German Clients: Will the German Finanzamt (tax office) accept the invoices from Upwork?

[#1]

Hi,

I've hired recently a freelance for his help on a project. Since he started we get weekly an invoice Upwork for his good work. But the German Finanzamt has some strict policies for invoices which require the kind of work (programming/designing/translating), the issuer of the invoice and the recepient (me).

Since Upwork is an escrow , the invoice misses the kind of work and I haven't finished a job here, I just wanted to know if there are issues with the German Finanzamt. Has anyone some informations to share?

Thanks in advance.

Andy

[#2]

Addendum: Or will I get at the end of the job an invoice with every transaction on it?

[#3]

What I know about Germans, they are very detailed and strict. If you comply to their way of accounting, you will be good. Personally I would avoid Germany, but if you need to, I am sure that there are plenty of legal advice available. That being said, most likely standard UpWork invoices will not be enough. But only your accountant will be able to say. When you are doing small business, I guess it is not an issue, but when you grow big, then you need to care more. And then you have resources to care too. Hire an accountant, here in UpWork, why not? They will be glad to assist you and take care.

[#4]

Hello Andreas,

Have you figured out how does the Finanzamt react on invoices issued by UpWork? Had your freelancer managed to for the invoices to be accepted?

I am very interested in this topic too. Please update this thread if you have some new information.

Steuererklärung time is close, and I will be sending my UpWork invoices to Finanzamt. But lookin at the auto generated Invoice number I already know that they will not be happy. Not to mention that the invoices themselves are in english.

Please share what you have learnt so far.

Regards

[#5]

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@Oleh P wrote:

Hello Andreas,

Have you figured out how does the Finanzamt react on invoices issued by UpWork? Had your freelancer managed to for the invoices to be accepted?

I am very interested in this topic too. Please update this thread if you have some new information.

Steuererklärung time is close, and I will be sending my UpWork invoices to Finanzamt. But lookin at the auto generated Invoice number I already know that they will not be happy. Not to mention that the invoices themselves are in english.

Please share what you have learnt so far.

Regards

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 Oleh and Andreas,

No need to be afraid of our Finanzamt. There is no obligation with regards to the language and very little with regards to the form. It just has to be recognizable as an invoice and from abroad. Real regulations exist only for invoices from freelancers which are located within the EU too. But they have the same problem and will most certainly issue their own invoices.

[#6]

Hello, I would like to share my own experience and happy to hear back how other Germany-based freelancers work.  But FYI: I am not 100% if this is the correct approach because I keep reading controversial options. 

My tax advisor suggested to create invoices myself, indicating Upwork with its VAT details (see below)  and the amount of each transaction in EUR  I finally receive on my German bank account: 

Upwork Global Inc. 441 Logue Ave.

Mountain View, CA 94043 USA
VAT ID: EU528002406

It means no matter where your clients come from, you need to invoice Upwork since you receive your money from Upwork to your bank account

In this way, it will mean that you invoice Upwork organisation and the "VAT charge reversed" will be justified. 

Happy to hear your feedback and thoughts on this approach 

[#7]

Hi Ani,

There are several threads already dealing with this issue which is no way limited to Germany. It affects all member states of the EU.

Upwork is NOT your customer! Upwork is an intermediary providing services for which you pay and for which Upwork issues an invoice to you. These service fees are booked as costs. Sorry to put it so blatantly, but your tax advisor is talking bulls...

[#8]

thanks for the reply, that is why I am here sharing my experience, but frankly now confused how to proceed since have already provided my invoices with the way they suggested for accounting. 

[#9]

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@Ani K wrote:

thanks for the reply, that is why I am here sharing my experience, but frankly now confused how to proceed since have already provided my invoices with the way they suggested for accounting. 

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 Well, that's something your tax advisor should correct. To me it sounds like your tax advisor still hasn't understood Upwork's business model. 

[#10]

well, what my tax advisor states that the VAT holder in Invoices and the bank account holder should not be different legal entities when processing the financial transaction,  so this is something Upwork's business model does not care much. 

My question, unfortunately, is not solved. I will update with news when advising to more tax advisors and accountants because want my documents to be done accurately. 

[#11]

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@Ani K wrote:

well, what my tax advisor states that the VAT holder in Invoices and the bank account holder should not be different legal entities when processing the financial transaction,  so this is something Upwork's business model does not care much. 

My question, unfortunately, is not solved. I will update with news when advising to more tax advisors and accountants because want my documents to be done accurately. 

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 Ani,

Upwork is acting like a bank. They issue invoice on your behalf, with your VAT number on them. They also issue an invoice for their services to you. They receive the funds from the client and put it in your account at Upwork at the same time deducting their fees. It works just like factoring.

Upworks invoices on your behalf are absolutely okay. You have to decide whether or not they include VAT or not. If you don't have your customers VAT number, the reverse charge (mentioned on the invoices) option won't work and the invoice should be booked as including your local VAT.

And working with foreign currencies, well the export busines in Germany (hundreds of thousands of companies) do it all the time.

[#12]

ok, thanks clarification. You say

"You have to decide whether or not they include VAT or not." 

So  I need 19% VAT in my invoice, however, Upwork generates invoices for me by automatically stating VAT reverse charged. I and my client provided VAT numbers though. 

How/where do I fix that in Upwork so it adds 19% of VAT from certain clients? 

[#13]

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@Ani K wrote:

ok, thanks clarification. You say

"You have to decide whether or not they include VAT or not." 

So  I need 19% VAT in my invoice, however, Upwork generates invoices for me by automatically stating VAT reverse charged. I and my client provided VAT numbers though. 

How/where do I fix that in Upwork so it adds 19% of VAT from certain clients? 

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 Not at all. You have to clarify this before quoting. I simply point it out to the client in my quotation by mentioning two prices. One price if he provides his VAT number BEFORE awarding the job and one price (the price including the 19% VAT) if the client doesn't come up with a VAT number. The latter is the price I put into the quotation the former the price I will amend the quotation to if the client comes up with a VAT number and the VAT number passes VIES. Unfortunately you can't be sure that a client has entered is VAT number in their Upwork profile.

BTW you will have the same problems with all of Upwork's competitors, even those located within the EU. Only Elance had this problem solved but after the takover by Upwork this was abolished, Upwork never implemented it and I'm not sure they will ever do it.

Apart from this two major problems remain with Upwork though:

1. Clients are not obliged to enter their full address

2. Invoice are not in sequence

In both cases my Finanzamt just shrugged their shoulders and don't care.

[#14]

Joachim, you might want to consider selling your expertize to U and CS.  😉 

Your solution(s) were far more precise, concise, and logical than anything on site.

[#15]

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@Wendy C wrote:

Joachim, you might want to consider selling your expertize to U and CS.  😉 

Your solution(s) were far more precise, concise, and logical than anything on site.

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 Thank you Wendy. People tend to forget that VAT is a consumer tax not a tax aimed at companies. Companies are just forced to collect the tax and transfer it to treasury. And that's where another trap is hidden into which many freelancers fall: VAT exemption. Many freelancers, well below the threshold were they are obliged to charge VAT, want to be VAT exemption. A really expensive mistake for most.

[#16]

Hi Ani,

I'm just trying to figure out how to handle Upwork transactions in the German system. If you don't mind, can you tell me how it worked out in the end? Did you provide invoices to Upwork with VAT reverse charges applied, or did you try another method?

Thanks in advance!
Ryan

[#17]

Hi Ryan,

in the end we gave the invoices to the German tax office and the accepted it. They also handled the VAT charges. So it might be not that hassle that I expected it to be.

Andy

[#18]

Okay, thanks for the response Andy!

[#19]

Hi 🙂 I'm very happy to read about this case. I'm in similar situation. As a Freelancer I need to provide Finanzamt invoices which I provided to my clients. I was wondering if Finanzamt will approve my invoices generated by Upwork. They should right?

[#20]

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Marta O wrote:
Hi 🙂 I'm very happy to read about this case. I'm in similar situation. As a Freelancer I need to provide Finanzamt invoices which I provided to my clients. I was wondering if Finanzamt will approve my invoices generated by Upwork. They should right?

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Well, my Finanzamt never gave me a problem.

[#21]

hi, my accountant provides to Finanzamt both invoices: Upwork + mine that have corrected 1) Numbering, 2) VAT clarification when it comes to German clients.  

[#22]

Hi Ryan, I send to my accountant my Upwork invoices +  invoices adapted with my numbering and corrected with VAT when having German clients. So I ask my German clients to give their VAT number and we add the 19% to the rate, which 1) I pay to Finanzamt and 2) they refund later.