Frequently asked questions about VAT for EU freelancers

Shayan H · May 4, 2020 04:13:01 PM

thanks for your answer, do you know that is this true for all or most of freelancing platforms? non of them charge my clients this amount of money and I should pay that from my own pocket?

Micael N · May 4, 2020 04:31:58 PM

No, I don't know any platforms that allow you to charge VAT on top of the project fee. I just avoid clients to which I have to charge VAT (anyone from the EU and any B2C clients).

Joachim M · May 4, 2020 11:54:06 PM

Shayan H wrote:
thanks for your answer, do you know that is this true for all or most of freelancing platforms? non of them charge my clients this amount of money and I should pay that from my own pocket?

Well, Elance once offered this but this was a feature abolished after the takeover by Upwork. People per Hour allows you to mention the percentage but you already have to have it included in your proposal. But, as I said before, with you located in the US VAT doesn't affect you, your clients in the EU will have to file for importation VAT when buying from you.

Joachim M · May 4, 2020 10:33:02 PM

Micael N wrote:
You wish. You have to pay it from your own pocket.

No Micael,

You don't. As you know in advance where your client is located you can add the VAT to your proposal and tell your client that the price will be reduced by that amount if they provide a valid VAT number.

Micael N · May 5, 2020 03:37:02 AM

Ah yes, the good old tactic of discussing accounting in the cover letter.

Joachim M · May 5, 2020 05:27:44 AM

Micael N wrote:
Ah yes, the good old tactic of discussing accounting in the cover letter.

Well, I don't discuss accounting in my cover letter. I merely inform the client of his options. The only reason being that Upwork doesn't display the VAT number in the clients profile. Would make things a lot easier.

Micael N · May 5, 2020 05:28:46 AM

Yes, I've suggested the same thing to Upwork before.

Joachim M · May 4, 2020 10:30:02 PM

Shayan H wrote:
Hi, my country asks me to pay 19% of my income as VAT that I must have taken from my customer to the tax office. Do you charge my customer with this amount of money or not?

Shayan,

Your profile says you are located in the US, the US don't have a VAT system.

Shayan H · May 5, 2020 02:46:14 AM

thanks for your answer,

my profile is not updated for a while. I do not reside in US now. I want to ask you for the situation that I reside in europe and I have to pay 19% of my income becuase of the VAT. Can I charge my clients this amount of money?

Joachim M · May 5, 2020 05:23:55 AM

Shayan H wrote:
thanks for your answer,
my profile is not updated for a while. I do not reside in US now. I want to ask you for the situation that I reside in europe and I have to pay 19% of my income becuase of the VAT. Can I charge my clients this amount of money?

Well, first of all you need to update your residence before Upwork realizes that your data are no longer valid. Upwork will have to charge VAT on their fees to you.

With regards to the 19% I have no idea as we currently have 28 member states in the EU which amounts to more than 56 different percentages for VAT. The VAT percentage you have to charge to your clients depends on the member state you are located in.

Generally you have a number of options:

1. You can apply for a small business scheme. If you stay below the threshold (different in each member state) you don't have to charge VAT at all.

2. If you are obliged to charge VAT (or chose to do so), you have to charge the VAT to your client if the client is located in the same member state you are located in or if the client doesn't have a VAT number. If the client is a commercial client VAT doesn't bother them as they will deduct the VAT being charged to them from the VAT they charge to their client. VAT is not a cost for any enterprise, only for the consumer.

3. You never charge VAT to clients outside of the EU.

4. You don't pay VAT on your income, tax on your income is called income tax. VAT is charged on services/goods you sell and buy, also on imports.

If you have no idea of how VAT works you may want to hire a tax consultant.