Thank you for your replies.
So, let me see if I get this clear. You find your client on upWork and let's say you earn $200 that you have on your account and can be withdrawn (upWork fee already deducted). What is the next step, then …
1. You contact your new client and request their companies full address and VAT ID (assuming they will want to hand me over this information, which will also be very hard in my oppinion)
2. When you get this information (VAT ID and full address, does US clients also have VAT ID?) you create your own invoice from your company to their company on $200 and send the invoice to them.
3. What I don't understand is this, on their side they will get two invoices, one will be from upWork which they do on my behalf and the 2nd one from my company (this doesn't make sense to me at all), if I would be them (the client) I would get two same invoices (practically the same, one from upWork would also have the upWork fee), how will they put it in their accounting books as two same invoices (it somehow doesn't seems right), can you explain me this please and how is your full process in this, I would really appreciate it.
For instance Joachim said here: "Depends. If your client needs an EU compliant invoice he will normally be happy. The amount will have to be identical (also the currency) and the payment has to be done through Upwork. But your client can then throw Upwork's invoice away or staple it to yours to make it clear that this is a single transaction."
>> Throw or away the invoice, is he serious?!
Thank you in advance.
I'm not an accountant/lawyer and I'm also still investigating the regulations myself, so please don't take my response as a legal advice as I'm not 100% sure this is correct myself (regulation here are sometimes a challenge even for the tax experts).
I'm still searching for a reliable accountant with experience in this, if I find someone good, I'll share.
What seems to be the correct way to do this is to display a full amount charged to the client on your invoice and treat the UpWork fee as the transfer cost in your accounting.
I don't see why wouldn't the client give you their details if it's a good and trusting business relationship, just explain that you're from now on required to do so by the local laws.
If they refuse to give you their details, then I agree it is a problem.
VIES VAT number exists for clients in EU, for the US I really don't know.
Further, your invoice has to be in Croatian anyway:
(you can, of course, additionally include an English translation for your client, but only the Croatian version is the legally-binding accounting document here). Therefore, I believe the client will have little value from your invoice and in fact should still continue doing their accounting based on invoices UpWork delivers them as clients (it's client's responsibility to do the proper accounting anyway, if they choose to discard your invoice, that's their decision to make).
Hey guys, this are informations I got so far.
For small freelancers it would be best to register a specific kind of small business, like Goran sad, called "paušalni obrt". Because of unsure and unpredicted yearly income, when working as a freelancer, that should be most suitable considering taxes.
You will need some advice on how to register it, from some accountant, because that specific kind of business can't be registred for engineering professions.
Than write invoices to UpWork, which you never send to UpWork, but just for showing to tax administration. As far as I am informed, that's the way how companies in Croatia, that make money form iStore for example, justify their income. They write "dummy" invoices to apple because croatian tax administration still does not have suitable regulations for this kind of earning over internet.
I can't tell for sure if this process is valid because I haven't tried it my self. That's just direction towards wihch I got advices.
Domagoj, where did you find the information that "pausalni obrt" cannot be registered for engineering professions?
They cannot be opened for hospitality and trade, however I found no restrictions for IT.
From Croatian tax administration, document, question 1 on pg. 3,
"porez na dohodak ne mogu se u paušalnoj svoti utvrđivati fizičkim osobama obveznicima poreza na dohodak koji obavljaju samostalnu djelatnost ugostiteljstva i trgovine."
Goran, a friend that has bookkeeping company told me that there are restrictions for engineering professions in case of registering "paušalni obrt".
I dont't see any restrictions like that in the document that you linked. I might have give the wrong information. Sorry if that is the case.
She also told me that there will be some major changes after 1. 1. 2017. considering croatian tax regulations. Like rising yearly income for "paušalni obrt" from maximum of 150.00kn to 230.000kn. The document that you linked is from 2015.
I will try to register "paušalni obrt" for providing IT services some time soon and than know for sure. I'll let you know how did it go.
Yes, also working on it , guess we should stay in touch and share experiences.
I have the same information about income limits, 230.000kn per year for 2017 and since this next year it will be 300.000kn.
Hi guys, unfortunately the system won't let me message one of you so I'm replying to this comment.
Have you managed to find any new information about this? I've registered a business of my own (paušalni obrt, ofc) and am thinking of doing some work via upWork. Are we able to invoice upWork, or the client? What's the best way to legalize payments coming through upWork?
I'm also want to use "paušalni obrt" as way of doing business in Croatia with Upwork clients. Pls provide instructions if that is possible and details of croatian tax accountant that can provide support. Thanks