VAT Question for Freelancer

20 posts in this topic

Dear all,

 

First of all, I want to say thank you to everybody who contributes to this amazing website! It's been my rock since I moved to Germany. 

I am in dire need of your help. I moved to Germany at the end of December 2018. I have been working as a freelancer online since then mainly with a company from Spain, a company from Switzerland and a company from UK.

 

Now, I did not charge any VAT on my invoices to them as they all told me that's not needed in our case. The big problem is that now I am reading that past the threshold of 17k a year I should actually charge VAT. Does this apply in my case? Or are these clients subject to a reverse charge and I do not need to add vat to my invoices?  

 

Another thing is, that I have read that if on the previous year I made less than 17k (which is true), even though I was not in Germany, for the following year I could proceed with not charging vat (as I did not know how much I will make) but now I should start charging it as the previous year put me above the threshold.  

 

Can you please please help me? Also, any advice on how to properly write my invoices or notes regarding VAT on them would be great!

 

I would speak with an accountant about this, but I can't afford the fee right now.

 

Thank you all for your attention!

1

Share this post


Link to post
Share on other sites

 

Your clients are most likely not experts in the ways of the German tax system so don't listen to them seek expert advice.

 

If you previously earned more than 17,000 € per year then you must charge your clients VAT.

 

BTW:  The VAT threshold was raised to 22,000 € on 1st January 2020.

 

https://www.lexoffice.de/gesetzesaenderungen/kleinunternehmerregelung-2020/

 

You should write your invoice something like this:

 

Xxxx hours or whatever           800,00 €

 

19% VAT                                 152,00 €

 

Are you a member of any professional organisations? If not, have a look at the homepage of the Verband der Gründer und Selbständigen Deutschlands e.V. There is a wealth of information to be found there. https://www.vgsd.de/

 

 

 

 

 

 

0

Share this post


Link to post
Share on other sites
On 24/01/2020, 13:44:49, Mary Anne said:

I am in dire need of your help. I moved to Germany at the end of December 2018. I have been working as a freelancer online since then mainly with a company from Spain, a company from Switzerland and a company from UK.

 

Now, I did not charge any VAT on my invoices to them as they all told me that's not needed in our case. The big problem is that now I am reading that past the threshold of 17k a year I should actually charge VAT. Does this apply in my case? Or are these clients subject to a reverse charge and I do not need to add vat to my invoices?  

 

Can you please please help me? Also, any advice on how to properly write my invoices or notes regarding VAT on them would be great!

 

Don't worry, reverse-charge turnover doesn't "count" towards the 22,000€ a year Kleinunternehmer turnover limit, since its VAT "location" isn't in Germany.

 

You need to mention both your client's and your own VAT-ID on all your reverse-charge invoices, and the words "Reverse Charge".

And never charge any VAT in such an invoice.

1

Share this post


Link to post
Share on other sites
4 hours ago, PandaMunich said:

 

Don't worry, reverse-charge turnover doesn't "count" towards the 22,000€ a year Kleinunternehmer turnover limit, since its VAT "location" isn't in Germany.

 

You need to mention both your client's and your own VAT-ID on all your reverse-charge invoices, and the words "Reverse Charge".

And never charge any VAT in such an invoice.

 

Sorry for my invasion of this post, but I found it interesting as I have similar issues/doubts.

PandaMunich, what do you mean by reverse-charge?

 

0

Share this post


Link to post
Share on other sites

If you are an EU business and provide services to another EU business, you have to write a reverse-charge invoice, i.e. you put the burden to pay the VAT at his local VAT rate onto your client.

At the same time, you have to snitch on your EU business client by filing the Zusammenfassende Meldung, to ensure that he really does pay that VAT.

That EU business client will declare the amount from your invoice in his own VAT announcement and pay the local VAT on it, and at the same time - if he is eligible for getting back VAT - get that VAT back.

 

Without the reverse-charge rule, you as a German business would have to register for VAT in the other country, pay that country's VAT rate based on your invoice amount and transfer that VAT amount to that country's tax department.

 

Example:

You are a freelance web designer and provide web design services to an Irish business that sells cars, at, say, 10 hours x 100€, in total 1,000€.

So you will write an invoice for 1,000€ but will not add 19% German VAT in your invoice.

Instead, you will write "Reverse charge" on the invoice, and both your and your EU business client's VAT-IDs, as proof that both of you are really businesses.

 

The Irish company will declare the 1,000€ from your invoice in their VAT announcement, and "pay" 23% Irish VAT, i.e. 230€ on it to the Irish tax department.

Since that Irish company performs a "normal" task like selling cars, and not a task that would bar them from getting back the VAT on all the services they need for their business, like - for example - providing medical care would, they will immediately get those 230€ back from the Irish tax department.

 

The idea behind doing it this way is to lay the duty of paying the VAT to the Irish tax department on somebody who already knows how to file these Irish tax forms, the Irish company, instead of on you, since you as a "German" freelancer may have no idea how to do it and may then just "forget" to pay Ireland its VAT...

 

Please also read this brief overview on when to charge VAT and when not: 

 

1

Share this post


Link to post
Share on other sites

Thank you PandaMunich! I am still confused but getting there... does this apply to Kleinunternehmer as well? I mean, if I am not supposed to charge VAT because I am "small", do I still have to do the reverse charge?

 

Also, what happens with Switzerland? I am sorry to fire so many questions at you, but you seem so well informed and I got even more confused by talking to the Finanzamt people... :huh: In 2019 I registered as a small business (articles, photos and translations) and I mostly work with a Swiss client with the occasional EU client. They told me that I need to submit my earnings from EU clients every quarter, while for my Swiss work Finanzamt have nothing to do with it, because it falls under Zoll and I need to get in touch with them. But I am not selling any merchandise, my work is purely "intellectual"... what has Zoll got to do with this?! Also, I didn't know about this rule about submitting every quarter. My head is exploding :blink:

0

Share this post


Link to post
Share on other sites
1 hour ago, Jean Genie said:

does this apply to Kleinunternehmer as well? I mean, if I am not supposed to charge VAT because I am "small", do I still have to do the reverse charge?

 

Yes, since you are only considered a "Kleinunternehmer" inside Germany.

With regards to other countries, you are considered a normal business, so you have to mention "reverse charge" on the invoices that you write to your EU business clients. These reverse-charge invoices are not allowed to show any VAT.

 

1 hour ago, Jean Genie said:

Also, what happens with Switzerland?

 

Switzerland also uses the reverse-charge rule, which is good for you, otherwise you would have to charge SWISS VAT in your invoices, register for VAT in Switzerland and pay the Swiss VAT on all the invoices that you write your Swiss business clients. 

As things are, you simply write on all your invoices (again: these are net invoices, i.e. with no VAT!) to your Swiss clients that they have to pay the "Bezugssteuer" and you are done:  https://www.unternehmenssteuern.de/reverse-charge-verfahren-bei-der-umsatzsteuer-einfach-erklaert/

 

1 hour ago, Jean Genie said:

They told me that I need to submit my earnings from EU clients every quarter

 

That is the Zusammenfassende Meldung, i.e. the snitching mechanism within the EU, with which German businesses that provide services to other EU businesses tell a central tax agency in Germany that they provided a service worth x€ to, for example, the Spanish company with the VAT-ID ES123456789, and then this information is then forwarded to the Spanish tax department so that they can check that that Spanish company really pays Spanish VAT on your invoice amount.

 

However, you can stop worrying, Kleinunternehmer are exempted from having to file the Zusammenfassende Meldung, see §18a (4) UStG.

So you don't have to snitch on your EU business clients.

 

1 hour ago, Jean Genie said:

while for my Swiss work Finanzamt have nothing to do with it, because it falls under Zoll and I need to get in touch with them. But I am not selling any merchandise, my work is purely "intellectual"... what has Zoll got to do with this?!

 

Nothing.

The Zoll would only be involved if you sold physical products that would be sent in parcels across the German/Swiss border.

2

Share this post


Link to post
Share on other sites

Thanks so much PandaMunich, so the Finanzamt gave me false information, but at least things are clearer to me now... thank you from the deep of my heart!!!! :)

0

Share this post


Link to post
Share on other sites

Another invasion of this post, so if a Kleinunternehmer had ventured over the 17000 limit in year X and then had to charge VAT in year Y, what happens if in year Y they go back under the 17000 limit? In year Z can they then simply stop charging VAT, do they have to jump through hoops and stop charging VAT, or do they have to keep charging it?  

I am just thinking that with 17000€ (now 22000€) being relatively low, its possible for someone to be charging it some years and not others like a yoyo if they are under and over the limit every other year?

0

Share this post


Link to post
Share on other sites

The limit was 17,500€, not 17,000€.

Apart from that, you simply tell the Finanzamt at the start of year Z that your turnover was again under the Kleinunternehmer limit in year Y and then only issue Kleinunternehmer invoices without VAT in year Z.

2

Share this post


Link to post
Share on other sites
5 hours ago, PandaMunich said:

The limit was 17,500€, not 17,000€.

Apart from that, you simply tell the Finanzamt at the start of year Z that your turnover was again under the Kleinunternehmer limit in year Y and then only issue Kleinunternehmer invoices without VAT in year Z.

Thank you, that makes sense and would be a lot easier than I would have expected it to be :)

0

Share this post


Link to post
Share on other sites

Amazing topic! Thank you @Mary Anne for starting it and everyone for contributing!

 

I rediscovered TT thanks to it, as I'm in the middle of filling my Fragebogen zur steuerlichen Erfassung :D 

 

I plan to do some teaching and training and, as the opportunity arises, consulting in the fields of management, marketing, communication, PR and intercultural management. Probably also some strategy, design and production for promotional, communication and training materials (at least this is what I think I will do and plan on writing in my Fragebogen). The job offer I have right now is for teaching 5-10 days a month, with the possibility of maybe working as an employee once a full position is available. So not really much going on yet, but I had freelance ideas for a long time.

 

I do the application with the goal of setting up as freelance, and did not want to register for VAT, as it's a hassle I am not able to take on right now and business volume will be low. Still, I might have the opportunity to serve as consultant for companies in other EU countries, rather than Germany, as I am not exactly fluent in German. My question is: if I don't opt to register for VAT, is there any way for me to bill EU companies which have a VAT no? I carefully read the thread and don't seem to get it :D

 

Also, though I've read a lot on it, any experience-based advice on declaring the predicted income&turnover for years 1&2 is welcomed. I am really afraid not to make mistakes there. I am still not clear on dealing with health insurance, pension and social security once I go freelance (Hamburg case), so I am cautious :)

 

Thanks plenty and sorry that I went a bit off topic, but I read so much on this stuff these days that I'm even confused about my own name :))

 

0

Share this post


Link to post
Share on other sites

Hello all, great thread but I'm still confused... & Stressed...

 

This stems from the fact that I was previously self employed in the UK, and I still have a home office their but my wife kids moved to Germany in 2018 and I now live in Germany when not working and commute overseas to work, just as I did previously. It would appear that I had some bad advice from a German accountant telling me I didn't need to register in Germany since my business was all in the uk... Anyway it would appear that by way of my family being resident in Germany I am then also tax resident in Germany... See Double taxation treaty...

 

Could I outline my situation and get some feedback...

 

I'm not registered for vat in the uk. & 

I have not yet registered for German vat

 

In my first year 2018 resident & freelance in Germany I had a turnover of €25000 liable for German income tax but all of it was outside of Germany providing services abroad to companies based in other EU states, mainly the UK. So I'm assuming all the income was exempt from German vat? 

 

In my second year 2019 all my turnover upto November was again for overseas companies, the bulk being in the UK again (~€40000) but from November I have done €18000 worth of work for a German based company, (but overseas outside of the EU) the last invoice of 2019 took me over the €17500...

 

I believe this €18000 of work is vat liable? And crossed the €17500 threshold?

 

In 2020 I have so far done one job for this German client (again for a service performed outside of the EU). Which would be German vat liable?

 

Note:Clients are all businesses that are vat registered in their home countries.

 

Up to now I have been declaring all income in the uk... But it looks like I need to amend my UK tax returns and issue German tax returns... But my main worry is vat...

 

1st question when did my liability for German vat start?

 

I'm assuming I need to register for vat in Germany asap? After which how far back am I liable for vat? Is it just the one job so far in 2020?

 

Any help much appreciated?

 

 

 

 

 

 

 

 

 

0

Share this post


Link to post
Share on other sites

Sorry if I up this thread but I think it fits :) 

 

Does anyone know (perhaps @PandaMunich as he seems to be an expert!) how is the income calculated, by invoice date or by the date when I actually receive the money on my account?

For example, if I send an article in December but then it gets published in May and I get paid in June, how does it fit in my tax declaration? In the UK one can choose between invoice date and payment date and stick to one or the other system, but I don't know if this applies to Germany as well.

Thanks!

0

Share this post


Link to post
Share on other sites

By the date you actually receive the amount in any of your worldwide accounts, i.e. you use "cash accounting":  https://bench.co/blog/accounting/cash-vs-accrual-accounting/

So in your example, that income was in June.

In cash accounting, your yearly profit is calculated in the Einnahmen-Überschuss-Rechnung.

See how the first letters form the acronym EÜR?

Yes, that's where the name of the Anlage EÜR comes from.

 

In the other way of doing accounting, "accrual accounting" the profit is calculated by doing balance sheets (for tax purposes: a Steuerbilanz).

Doing this type of accounting would not be something you could manage on your own, you would need to know double-entry accounting and even then your would fall foul of all the rules set down in German tax legislation for accrual accounting - unless you had German accountancy training, but then you wouldn't have asked this question ;)

People who do accrual accounting do not file an Anlage EÜR, but instead the Steuerbilanz.

Accrual accounting is only mandatory in Germany for Gewerbetreibende (= anybody self-employed who doesn't belong to the privileged professions listed in §18 (1) EStG) who have a profit of over 60,000€ a year and for capital companies (UG, GmbH, Ltd., and so on) no matter how low their profit is.

0

Share this post


Link to post
Share on other sites
On 1/24/2020, 11:06:43, White Rose of Yorkshire said:

 

Your clients are most likely not experts in the ways of the German tax system so don't listen to them seek expert advice.

 

If you previously earned more than 17,000 € per year then you must charge your clients VAT.

 

BTW:  The VAT threshold was raised to 22,000 € on 1st January 2020.

 

https://www.lexoffice.de/gesetzesaenderungen/kleinunternehmerregelung-2020/

 

You should write your invoice something like this:

 

Xxxx hours or whatever           800,00 €

 

19% VAT                                 152,00 €

 

Are you a member of any professional organisations? If not, have a look at the homepage of the Verband der Gründer und Selbständigen Deutschlands e.V. There is a wealth of information to be found there. https://www.vgsd.de/

 

 

 

 

 

 

 

I'm a little confused. The link says the new threshold takes effect in January 2020, but does that mean it applies to income earned in 2019, too, ie if I earned over 17,500 but under 22,000 in 2019, I'm still considered a Kleinunternehmer? I just want to make sure I've understood correctly so I don't end up with any surprises. 

0

Share this post


Link to post
Share on other sites
7 hours ago, Fritsen said:

I'm a little confused. The link says the new threshold takes effect in January 2020, but does that mean it applies to income earned in 2019, too, ie if I earned over 17,500 but under 22,000 in 2019, I'm still considered a Kleinunternehmer?

 

Yes, because since we're now in 2020, the year 2019 is the previous calendar year (= vorangegangenes Kalenderjahr) mentioned in §19 UStG: https://www.gesetze-im-internet.de/ustg_1980/__19.html

2

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now