Reverse Charging: Work in Germany for Irish Company

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Hi guys - I'm getting a lot of conflicting info on this matter from different accountants who are all quick to say the other accountant is wrong, but never explain properly. 

 

I teach a course here in Berlin every 2 months where I am VAT registered. The company I do the course for is based in Ireland. So when I invoice them, i reverse charge them. I put all the info the invoice as I should. 

 

My accountant now tells me that I should be charging them 19% because I am based and registered in Germany as a Freiberuflich. 

 

My mother is a translator based and registered as a business in Ireland. She works from home for a lot of French, German etc clients. She always reverse charges them. 

 

I can't tell what the difference between our two situations is and why I should charge VAT and she should reverse charge. 

 

Please help me out here. Have I got it wrong, or is my accountant just jumping the gun?

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Your accountant is right, "teaching" is a special case set down in §3a (3) Nr. 3 lit. a UStG, so you have to charge 19% German VAT. This special rule takes precedence over the general rule of §3a (2) UStG.

The "location" of your service is Germany, not Ireland, so you have to charge German VAT.

 

Your mum's activity "translating" is not a special case. Translating takes its "location" from the Irish version of the general rule §3a (2) UStG (the rules for VAT are the same throughout the EU, the European Commission saw to that with Council Directive 2006/112/EC), so the "location" is the location of her client companies, so her translation services carry the VAT of her client's countries. Which those countries don't trust her to actually pay, so the European Commission invented the "reverse charge" system, thereby making her clients (instead of her) pay that VAT in their own countries.

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Hi PandaMunich - thanks for your quick reply. That really helps. If we were to not say "teaching" but "giving" a course, or "facilitating" would that mean I could use the general rule instead?

 

I fear that this means I will have to sacrifice 19% of my pay (as I work for a set fee and can't change it) as the Irish company I work for can't claim the VAT back on their end. 

 

Thanks in advance

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31 minutes ago, Kevin de Freine said:

 If we were to not say "teaching" but "giving" a course, or "facilitating" would that mean I could use the general rule instead?

 

No, anything "unterrichtend" is subject to that special rule. Just read the law §3a (3) Nr. 3 lit. a USt.

 

31 minutes ago, Kevin de Freine said:

I fear that this means I will have to sacrifice 19% of my pay (as I work for a set fee and can't change it) as the Irish company I work for can't claim the VAT back on their end. 

 

Of course they can claim back the 19% German VAT:  https://www.revenue.ie/en/vat/reclaiming-vat/irish-vat-registered-traders-reclaiming-vat-from-european-union-eu-member-states.aspx

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Just read it now in Google Translate. I understand it now - thanks!

 

Can I ask you a related question: I've just been looking at similar threads that you answered but never quite the same situation so I would appreciate if you can advise me on this. 

 

I also run a Gbr with my wife. We both have our VAT-registered freelance businesses that are completely separate. We set up the Gbr so we could charge our clients without VAT. But now our accountant (who told us differently before) says we must charge VAT on all Gbr invoices by virtue of the fact that we pay VAT on our freelance invoices. 

 

Very confusing, but which is true? We believed the Gbr is a separate entity and wouldnt be viable to pay VAT until its rurnover passed 17,500. 

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You're right as long as the GbR wasn't set up just to evade Umsatzsteuer, i.e. if it has a different activity from your and your wife's activities. 

So your accountant would be right if you just set up the GbR as a trick.

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Well - the freelance and the Gbr do completely different activities. My freelance business is publishing books and giving tours in Berlin and the Gbr is for language teaching online. 

 

But actually now I realise that the steuernummer I have for my freiberuflich activities is: unterricht (for giving tours in Berlin) and the Gbr is also unterricht (for teaching languages online). 

 

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Giving tours to tourists isn't "Unterricht", which is "freiberuflich", but a "gewerbliche Tätigkeit", for which you would officially need a Gewerbeschein and pay Gewerbesteuer on if the profit exceeds 24,500€ per year.

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Ok, thanks a lot PandaMunich - I do appreciate it greatly. This low VAT threshold really kills when you are working with consumers or clients who set their wage and force you to pay the 19% out of what they paid you. So i thank you - have a nice day!  

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4 hours ago, Kevin de Freine said:

Hi guys - I'm getting a lot of conflicting info on this matter from different accountants who are all quick to say the other accountant is wrong, but never explain properly. 

 

Maybe it's because your information is highly contradictory? 

 

2 hours ago, Kevin de Freine said:

My freelance business is publishing books and giving tours in Berlin and the Gbr is for language teaching online. 

 

Last year it was a trade: 

 

On 22.6.2018, 15:36:44, Kevin de Freine said:

 

- Came to Germany in June 2017 and set up a Gewerbe for my publishing business. 

 

Could it be that you can't see through yourself anymore? 

 

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3 minutes ago, Kevin de Freine said:

Not sure what you mean or if you are trying to be helpful or just rub it in that I'm lost! 

 

I wanted to give you a clue ... but forget it. 

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@PandaMunich

 

Hi - just wanted to fill you in on this; I wrote the the company in Ireland that I've been Reverse Charging. They said I need to keep doing it that way because:

 

"As I understand the "where performed" EU VAT rules for supplies of education only relate to services when the customer and the supplier are in the same place when the service is taking place. If Kevin was charging the students himself for the training, then he would be in the same place as his  customer(s) and would therefore need to charge VAT. Kevin's customer is Everything TEFL LTD who is NOT present in the same place during the service and therefore the general B2B rule should apply; and Kevin should continue to account for the VAT using the reverse charge mechanism. "

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Actually, they're right.

So I take everything back, you're the general case of §3a (2) UStG, which means that the "location" is Ireland and the reverse-charge system applies.

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