Reply
cancel
Showing results for 
Search instead for 
Did you mean: 
Reply

Re: EU Cross-Border VAT and Non-VAT Registered Freelancers

victory_over_all
Active Member
Jason R Member Since: Jun 21, 2017
1 of 8

Hi Internet!

 

I'm hoping that someone out there understands the confusing mess of EU Cross-Border VAT and whether working through Upwork can help alleviate that confusion!

 

Let me explain my situation... I'm a freelance graphic designer originally from the UK, moved to France in December and soon after was registered as self employed (got my SIRET number) but I am not VAT registered, and do not wish to be until the day I'm earning enough to hit the VAT threshold. I work with most clients through Upwork, but sometimes I get approached directly, and I was recently contacted by a potential client from Sweden who wanted to work with me. They quickly wanted to know if I was VAT registered, and when I said I was not, they started telling me how this is not normal, that they would have to pay unnecessary VAT on top of my fee which they cannot reclaim, and that I will struggle to find other EU companies willing to work with me if I'm not VAT registered.

 

As far as I understand, the current EU Cross-Border VAT rules goes something like this:
When selling a service to other EU businesses, a VAT registered business would not charge VAT because the place of taxation is the country the service is supplied to (in this case Sweden) and they just have to note on the invoice that VAT is being accounted for using the reverse charge mechanism. The client receiving the service has to account for the VAT as if they sold the service themselves at the rate of VAT in their country (under “Services” and “Buying” herebut they should then be able to recover that same amount back as input tax, meaning the tax they pay and the tax they reclaim completely offset each other.

 

Now, as I'm not VAT registered I usually wouldn't charge my client VAT anyway, but now I'm not sure the above rule still applies because I'm not registered, and my potential client is insisting that without me being registered the whole reclaiming VAT procedure on their end becomes very difficult and costly and they have to file a special request with their local Tax authorities. They also informed me that if I had an EU client who was also not VAT registered I would be responsible for paying the VAT myself.

 

"What does this have to do with Upwork?!" I hear you cry! Well, I was wondering if the EU Cross-Border VAT rules apply when working through Upwork, or, because Upwork is acting as the "middle-man" and providing a separate service to both me and the client, is the only VAT we need to consider the one that needs to be paid for Upwork's service?

 

It would be great to know if Upwork would be a good alternative to working directly with clients based in other EU member states, especially if it helps to avoid situations where the client must pay the VAT because they are VAT registered but the freelancer is not, or situations where both the client and freelancer are not VAT registered and are based in different EU countries.

 

I hope someone out there can help clarify the situation and ease my confused mind! And apologies in advance if I've just gone and confused everyone else!

 

Thanks,

Jason

P.S. I don't seem to have received an email which allows me to invite clients and receive the 0% service fee bonus for being Top Rated. Not sure if it got caught up in my spam or if I just wasn't entitled to it when the email was sent out. Is there any way I can find out if I have an invitation link I can send to a client? Obviously a 0% service fee would make it a lot more attractive to bring clients to Upwork.

jmeyn
Community Guru
Joachim M Member Since: Mar 23, 2015
2 of 8

Jason,

 

You got most of the VAT issue right.

 

Not being VAT registered means you have to pay VAT on all your purchases and can't claim it back. In selling it means you don't charge your clients VAT and they have to deal with the problem, normally meaning they have to pay VAT on the import from you, just as if you had a VAT ID. Just more paperwork for them without your VAT ID. But, they have to pay VAT on imports either way.

 

Upwork is no solution to this, as Upwork is not your customer. You don't sell to Upwork your sell to your client.

 

That said, IMHO it doesn't make sense to not register for VAT. If you are VAT registered you can claim back all the VAT on your purchases (petrol, office equipment, consumables etc.). This can easily amount to several thousand Euros per year. You then still don't charge VAT to your EU clients with VAT ID, only to those without VAT ID or those in the same country of residence. 

victory_over_all
Active Member
Jason R Member Since: Jun 21, 2017
3 of 8

Thanks Joachim. I thought that might be the case, but was hoping that in some way from a technical standpoint Upwork was my "client", and to my client Upwork was the "seller", and with Upwork being VAT registered the client would not pay VAT. I know... wishful thinking!

In the meantime I have been doing a little more reading on the subject and I am closer to considering VAT registration than I was before as there are plenty of benefits.

 

So from what I understand, when working with a client through Upwork, if they're in another EU member state they still have to pay the VAT on import, just as they would if they were working with me directly. Upwork is just a service both the client and I are using, and so the only VAT concern in regards to Upwork is that of the service fees. Right?

 

Thanks again for your advice!

jmeyn
Community Guru
Joachim M Member Since: Mar 23, 2015
4 of 8

@jason R wrote:


So from what I understand, when working with a client through Upwork, if they're in another EU member state they still have to pay the VAT on import, just as they would if they were working with me directly. Upwork is just a service both the client and I are using, and so the only VAT concern in regards to Upwork is that of the service fees. Right?

 

Thanks again for your advice!


 Yes, that's right. BTW, you can have a VAT ID and remain exempted from charging VAT. So if you decide on remaing VAT exempted that would be an option. Naturally you then can't claim back the VAT you paid on your purchases.

 

BTW, ALL the VAT you paid is claimed back even if - after registering for VAT - you never charge a single customer VAT because all your customers either have a VAT ID or are located outside the EU. This is why I never understood all these folks here on Upwork insisting on remaining VAT exempted. Doesn't make sense to me. Say over the year you charge 200 Dollar in VAT to your clients and you paid 2,000 Dollar VAT on purchases, your tax office will return 1,800 Dollar to you.

vladag
Community Manager
Vladimir G Community Manager Member Since: Oct 31, 2014
5 of 8

Hi Jason,

 

Regarding the 0% promotion, I asked our team to check and share an update with you directly.

Untitled
victory_over_all
Active Member
Jason R Member Since: Jun 21, 2017
6 of 8

Hey Vladimir,

 

I've received the email about the BYOC program. Thank you for sorting that out for me!

versailles
Community Guru
Rene K Member Since: Jul 10, 2014
7 of 8

@jason R wrote:

(got my SIRET number) but I am not VAT registered,


For the purposes of cross border trading, you can get a French VAT number even if you are not subject to the VAT.

 

Please read this link, especially the section named Demande pour un assujeti non redevable

-----------
"Where darkness shines like dazzling light"   —William Ashbless
jmeyn
Community Guru
Joachim M Member Since: Mar 23, 2015
8 of 8

@Rene K wrote:

@jason R wrote:

(got my SIRET number) but I am not VAT registered,


For the purposes of cross border trading, you can get a French VAT number even if you are not subject to the VAT.

 

Please read this link, especially the section named Demande pour un assujeti non redevable


 As far as I know that's an EU requirement and is true for all EU member states.

TOP SOLUTION AUTHORS
TOP KUDOED MEMBERS