VAT charging by freelance language teachers - Germany

Hi all,
I am working for Inlingua, and have written my first invoice. I have a VAT tax ID number in Germany, so I charged 19% VAT tax. They wrote back that they don't pay this to the teachers. Is this normal?

That's funny because I told other schools that I would add the tax to the invoice, and they had no problem with that.

You need to get advice from a Steuerberater/in. I've worked in schools before where I didn't need to charge MwSt. but I believe the reason behind that was the courses were "gemeinschaftsnützig". But you really need to ask for some professional advice.

According to §4, Abs. 21b of the Umsatzsteuergestz (VAT Law), freelance teachers neither need to register nor charge VAT, so unless you have alternative freelance work to teaching you didn't need to register yourself and you certainly don't need to charge Inlingua (but you must indicate the relevant regulation on the invoice as a reason for not including it). Assuming Inlingua themselves are registered for VAT then it should be no problem for them to reclaim it, but I guess it's hassle they prefer to avoid

If I don't charge it, then I can't claim expenses...books, petrol, etc. Well, I registered, and I'm paying the tax, no way around it. The other schools seemed to accept this, I'm wondering why Inlingua doesn't. Boyfriend seems to think Inlingua charges the company tax, and doesn't pay the teachers.

I've already had shady deals with Inlingua. They promised me 21 Euros an hour in the beginning, then suddenly, on the contract, it was 20 Euros for the first 30 hours, only then to be increased to 21. They didn't say a word about that. Also, they only pay .20 cents per kilometer for petrol. I've been told that it's almost always .30 cents.

Again... ask a tax advisor. Find another freelance teacher you can trust- and then ask them who does their taxes. A tax advisor/accountant who's familiar with freelance teachers will be able to answer your specific questions and prevent you from getting potentially screwed over.

It's quite possible that as a training institute Inlingua are simply not registered for VAT themselves, which is within their right. While, like you they *could* register they may have the opinion that the effort in managing the VAT is simply not worth it. This makes you 19% more expensive to them than your contemporaries.

Thanks for the advice, this really helps me out.

So, if they are not registered, but I am, do I have to pay the VAT?

I think I need to ask Inlingua if they are VAT registered, and in any case, start looking for work at a school that is VAT registered.

If they are not registered, but you are, then you have to charge the VAT (and pay it on to the taxman), but they cannot reclaim it (as registered businesses can)

I need some advice on this topic. From 2004 - 2008, I was a freelance English teacher. I worked for various schools and was always advised that I did not need to charge VAT, but could if I wanted to. I must confess, I never researched the topic for myself, but blindly (and perhaps stupidly) followed the advice of my language schools.

I did my taxes myself in 2004, 2005, and 2006. For tax year 2007, I used an accountant for the first time - she did my taxes and I had earned more than 17,500 Euros. For tax year 2008, I sent her my papers again (in July). She finally got around to doing my taxes and contacted me today, informing me that I should have charged VAT in 2008 because I earned more than 17,500 Euros in 2007 and in 2008.

My first question, based on Yorkshirt Lad's post above, it seems that I don't actually have to pay - so should I have charged VAT or not?

Second question, if I should have, what are my options now? She told me that I needed to get it back from the various language schools that I worked for - how likely is this?

Third question, while I do accept responsibility for not researching this myself, shouldn't she have told me this the first year she did my taxes? The reason I paid someone was to get help with such questions. Do I have any options besides not using her again? She is unfortunately somehow related to me (cousin of my brother-in-law) so I probably can't get into anything ugly, but would be good to know nonetheless.

I realize a lot of these questions will require a professional answer, but I am really quite displeased with my accountant at the moment - recommendations for reliable accountants would also be appreciated.

Thanks in advance for your help!

If you are freelance teacher in the true sense then §4, Abs. 21b of the Umsatzsteuergesetz (VAT Law) would normally apply which exempts you from VAT accounting. Ask your accountant if she is aware of this exception and if so why she thinks it does not apply to you.

@YL6 - Thanks so much for your quick reply! I have passed the question onto my accountant and will update when she answers me.

In other news, I have already heard from one of my language schools - they have a form for such cases and will transfer me the necessary money, so at least it seems that I won't be having to fork over the VAT myself...if I have to fork it over at all. Quite a relief as I was panicking about having to come up with 19% of last year's income...

YL6 already said it. §4 Nr. 21 b UStG means: If you are writing an invoice for teaching services at an officially recognized school (§4 Nr. 21 a UStG), you dont have to charge VAT for that service. But it´s my understanding that if you are not a "Kleinunternehmer" any more you would still have to charge for teaching at any other institution. The fact that your school seems to have a form for that case does imply, that they are not officially recognized. (Or I am wrong or they just dont have a clue.)

If at least some of your teaching jobs were rightfully VAT free according to §4 Nr.21b UStG, there is one good news:
the tax free revenue does get subtracted from the total revenue, when deciding if you hit the 17.500 EUR bar. So maybe you didnt make more than 17.500 EUr in 2007, then you would be still a "Kleinunternehmer" in 2008.

One school I worked for were exempt under §4 Abs 21a of the bb UStgesetz.
so i did not have to charge them VAT. Another school insisted on being charged.
robert

I've quoted the above reference to Finanzamt when they asked me about why a lot of my income does not attract VAT (I am VAT registered but for various reasons, most of my income is exempt, so they are interested in why). I also copied my invoices to them. This was ages ago now and I heard nothing from them again and was not assessed as having to pay VAT, for what that's worth (ie. I can only rely on it not being followed up to date, they could still get back to me)!

Therefore, first thing you do, as suggested, is quote back that law section. If that doesn't work, then you might have a bigger issue. A lot of such enquiries / interest are simply trying to get positive assurance about your compliance, whether it's having to charge or not. It doesn't automatically mean there's a problem, a big bill to pay etc. Anyone not charging VAT when registered, and with significant turnover should realistically expect some attention at some point, you just have to work it through.

Personally, I drive my decisions to charge VAT according to the rules regarding my circumstances and the type / nature of the work I deliver and so on. What the client does with its VAT arrangements (or not) is down to them. Nothing to do with me. If I don't charge VAT for a lot of my education / training work, that's because the law exempts me for whatever reason. Nothing to do with what a client might (want me to) do (or not), although sometimes their perspective and arrangements about the nature of the service are useful in deciding whether it's exempt or not. Finanzamt aren't interested in me saying: "but the client said....". My VAT compliance is my responsibility.

It is certainly worth reading the relevant law section about how VAT applies to such education services in detail (it's on the internet). I need to read it again now given some of the comments here.

PS - tenngirl: 19/119% of your 2008 income would be your liability, to be exact, so about 16%! What you thought was a sort of "net" income would turn "gross" and that proportion would be the VAT bit.