German VAT when invoicing clients in the U.S.

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Hi,

I'm a Dutch freelance writer/designer living and working in Berlin. I have a German one-man company with a (Euro-) VAT number/Umsatzsteuernummer.

So I don't invoice VAT (USt or Mehrwertsteuer) to my EU clients, being companies that also have VAT numbers.

My new client is an American (Massachusetts) company. Some of my German colleagues say I don't need to put VAT on my invoices to them -- it's "abroad". That sounds too simple to me, and I can't find info about the legislation.

Does anyody here have any experience as a German firm invoicing American clients?

Needless to say, I provide services, I don't export goods.

Thanks!

Jan

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If you deliver your services outside of Germany then VAT does not apply. If you are invoicing another customer in the EU they must be provide with a valid international VAT number before you can eliminate the VAT content from your invoice. "Services" ("Leistungen") are difficult to define. As a writer it could be argued that you do the work (i.e. the writing) in Germany so VAT does apply as you effectively provided the service here. Your US customer should be able to claim back any VAT applied (although it's a long and complicated process). There are also exceptions for certain activities related to sales or marketing activities (e.g. you are writing technical marketing documents). You should take professional advice or apply to the Finanzamt for guidance stating the particular services you are providing and offering examples of the work you do and the customers you service. If you get it wrong this can bite you later. If the Finanzamt audits your business and determines that VAT was applicable but you have not charged it they'll simply claim 16/19% from you on all the VAT-free invoices you have written. They can go back up to 7 years doing this and although you might be entitled to it would be somewhat embarrassing to go to a customer 7 years later with an additional invoice. In this respect the better rule to apply in your case is "if in doubt always include VAT", even though it makes you 19% more expensive to your US customers.

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Bit confused with this silly tax carry on. If I'm sending an invoice to a client outside of Germany, what do I need to include on the invoice to exempt said client from MwSt. My tax number is on the invoice, but don't I need to write something on their stating that since I have their tax number they're exempt from MwSt?

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You need more than a tax number you need a USt-ID. Best get theirs aswell so if there are any enquiries you're ok.

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I have the Ust-ID for my company, and I have theirs on file. Someone mentioned that I may have to write something on the invoice to that effect too?

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If you are not charging German VAT to an international client then you should include the reason for not applying this (usually referring to the relevant statute) and if supplying goods you must indicate the international VAT number of the customer. If you are supplying services to them, then VAT normally applies unless you actually performed (the bulk of) these services outside of Germany. It is up to you to check their VAT number is valid prior to writing the invoice. You can do this on the VIES database. Be warned - this is a hairy topic with many pitfalls, which can bite you in the bum later if you subsequently have a VAT inspection (if you have incorrectly NOT charged VAT the taxman will charge *you* the 19% you failed to collect and you may have little chance to reclaim it from your now long gone client). If in doubt, always charge VAT - in theory at least eligible foreign customers can reclaim it manually from the German tax authorities. Your invoice must (in all cases, not just for international trade) include your tax number, and your VAT number (Ust-IDNr) if you have one (these are NOT the same!)

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I have a small business too, and according to my stuerberater, for any European customers you have to indicate the VAT no. and no tax. When it comes to my American and Canadian customers, it is different, it will depend on the type of biz you do, some services are taxable, but designing isn't, I am 100% sure on that.

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There is no such thing as "100%" sure in this game. Asking a Steuerberater for advice is a good idea, as he is liable for any answer he gives, should it subsequently be wrong. Do be sure, however, that you give him all the information so he can give an informed opinion and not wriggle out later. He needs to know exactly what services or good you have supplied, and to whom, when and from where. I've even submitted questions to the Finanzamt on this topic for a definitive answer and they have refused to reply (their answer is typically "do it how you think fit and we'll tell you later if you did it right). Finanzamts in different areas can differ in opinion too. Your customer being in, or out of the EU has little bearing on the application of VAT, but does have a major bearing on how you write the invoice or report the transaction.

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I might have overseen this, but if someone already mentioned it, it seems to be worth to point it out again:

How VAT is handeled also depends on, if your customer is a private person or a businessman ("Unternehmer") buying for business purposes. If your customer demands tax-free delievery (because he says he is a businessman) you better check that twice and collect and store the proof in case of a later tax inspection.

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Is there anyone here who knows for sure what the rules are? I've been trying to work this out for ages!

 

I am invoicing a non-EU company for technical translational services, delivered electronically. From what I can gather so far, it depends on the place of supply. If it is said to be supplied at the customer's location, then this is outside of the EU and VAT is not chargeable. If services are 'supplied here' in germany (because I live here), then I have to charge it.

 

It also seems to have something to do with the nature of the work. According to UK rules (where I'm originally from), my work would be exempt, since it is marketing/information services. The german version of the laws are just a bit too complicated for me!

 

The finanzamt are being slow to reply, took them a week last time and god knows how long i'll wait this time...

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I am invoicing a non-EU company for technical translational services, delivered electronically. From what I can gather so far, it depends on the place of supply. If it is said to be supplied at the customer's location, then this is outside of the EU and VAT is not chargeable. If services are 'supplied here' in germany (because I live here), then I have to charge it. (...)

It also seems to have something to do with the nature of the work.

The work you do is a "sonstige Leistung". The fact that it is delivered electronically does not matter in your case. Normally the place of supply for "sonstige Leistungen" would be the suppliers business address, but §3a(4) UStG mentions some exceptions, that are treated differently. One of those exceptions is the work of a translator. In that case the place of supply is the business address of the recipient. So in your case it wouldnt be taxable in germany. But of course the VAT laws of your customers country would apply.

 

You should verify this information with your tax advisor.

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Looks like I'm resurrecting a zombie thread here, but I suppose that's okay...

 

My husband and I run a small business here in Germany. We sell handmade accessories (made by us in Berlin) online and most of our customers are from the US. A small percentage are from the EU, and an even smaller percentage are German. Obviously we pay tax on sales made in Germany, but our Steuerberater said we don't need to pay any tax on anything outside of Germany as long as the customer is private and not an entrepreneur. Is this correct? 

 

 

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I am sure an expert will be along soon, but I  thought  one had to pay tax on all earned income, whether   from here or US?

I think Panda is one of the experts on TT.

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Thanks Panda! But what about within the EU - my Steuerberater said that outside of Germany, no VAT was payable, as long as the customer was private. We filed last year's tax return on that premise... And he didn't correct it. Were we wrong? Do we need to pay 19% on everything sold to EU customers, private or not?

 

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Nope, when exporting products to an EU country  you have to charge 19% VAT to private customers (up to a certain (high) limit, above that limit you have to charge that country's VAT rate), and no VAT to EU businesses (they have to prove to you that they are a business by providing you with their VAT ID).

 

But I'm repeating myself, all possible cases are described in the post I have already linked to: 

http://www.toytowngermany.com/forum/topic/300112-kleinunternehmer-will-start-2nd-freelance-job/#comment-3068478

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Sorry - I should have checked. This is very helpful though.

However it does worry me a tad as it means we haven't paid tax on some of our European income from last year. I guess our Steuerberater will be liable if the authorities get wind of it though, as he is the one who told us the wrong info and he also checked over our accounts and didn't rectify things? 
Argh. Tax. I don't mind paying it, I just wish it was easier to work it all out.

Thanks again for your response Panda - much appreciated!

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Well, actually you are liable (in Germany, it's always the taxable person who is liable - you are supposed to understand the tax return you sign).

Your tax advisor's liability insurance wouldn't pay that extra VAT, because after all, you will only end up paying the legitimate tax. They would however pay the late interest and the late fee.

 

By the way, when shipping a product to an EU business you also have to prove that that item reached the recipient. For that purpose the recipient EU business has to fill in and sign a Gelangensbestätigung and you have to keep it safely in a folder.

When you get audited by the Finanzamt (= well, an Umsatzsteuer-Sonderprüfer) you have to show it to them, otherwise they will slap 19% VAT on that sale, which you will have to pay immediately.

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