When to add Mehrwertsteuer to your invoices

103 posts in this topic

Posted

Hello all!

I've got a question which for some of you may seem so easy but it bothers me greatly:)

Here it goes:

If a person I am going to do a cleaning job for is a private person and wants the bill (Rechnung), then does this person get the 16% back from the Finanzamt or not?

The guy says I will have to pay the tax myself and not him because he is a private person and doesn't run any business.Is he right?

..If he will not get the money back, what does he need the bill for???..or I'm wrong?

Thanks!

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Posted

Ask him if his local supermarket pays his tax as well ! If so, I'll go shopping there!

In principle, the bill has to show MwStr, so did you agree a fee with or without tax? If with, then he pays you the sum which includes tax. If the fee was X plus tax, then add it on.

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Posted

Thanks Spookyfella!

But does he get the money back or is he lying?

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Posted

He gets the money back if it was a business expense. He pay EUST (VAT) on his cornflakes. No refund. He pays EUST on a new PC. It is refunded.

Either way if you write an invoice, you have to charge EUST, it does not matter to you whether its refunded or not.

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Posted

I tried that in college but didnt work out for me. Mainly because I thought cornflake was code word for... well ya know.

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Posted

Then his employer buys the cornflakes. Unless he's a freelance cornflake tester, but then he'll need a formal receipt from the supermarket both to claim back the EUST, and write off the cornflakes as a business expense.

Realistically I don't feel the query two above has added any clarity to Bidul's dilemna.

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Posted

Bidul shouldn't have a dilemna, he or she should have a Weetabix instead or maybe a Pop Tart.

If they are being paid black, under the table or around the back of the ceral box then they can't write a bill anyway.

If they are writing a bill then the MwSt has to be on it, and as the MAXMAN said, if it's a business expense then it can be claimed back.

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Posted

Thanks guys, yes I'm going to write the bill for him but just can't believe I should pay this 16% :angry:

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Posted

Yes, in everycase (except black, and therefore no paper trail) you are due to pay the 16%. The question is whether you charge him as well. Whether he claims it back or not is his problem.

So, if you agreed 100 bucks, was that with or without tax? Ie, do you get 86 odd and the taxman 14, ( bill for 100) or do you get 100 and the taxman 16 (bill for 100 plus 16 = 116)?

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Posted

Basically VAT/Mwst works like this: You do some work, charge the person you worked for your fee +16% Mwst. This 16% belongs to the taxman, so you have to give it to them.

The only way you can aviod doing this, legally, is if you have bought some equipment to do the job. e.g. a new bucket, in which case you can deduct the amount of Mwst. you paid on the bucket from the amount you owe the taxman, i.e. the mwst. you charged your customer.

Your customer may be able to claim back the Mwst. he paid you if it was a business expense, for example if it was his office you were cleaning. You cannot hold on to the Mwst. it is not your money.

If he's a private person then he cannot claim the tax back, the same as you can't if you buy a new TV. He wants a receipt so if you fcuk up he can prove you worked for him and sue your ass!

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Posted

bidul, do you have a registered business? According to the Umsatzsteuergesetz (Law on VAT) only businesses are allowed to charge Mehrwertsteuer.

§ 1 Umsatzsteuergesetz

Steuerbare Umsätze

(1) Der Umsatzsteuer unterliegen die folgenden Umsätze:

1. die Lieferungen und sonstigen Leistungen, die ein Unternehmer im Inland gegen Entgelt im Rahmen seines Unternehmens ausführt.

my bold

If you don't have a business you get paid net. If you do, you have to charge Mehrwertsteuer but you can claim Vorsteuer against it. But best consult one of the tax consultants who advertise here to be on the safe side.

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Posted

Whoever is putting this to you is a cheeky corn and should flake off.

The whole POINT of cash in hand work is that it is more lucrative for both the employee and the employer because the tax man is getting nothing. But there's no paper, apart from the cash. If this employer wants a bill off you to claim back as tax expenses then they should be paying to cover social insurance.

Bear in mind that if you produce an invoice for this person to claim against then there is the possibility that the finance people might investigate the issuer of said invoice...

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Posted

Actually, you even can decide to have a business without charging Mehrwertsteuer. But it's available only for small business not exeeding a certain turnover per year.

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Posted

Bidul,

it depends if YOUR business is VAT registered!

Not all businesses have to be VAT registered, it depends upon your turnover total for the previous year(s).

If you are VAT registered, you issue a receipt showing the VAT and he claims it back from the tax office if he has a VAT registered business and this is a valid expense.

If you are VAT registered and he is not VAT registered, but still has a business, then your receipt must show the VAT and he cannot claim it back.

If you are VAT registered and he is just a private person wihtout his own business, your receipt should show VAT and again, he cannot claim it back.

If YOU are a private person without a business, then I would be very careful about issuing receipts and they most certainly should NOT mention VAT!

Even as a private person you re allowed to 'earn' an amount of extra money per year doing extra jobs / selling. But it must be declared to the Taxman.

DO NOT issue VAT receipts for this!

MT

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Posted

Thanks everyone for advice. The problem is solved. At the beginning I set up a wrong kind of business! (with MwSt), but now I have put it right and I run a small firm without MwSt which is just perfect as I don't have to worry about the tax and I still can give the bill!

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Posted

When writing out an bill for certain services, does one charge Mehrwertsteuer? If you don't know whether you earn over €7,500 "Gewinn" per annum, should you do it? How does it affect how I declare income tax for the year?

Topics merged by admin

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Posted

IF you are registered for Umsatzsteuer, or are in the process of registering then you apply it (currently at a rate of 19% for general services) to any service or goods you provide in Germany, assuming VAT applies to that service in the first place. Registration is voluntary if your turnover (not profit!) is less than €50,000/year otherwise it is compulsory. It has no affect on your income or income tax. All the VAT you charge is handed over to the taxman at the end of the month, but is balanced against any VAT you paid for purchases for your business in the same period.

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Posted

EUR 50.000 (if the previous year's turnover was over EUR 16.620 you must pay VAT regardless of your turnover)

I love this place.

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Posted

Is YL6 slipping? B)

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Posted

Max €17,500 in your first (or previous) year of business, €50,000 thereafter...

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Posted

From what I read it sounds like if you do €16,620 in Year 1, then you have to register in the 2nd year whether you end up doing only €20,000 in the end???

Edit: Limit now €17,500 but sounds like you still MUST then register in Year 2???

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Posted

If you have (or expect to have) a turnover exceeding €17,500 in your first or previous year of business and you have, (or expect to have) an excess of €50,000 turnover in your current year then you are obliged to register. Otherwise you can register voluntarily.

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Posted

Everything said above is centered around the question if you are a "Kleinunternehmer", who doesnt have to deal with VAT. Assuming you choose or have to deal with VAT, the question if you have to charge VAT on this specific bill is still not answered.

The services you are offering might not be liable to VAT. (YL6 mentioned it.) For example services of a physical therapist do not. Not to speak of the difficulties, when doing business outside of germany...

You can always choose to charge VAT, but then you have to consider the additional administrative work.

If your clients are companies, they wont care if you charge VAT because they can deduct the "Vorsteuer" from their own "Umsatzsteuer"- debts. But if your clients are private individuals, they would be glad they dont have to pay the additional 19% (assuming you dont have to charge VAT).

A reason to choose to charge VAT, although you dont have to, would be: you are having high expenditures, for whom you would want to get the VAT back (if you have to buy a car for example)

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Posted

Typical tricky example is a golf pro in the UK. You find that they ALL magically try and keep their income below the UK VAT threshold 'cos 99% of clients are end-users and cannot reclaim VAT. Furthermore they have very little vatable costs on their business. So if they become VAT registered they just magically become 17.5% more expensive than the others (or in reality lose 17.5% of their income, when charging the same prices). This is when it becomes akward whether you register or not.

The flipside is if you are a business that purchases stock and resells. Your profit might be only say 20% of the item value and so you are gonna bust the threshold very quickly. But your competitors will be bigger and so you are all in the same position and you will be just as competitive. But you are gonna need to get registered for sure, even if you are selling only to end users/public.

Finally if you are selling to other businesses, who are VAT registered themselves, then there is generally no disadvanatge to becoming VAT registered and usually works in your favour for reclaiming on your costs. Even if you are in a pure "labour" business like a translator for example.

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