2009)
English to German
+ ...
| Services within the EU... | Oct 15, 2010 |
It appears that this is yet another case of some people getting confused about the whole EU-internal exchange of services, reverse-charge, etc.
Many people seem to be unsure/confused about this (including myself), and I've recently had an agency from Lithuania asking me to put Lithuanian taxes on my invoices.. I get the feeling that this happens a lot these days..
Also, some of these changes are new this year - maybe it took a while until that Portuguese company found out and... See more It appears that this is yet another case of some people getting confused about the whole EU-internal exchange of services, reverse-charge, etc.
Many people seem to be unsure/confused about this (including myself), and I've recently had an agency from Lithuania asking me to put Lithuanian taxes on my invoices.. I get the feeling that this happens a lot these days..
Also, some of these changes are new this year - maybe it took a while until that Portuguese company found out and that's why they say it happened three weeks ago??
But whatever may be going on here, if they do need to add taxes, then the invoice should be corrected and the taxes should be added to your regular price. They can't just deduct some amount from your actual payment without ever informing you about it beforehand.
About the contract: I think it's obvious that they cannot force you to sign something that is written in a foreign language you don't understand. Pretty lame for a translation agency! ▲ Collapse
| | | | MariusV
Lithuania
Local time: 03:02
English to Lithuanian
+ ...
TOPIC STARTER
I think that their "fresh accountant" does not see much difference between two things:
1) if a Portuguese company employs a free-lancer who is a foreign citizen working and living in Portugal during the time of employment - then yes, both sides should pay some taxes (as it is not employee-employer relations) - such a free-lancer should pay some taxes either to Portuguese government (usually), or sign some forms/requests for these taxes to be paid in his/her "home country". And these... See more I think that their "fresh accountant" does not see much difference between two things:
1) if a Portuguese company employs a free-lancer who is a foreign citizen working and living in Portugal during the time of employment - then yes, both sides should pay some taxes (as it is not employee-employer relations) - such a free-lancer should pay some taxes either to Portuguese government (usually), or sign some forms/requests for these taxes to be paid in his/her "home country". And these "double taxation treaties" between countries are for the reason to avoid double taxation (say, a Lithuanian returns from Portugal after working there where he/she paid all taxes, he/she should not be taxed twice by his/her local government for what he/she already paid there).
2) if a Portuguese company employs a free-lancer who is citizen of another country, and who works in "own country", then both sides are liable for their own taxes and that is it...
This is at least what my accountant (over 30 years working as an accountant) told me today.
Some practical situation for "legal logics": say I am a citizen of Lithuania who has a car registered in Lithuanial - if I go to Portugal and overspeed here, it means I will have to pay a fine for the breach of traffic regulations to the Portuguese traffic authorities. But say if I overspeed with my Lithuanian car in Lithuania, would it be logical to pay the fine to the Portuguese traffic authorities???
I think same logical nonsense with the situation that I have now...
[Edited at 2010-10-15 18:00 GMT] ▲ Collapse
| | | | | ask for the legislation reference | Oct 15, 2010 |
MariusV wrote:
If I do not sign it, they said they will pay, but then they will reduce the payment by 21.5%.
I did wonder if the problem was not understanding how reverse charges work on VAT returns, but Portugals' VAT rate appears to be 21% not 21.5%
They are explaining to me that they have to pay taxes for self-employed persons (i.e. natural persons) who are residents of other countries (i.e. who provided services to them NOT from Portugal). .... They are explaining that the laws of Portugal changed during the time (in 3 weeks???) and that "all their translators sign it".
Ask for a full reference for the legislation in question. If you're lucky, it will be the PT transposition of an EU directive you can read in Lithuanian.
If not... google translate and some kudoz questions to get the gist Or post a message in proz's Portuguese forum?
Don't you think this agency is simply lying when the due payment date approached and when they need to pay - being inventive about some "changes of the laws and new formalities" as to postpone, reduce the payment, or even to find all possible reasons not to pay at all? Any experiences about that?
Nah my guess is it's misunderstanding (hopefully*) of some kind of legislation somehere. There was a thread about a Latvian agency pulling a similar stunt a couple of weeks ago.
* I say "hopefully" because this was the consensus re: Spanish agencies demanding VAT numbers from any non-domestic supplier. It was "a misunderstanding", the "Spanish accountant is being lazy and doesn't want to work out how to deal with it", etc. Turns out the Spanish tax authorities are imposing fines on businesses who pay foreign suppliers without a valid VAT number. I'm not saying this is the same, or even VAT related. But find out the actual legal text, date, reference number, etc. and take it from the very beginning.
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MariusV
Lithuania
Local time: 03:02
English to Lithuanian
+ ...
TOPIC STARTER
:
* I say "hopefully" because this was the consensus re: Spanish agencies demanding VAT numbers from any non-domestic supplier. It was "a misunderstanding", the "Spanish accountant is being lazy and doesn't want to work out how to deal with it", etc. Turns out the Spanish tax authorities are imposing fines on businesses who pay foreign suppliers without a valid VAT number.
Hi Charlie,
Here for a self-employed free-lancer to get VAT-registered, one needs to have a substantial turnaround (for the mandatory VAT "limit"). I understand what you say, but ... if foreign agencies cannot pay foreign suppliers who are not VAT registered, so actually it means (if inverted) that foreign suppliers who are not VAT registered cannot even provide the services??? In the formal sense I mean...
| | | | | Essentially... | Oct 15, 2010 |
MariusV wrote: :
* I say "hopefully" because this was the consensus re: Spanish agencies demanding VAT numbers from any non-domestic supplier. It was "a misunderstanding", the "Spanish accountant is being lazy and doesn't want to work out how to deal with it", etc. Turns out the Spanish tax authorities are imposing fines on businesses who pay foreign suppliers without a valid VAT number.
Hi Charlie, Here for a self-employed free-lancer to get VAT-registered, one needs to have a substantial turnaround (for the mandatory VAT "limit"). I understand what you say, but ... if foreign agencies cannot pay foreign suppliers who are not VAT registered, so actually it means (if inverted) that foreign suppliers who are not VAT registered cannot even provide the services??? In the formal sense I mean...
.... my understanding is that that is indeed the current state of affairs, and as you know, the turnover for mandatory VAT registration in the UK is also quite high. I should add that I have no Spanish clients and my source was someone about whom I know nothing on a general UK business forum. But it sounds plausible to me and I keep hearing about this same problem (altho not perhaps as much or as often as I might expect, so I'm not sure how universal the issue is). Which is nonetheless different to yours, so we digress slightly. But it does serve to illustrate that circumstances can arise which we might think are unlikely or impossible, in these days of attempts to converge practices across the EU.
Were it not for the differences in percentages, my immediate reaction would have been it is a reverse charge issue. I must admit, that when you read some of the UK guidance on reverse charging, if you don't read it carefully or properly, it can sound as though people like me (UK VAT reg'd) should deduct VAT from suppliers like you. We do not, of course. And I cannot speak for the clarity or otherwise of Portuguese guidance on reverse charging or anything else.
But I your shoes, I think I would ask for the source. Not an explanation/interpretation in a couple of sentences by the client, but a link to an online document, in Portuguese, of the actual legislation/regulation your client is applying. And take it from there.
| | | | MariusV
Lithuania
Local time: 03:02
English to Lithuanian
+ ...
TOPIC STARTER
Charlie, I got your point. But one question which I do not understand - HOW can I be subject to Portuguese laws? I did not work in Portugal, and I have not registered as any business entity of Portugal? And what if I have a client from Germany, Austria, Poland, Italy, Spain - so I should actually know all DIFFERENT laws on the same matter of all EU member countries before taking any job? Just from the point of view of common sense.
Regarding VAT. Here it is simple (at least in my co... See more Charlie, I got your point. But one question which I do not understand - HOW can I be subject to Portuguese laws? I did not work in Portugal, and I have not registered as any business entity of Portugal? And what if I have a client from Germany, Austria, Poland, Italy, Spain - so I should actually know all DIFFERENT laws on the same matter of all EU member countries before taking any job? Just from the point of view of common sense.
Regarding VAT. Here it is simple (at least in my country). Say I buy a PC. The seller is a VAT payer. So, they add 21% VAT to its price. E.g. 1000 x 210 = 1210.
Which I pay as "1210". And that is it.
If I sell my services to them (vice versa), I (being NOT a VAT payer) I issue an invoice to them for 1000 and that is it...I do not add VAT at all as I cannot do it. Between the EU countries (if both sides are VAT payers) - then they ADD VAT into invoices. Which is 0%. And ... laws of the countries MUST be in concordance with the EU legislation. So, there cannot be differences on these main issues "between countries" or "inside countries"... ▲ Collapse
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MariusV wrote:
Charlie, I got your point. But one question which I do not understand - HOW can I be subject to Portuguese laws?
Indeed. We must not overlook that if you fill in the form to their satisfaction (whatever that means in practice), you will get the full amount. So clearly it depends on the information you can, or cannot, give them. And as such, I would argue that technically they are not trying to make you subject to Portuguse law as such.
Let us return to our unconfirmed Spanish VAT example. A Spanish firm, knowing it needs your VAT number to comply with its national regulations, and knowing it will be fined if it does not provide one, and then discovering you have no VAT number, might decide unilaterally to deduct the amount of the fine from an invoice. Such action might seem "fair" from that agency's point of view - you (and I) would obviously dispute that, having entered into the transaction in good faith.
It sounds to me, then, as though we may have a similar situation. There may be circumstances (depending on what you put on their form - the possibility of full payment still exists!) under which the Portuguese agency:
either i) will definitely have to (like a Spanish agency being fined for using non-VAT suppliers),
or ii) believes it will have to (like someone who has misunderstood reverse charging) pay spomething to the Portuguse state,
AND
furthermore believes it is entitled to deduct i) or ii) (or something else) from your invoice because it perceives the "fault" to be yours (if it had used someone else, the situation would not have arisen, ergo your fault not theirs, kind of logic...). They intend to disburse €X for this job, and whether they pay X to you, or they pay Y to you and Z to their govt (where Y + Z = X, of course), they don't care.
A more reasonable agency might say "whoops we messed up using you because we've got to pay X + Z, we just won't use you again, sorry". Hence, because the outcome could easily be very different depending on who your customer was and how reasonable they are, I would say it's less about being directly subject to PT law (where surely the outcome under a given set of circumstances is always the same) than about being penalised for the choices your customer has made relative to PT law. Maybe that's all semantics - the outcome is the same for you in this case.
You probably realised all that. But I've typed it now.
But it's all a bit hypothetical until we know exactly why it thinks it might need to make this deduction.
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Krzysztof Kajetanowicz (X)
Poland
Local time: 02:02
English to Polish
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| withholding tax | Oct 16, 2010 |
Look Marius, you're not a tax lawyer, and your accountant may have limited knowledge of international tax issues. It's not like a Lithuanian business may not be taxed in Portugal "because it's illogical". It very well might be taxed in Portugal on certain types of income earned in Portugal (i.e. paid by a Portuguese company), as is commonly done with interest or dividends.
It all depends on domestic legislation in Portugal. W... See more Look Marius, you're not a tax lawyer, and your accountant may have limited knowledge of international tax issues. It's not like a Lithuanian business may not be taxed in Portugal "because it's illogical". It very well might be taxed in Portugal on certain types of income earned in Portugal (i.e. paid by a Portuguese company), as is commonly done with interest or dividends.
It all depends on domestic legislation in Portugal. While domestic legislation is overriden by double tax treaties, which usually restrict the right of a "source country" like Portugal to withhold tax on the income of a foreign company, in order to apply the treaty you may need to present certain documents. Hence the PDF, probably. Again, it's just a guess but it does look like a typical withholding tax situation. ▲ Collapse
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