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Frequently asked questions about VAT for EU freelancers

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Ace Contributor
Lucian M Member Since: Jun 25, 2017
311 of 340

The year is closing by and I went to IRS / tax institute a few weeks ago to understand what I actually have to declare, provide proof of how I own this money through work / a job in order to not get a fine or something else greater. I had discussed with the person at the Information desk, providing to her all the history of my work here on Upwork, file by file printed.  She wasn't clear either and we talked for at least 30 minutes. She knew English at medium level which was a bit hard for her to realize the entire subject. She told me to get more info and then return to her.

 

Now that I have read the main page of this topic and with my previous thread I made a few months ago relating to VAT, I understood only half of it as now I'm still a little confuse.

 

I have worked for 10$. 2$ is Upwork fee = 8$ - VAT = 7.62$ at the end.

"Amount: $2.00 USD x 19% = $0.38 USD"

From my understanding, this VAT 0.38$ fee tax is going back or "remitting" to my tax authorities through Mini One Stop Shop.

 

Question 1:

I need to know how does my tax authorities get the signal, something to show up on their screen computer that this VAT tax fee has my identity  ?

 

Question 2:

This VAT tax fee that was taken from me, it means that I don't have to pay any other taxes in my country? I notice in my invoices that I have 19% which is what my Romanian country current percentage is.

 

Question 3:

If I don't have to pay any more taxes (by my understandings) and just to show my earnings how can I show the exact proof on paper to my IRS or government that,  tax was already taken from my earnings.

I have to start and form a file in February 2018 to show what I have earned in 2017 and from this sum to tax me.

 

I do not have a VAT number. Freelancer working from home.

 

 

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Community Guru
Joachim M Member Since: Mar 23, 2015
312 of 340

@Lucian M wrote:

The year is closing by and I went to IRS / tax institute a few weeks ago to understand what I actually have to declare, provide proof of how I own this money through work / a job in order to not get a fine or something else greater. I had discussed with the person at the Information desk, providing to her all the history of my work here on Upwork, file by file printed.  She wasn't clear either and we talked for at least 30 minutes. She knew English at medium level which was a bit hard for her to realize the entire subject. She told me to get more info and then return to her.

 

Now that I have read the main page of this topic and with my previous thread I made a few months ago relating to VAT, I understood only half of it as now I'm still a little confuse.

 

I have worked for 10$. 2$ is Upwork fee = 8$ - VAT = 7.62$ at the end.

"Amount: $2.00 USD x 19% = $0.38 USD"

From my understanding, this VAT 0.38$ fee tax is going back or "remitting" to my tax authorities through Mini One Stop Shop.

 

Question 1:

I need to know how does my tax authorities get the signal, something to show up on their screen computer that this VAT tax fee has my identity  ?

 

Question 2:

This VAT tax fee that was taken from me, it means that I don't have to pay any other taxes in my country? I notice in my invoices that I have 19% which is what my Romanian country current percentage is.

 

Question 3:

If I don't have to pay any more taxes (by my understandings) and just to show my earnings how can I show the exact proof on paper to my IRS or government that,  tax was already taken from my earnings.

I have to start and form a file in February 2018 to show what I have earned in 2017 and from this sum to tax me.

 

I do not have a VAT number. Freelancer working from home.

 

 


 Lucian,

 

First of all, this are questions you should discuss with a tax consultant.

 

That said, the $10 you mention are your revenue, the $2 commission are costs which leaves you with a net income of $8. This has to be filed for income tax. The VAT Upwork charged you can be reclaimed if you are VAT registered. If you exempted from charging VAT you cannot reclaim it. But again, please discuss this whole matter with a tax consultant.

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Active Member
Chris W Member Since: Mar 29, 2018
313 of 340

So, for what I understand, this is the tax for Upwork's services. If I do not give my VAT number, Upwork will take care of those taxes, and if I enter my VAT number, I need to take care of those taxes. As a Dutch resident, both cases would result in a 21% increase over the Upwork services. Then what advantage do I gain by entering my VAT number and doing the administration over those taxes?

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Active Member
Gurgen H Member Since: Mar 12, 2016
314 of 340

Hi

 

please see my question and responses in the 1st 2nd page, same questions is there answered.

 

KR

Gurgen

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Moderator
Vladimir G Moderator Member Since: Oct 31, 2014
315 of 340

Hi Gurgen,

 

We apologize for the late follow up to your question. While previous VAT charges can't be reversed by Upwork, you can consult a local tax adviser about processing a tax return via your local government.

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Community Guru
Joachim M Member Since: Mar 23, 2015
316 of 340

@Chris W wrote:

So, for what I understand, this is the tax for Upwork's services. If I do not give my VAT number, Upwork will take care of those taxes, and if I enter my VAT number, I need to take care of those taxes. As a Dutch resident, both cases would result in a 21% increase over the Upwork services. Then what advantage do I gain by entering my VAT number and doing the administration over those taxes?


If you are ALSO VAT registered and charge VAT to your clients, you can claim back the VAT you paid more easily, that's all. If you have clients in EU member states having a VAT ID will make things for them easier too.

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Active Member
Robbie M Member Since: Mar 18, 2020
317 of 340

Hi, I am a VAT registered business in the UK. How do I add VAT to my proposals / invoices?

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Moderator
Joanne Marie P Moderator Member Since: Nov 26, 2017
318 of 340

Hi Robbie,

 

VAT is applied to Freelancer service fees, Any Connects purchases, and any Any membership fees. I also checked your account, and it looks like you have added your VAT number, and it has already been approved also. Let us know if you have other questions. Thanks!



-Joanne
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Active Member
Tom G Member Since: Apr 21, 2020
319 of 340

Hello, I'm also new to the platform and I have a UK based limted company that I have set up as an agency on Upwork and added my VAT number to.

 

This forum makes it very clear that once approved I will not pay VAT on any fees that Upwork charge to me - I understand this. What is not clear however is what happens when my company does work for a UK based client through Upwork?

 

If I'm correct in my understanding then either:

 

1. The UK based client contracts Upwork USA for software services. Upwork then contracts my company to carry out the services which I then provide as a supplier to Upwork. In this scenario my company is exporting services to the USA which means that it is accounted for as VAT exempt.

 

or

 

2. Client contracts my company for sofware services and Upwork US is acting as a collections agency for payment. In the scenario my UK company is providing services to another UK company or individual so it's my duty to add 20% VAT to the invoice total (the UK based client can then claim back that VAT from the government if they are VAT registered).

 

I'm clear on the tax law so it not a matter for my tax consultant and more a matter of how Upwork legally structures it's fees. I'd be grateful for any clarity you can provide.

 

Many thanks, Tom

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Active Member
Micael N Member Since: Jul 5, 2016
320 of 340

Situation 2 is correct. However, in that situation, you'd have to send your own invoice to the client (with the added VAT), tell him to ignore the invoice Upwork sent him, and he'd have to pay that VAT amount outside of Upwork. It's not an ideal situation at all which is why I avoid working with anyone I have to charge VAT to.

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