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European/Italian freelancers with VAT number. Problems with client invoices.

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Active Member
Camilla B Member Since: May 3, 2016

Dear Upwork community,


Two months ago, I registered a VAT number and now I find myself in an awkward situation. I'll illustrate it with an example.

 

I work on a 200$ contract on Upwork. The client is new and Upwork deducts its 20% fee.

My actual earnings are 160$. Nonetheless, my accountant says:

1. I have to create a 200$ invoice,

2. Pay taxes, VAT and retirement tax on 200$

This causes a huge loss of profits on my side and makes it non profitable for me to work on Upwork anymore.

Point n. 2 is the biggest problem. I cannot claim back any money on the service fee as work expense. 

 

I would like to know if someone shares the same problem. What are your thoughts on this?

I am very sorry to say that I am considering to stop working here.

 

Thanks a lot,

 

camilla

7 REPLIES 7

Camilla, you are right, all of us from EU countries with a VAT-ID who have to charge VAT to their clients have this problem. If Upwork would apply VAT correctly to the invoices according the freelancer's and the client's countries and send a copy of the invoice to the freelancer as well everything would be fine and correct. However, this isn't the case. Please look at all the discussions before. Each freelancer tries to find a less-than-ideal-solution for this. I myself have withdrawn my VAT-ID from Upwork recently when I discovered that they apply reverse charge VAT (client pays the VAT in his own country) and disables me to do the same by hiding the client's address and VAT-ID. So, I cannot apply reverse charge if the client refuses to provide his details and have to subtract the VAT from my earnings and the VAT has to be paid twice: in the client's country and in my country. Sad, but true.

 

https://community.upwork.com/t5/forums/searchpage/tab/message?q=VAT+invoice

 

Active Member
Camilla B Member Since: May 3, 2016

Hi Margarete, 

 

thank you for your message and for the link. I see many people share the same problem and I really hope Upwork will improve the system soon.  

 

I guess I should consider withdrawing my VAT-ID from Upwork and working on this platform as little as possible.

 


@Camilla B wrote:

Hi Margarete, 

 

thank you for your message and for the link. I see many people share the same problem and I really hope Upwork will improve the system soon.  

 

I guess I should consider withdrawing my VAT-ID from Upwork and working on this platform as little as possible.

 


 I apply reverse charge to clients from other EU countries if they provide their address and VAT-ID. Then I issue my own invoice to them and refer to the payment on Upwork (less-than-ideal only). I will know next year after my tax return if there will be problems with the tax authorities. I live in a large city and the tax authorities are very strict here and do not like "creative solutions" that do not follow the tax laws.

 

In any other case I have to subtract the VAT (19 % in Germany) from my earnings and so 39 % disappear (before income tax already). Moreover, Upwork applies its service fee on the whole amount (including its own service fee and the VAT)! Apart from the fact that there has not been a solution for more than one year now I am not sure if the Upwork finance department really (wants to) understand(s) the problem of the freelancers from EU countries.

 

Anybody who thinks that one could just "forget" to care about the VAT due for the invoices in question will awake soon. It is only a question of time that the tax authorites will look after the earnings/invoices of the freelancers Upwork's service fee invoices refer to. They have all necessary data already (name, address, invoice no.). Anything where VAT disappears in the exchange between countries is prosecuted as a crime and treated accordingly. Upwork and freelancers should be aware of this. Just facts, nothing else!

 

 Camilla, I hope that you can find a (less-than-ideal) "solution" together with your tax consultant.

Active Member
Camilla B Member Since: May 3, 2016

Thanks Margarete.

 

 

 

 

Camillia, we are not allowed to post in German here, your post will be deleted but you can send me a private message. Yes, German is my native language.

As to your question: I issue my invoice covering the whole amount (where I cannot apply reverse charge) including VAT, Upwork's service fees are costs and forward the VAT to the tax authorities. I am careful with recommendations, because I am not a tax consultant, I use a less-than-ideal "solution" and even in EU member states there are different tax laws in the member states and freelancers could get in serious troubles later if they follow my advice.

Active Member
Carmelo R Member Since: Jun 1, 2017

Hi Camilla,
I'm an Italian freelancer. Being almost forced to open a VAT and as I am interested to know, especially in Italy, how it works and the taxes withheld on invoices, I would if possible and kindly, that you give me some clarifications. Thanks in advance.

Frequent Visitor
Luca S Member Since: Aug 13, 2018

Regime forfettario non preve l'emissione di IVA/VAT in Italia 

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