Issue with VAT and invoices in Germany

[simonscheuring]

Hey there folks,

I got a serious question about the VAT number thing on here. Right at the beginning, I read every topic I could find about this but that didn't really help me either.

I am living in Germany, and also have a registered business here, but with the special "Kleinunternehmer"-Regelung. That mean's, I do not have to pay VAT taxes as far as I do not make a revenue of more than 17,500€ a year, but I also am not allowed to charge VAT tax to my clients. I still ordered a so called USt.Id and VAT number when registering my business, as it can be used later on if I'd play to scale my business (where I have to use them)

Right now, I was thinking about entering this VAT number to my UpWork profile. If I enter it, I don't have to pay those additional UpWork fees, but will my clients get charged VAT? (Which is 19% in Germany) – As I am currently not allowed to do that, it's pretty confusing here in Germany with everything regarding taxes. What advantage would I have entering my VAT number under these circumstances?

Another question: I need to create an invoice for every task I do for customers for my local "Finanzamt", which is sth. like a tax office. Can I somewhere download generated invoices with everything important included, like tax number etc.? Invoices in Germany have to state a correct customer address, which isn't available here on UpWork. How do I manage to write a correct invoice then? I also can create invoices myself, but still I don't know who to bill then, as I don't have a specific adress.



Any help, especially from german people experiencing the same, is highly appreciated.

Regards

Simon

[elastella]

What exactly do you mean by "If I enter it [VAT #], I don't have to pay those additional UpWork fees ..." ?

Upwork adds the locally applicable VAT to their service fee (19% for DE) when invoicing EU freelancers and you DO HAVE to pay that. Because you 'consume' their service. And they are obligated to charge it due to EU law.

There are 2 ways to do that:

Either you give UW your VAT # and report & pay the VAT to your tax authority yourself or you don't give them your VAT # and let them collect the VAT, which they will then remit to "your government" on your behalf.

They will not charge VAT to your clients but they will print "VAT Reverse Charged" on every invoice whether it's applicable or not. Since I don't want them to do that I haven't given them my German VAT number.

If you plan on properly paying your taxes, you will have to write your own invoices & send them to your clients.

[simonscheuring]

Thanks for your answer, still I think you got me wrong a bit. If I finish an order, I receive the amount the client deposited minus UW fees minus VAT taxes. If I enter my VAT number, it just deducts the UW fees. So far so good - but as I said I don't have to pay VAT tax here in Germany as "Kleinunternehmer", still UW would deduct it from that amount if I wouldn't enter my VAT ID.

So it would make sense to enter it and then create a custom invoice for each client stating I don't have to deduct VAT taxes (this is required by law when writing invoices in Germany when being Kleinunternehmer). So in the end UW didn't charge me VAT taxes, and I didn't charge it to any customer (which I am not allowed to anyway), but UW still got its usual service fees - does that make sense?


Regarding my second question: You said I have to create a custom invoice for every customer. That's not that cool, but well. What's more questionable is that I won't receive the amount deposited by a customer in a single payment, instead I get a collected payment. So how will my tax office (Finanzamt) know which payments corresponds to which service? I can't prove them, and UW doesn't give me an option to do single payments.... 😕

[Anonymous-User]

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@Simon S wrote:

Thanks for your answer, still I think you got me wrong a bit. If I finish an order, I receive the amount the client deposited minus UW fees minus VAT taxes. If I enter my VAT number, it just deducts the UW fees. So far so good - but as I said I don't have to pay VAT tax here in Germany as "Kleinunternehmer", still UW would deduct it from that amount if I wouldn't enter my VAT ID.

So it would make sense to enter it and then create a custom invoice for each client stating I don't have to deduct VAT taxes (this is required by law when writing invoices in Germany when being Kleinunternehmer). So in the end UW didn't charge me VAT taxes, and I didn't charge it to any customer (which I am not allowed to anyway), but UW still got its usual service fees - does that make sense?


Regarding my second question: You said I have to create a custom invoice for every customer. That's not that cool, but well. What's more questionable is that I won't receive the amount deposited by a customer in a single payment, instead I get a collected payment. So how will my tax office (Finanzamt) know which payments corresponds to which service? I can't prove them, and UW doesn't give me an option to do single payments.... 😕

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 You have to pay VAT in Germany like everybody else but you obviously have decided/or are not allowed to charge VAT. Do not confuse paying VAT and charging VAT. All your other questions have been discussed many times in other threads. Please search for VAT and/or invoices and you will find answers to all of your questions.

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

https://community.upwork.com/t5/forums/searchpage/tab/message/page/1?q=invoices&search_type=thread&q...

[elastella]

"So far so good - but as I said I don't have to pay VAT tax here in Germany as "Kleinunternehmer", still UW would deduct it from that amount if I wouldn't enter my VAT ID".

You have to pay VAT on the Upwork fee, just like you have to pay VAT on a pair of socks you buy in a store in DE.

If you enter your VAT ID you opt to report and remit the VAT on the Upwork fee yourself to your tax authority.

As to your second question - you don't have to prove to your tax authority that you received a payment. They don't care about that. They only care about payments you're owed (money you are entitled to). Whether you collect it or not.

[robertogiardina]

Hi Ela K.

Could you please elaborate a bit on "If you plan on properly paying your taxes, you will have to write your own invoices & send them to your clients"? Because I can not figure it out how these invoices should look like in respect to VAT on service and VAT on job provided, how to pay taxes from that invoice, and so on.

Thanks in advance

Roberto

[Anonymous-User]

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@Simon S wrote:

Hey there folks,

I got a serious question about the VAT number thing on here. Right at the beginning, I read every topic I could find about this but that didn't really help me either.

I am living in Germany, and also have a registered business here, but with the special "Kleinunternehmer"-Regelung. That mean's, I do not have to pay VAT taxes as far as I do not make a revenue of more than 17,500€ a year, but I also am not allowed to charge VAT tax to my clients. I still ordered a so called USt.Id and VAT number when registering my business, as it can be used later on if I'd play to scale my business (where I have to use them)

Right now, I was thinking about entering this VAT number to my UpWork profile. If I enter it, I don't have to pay those additional UpWork fees, but will my clients get charged VAT? (Which is 19% in Germany) – As I am currently not allowed to do that, it's pretty confusing here in Germany with everything regarding taxes. What advantage would I have entering my VAT number under these circumstances?

Another question: I need to create an invoice for every task I do for customers for my local "Finanzamt", which is sth. like a tax office. Can I somewhere download generated invoices with everything important included, like tax number etc.? Invoices in Germany have to state a correct customer address, which isn't available here on UpWork. How do I manage to write a correct invoice then? I also can create invoices myself, but still I don't know who to bill then, as I don't have a specific adress.



Any help, especially from german people experiencing the same, is highly appreciated.

Regards

Simon

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 If you are not entitled to charge VAT you are not allowed to enter your VAT-ID. I do not really understand why you have a VAT-ID. And in case somebody enters his/her VAT-Id and reverse charge is applied on Upwork's service fees. However, reverse charge does not mean that no VAT has to be paid. The VAT has to be paid in the country of the person who received the service (in this case you). Your questions show that you need some basic knowledge about tax reporting for enterprises in Germany. You should get in touch with a tax consultant and/or attend a course.

Edited to add: Like Ela I do not use my VAT-ID on Upwork anymore, because of the problems with the invoices she described.

[simonscheuring]

Sorry I apparently really messed up paying and charging VAT, my bad.

But there's still the issue with writing invoices – what if my customer doesn't give me his billing credentials (whatever reason this might be), like complete postal adress etc.? Then I am not able to work for him or what?

I know we're working here under some anonymity circumstances, but something like that would really be substantial when it comes to being able to correctly creating invoices... maybe that could be a feature for future updates of this platform, that if there's a finalized project the postal adress (which I guess a client has to enter like the freelancer also has to?) is displayed to the freelancer so he can write a correct invoice for himself / his tax office....

[Anonymous-User]

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@Simon S wrote:

Sorry I apparently really messed up paying and charging VAT, my bad.

But there's still the issue with writing invoices – what if my customer doesn't give me his billing credentials (whatever reason this might be), like complete postal adress etc.? Then I am not able to work for him or what?

I know we're working here under some anonymity circumstances, but something like that would really be substantial when it comes to being able to correctly creating invoices... maybe that could be a feature for future updates of this platform, that if there's a finalized project the postal adress (which I guess a client has to enter like the freelancer also has to?) is displayed to the freelancer so he can write a correct invoice for himself / his tax office....

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 Yes, that could be a problem. Not all clients leave their details. So, you have to ask them. I always do this or research it myself if possible. If a client refuses to provide his company details I do not work for him/her. As you are not oblieged to charge VAT you probably can use some of the invoices Upwork issues, for others you will have to issue your own invoice. I have to write my own invoices, because I have to charge VAT.

[elastella · Accepted solution]

As of 3 days ago, Upwork apparently enables you to download the invoices they send to your clients on your behalf (I haven't checked it yet).

That's where you shall find the necessary contact details.

[Anonymous-User]

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@Ela K wrote:

As of 3 days ago, Upwork apparently enables you to download the invoices they send to your clients on your behalf (I haven't checked it yet).

That's where you shall find the necessary contact details.

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 I had a look. Some clients left their complete details: name, company name, address, VAT-ID (if available), others only left incomplete data.

[simonscheuring]

If that really works that'd be awesome. I couldn't check it out yet as I didn't have any orders so nothing to check there but wanted to make sure about that as I got a client tomorrow which approved my proposal already. Thanks for the help! 🙂

[Anonymous-User]

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@Simon S wrote:

If that really works that'd be awesome. I couldn't check it out yet as I didn't have any orders so nothing to check there but wanted to make sure about that as I got a client tomorrow which approved my proposal already. Thanks for the help! 🙂

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 Good luck!

[lonwordi]

Hi Simon, 

sorry for coming in late into the discussion but I have the same questions that you had and I am still not sure how to handle it. 

- Steuererklärung Finanzamt: We are now able to download the individual invoices, so that should be sufficient, correct?

- VAT number: How did you solve this issue? 

Kind regards

Lisa

[richard_bailey]

I am also struggling with this. I just became a freelancer in Germany and I have no idea what I am doing about VAT and Upwork.

[vladag]

Hi Richard,

Please check the information Ela and Margarete posted earlier on this thread and follow up with any questions you might have.

[suther]

Ok, so what is the conclusion of this? Can anybody clearify this?

Let's say:

1. you have a VAT-ID
2. you have add this VAT-ID to your UW-Account
3. you have work for somebody
   a) inside of Germany
   b) outside Germany but inside EU
   c) outside EU

With the above given Points, are these Answers right (?):

If you have 1,2 and 3a:
UW create an invoice for the customer (who used my WebProgmaming-Skills for their Project) with "19% MwSt. (Tax)" notice. Customer send payment to UW.
I have to create a "Pseudo-Invoice" with 19% MwSt and the Contact-Details which I've found at that bill (ela told I can see this bill)
I may not send this Bill to the Customer, but have to create it to got it for my Tax-Agency (Finanzamt)?!
I even have to pay the UW ammount for their service (got an Invoice from UW for their fees)

If you have 1,2 and 3b (and even 3c):

UW create an invoice for the customer (who used my WebProgmaming-Skills for their Project) with "Reverse Charge" notice. Customer send payment to UW.
I have to create a "Pseudo-Invoice" with Notice of "Reverse Charge" and the Contact-Details which I've found at that bill (ela told I can see this bill)
I may not send this Bill to the Customer, but have to create it to got it for my Tax-Agency (Finanzamt)?!
I even have to pay the UW ammount for their service (got an Invoice from UW for their fees)

Is that right, or did I missed something?

[goodmorningjulie]

Simon, did you ever get this sorted out? 

I am in Germany and the two situations that are most annoying to handle are these (I have a VAT number):

(1) When I have a European client who does not have his or her VAT number in the Upwork system, so I HAVE to pay VAT out of the money they pay me. (If their VAT number is in the system, VAT reverse charges and we're good to go.)

(2) When I have a German client, becuase whether or not they have a VAT number, I MUST charge them VAT up front (because we are both in Germany) and they can apply to the government to get that money back later.

I avoid these two categories of clients because basically it means that I lose 10-20% of the agreed payment to Upwork, and another 19% to VAT. Plus I have to worry about recording that VAT properly in my records and repaying it to the government. I have asked Upwork to make a way so we can see which clients are VAT registered and which are not (so we don't have to ask - I only want to work with the ones who are VAT registered, if possible) and also to add additional VAT to the bill when necessary, so I don't have to lose 19% from my own income. Hoping SOMEDAY they fix this! But I'm always curious what other people who attempt to be law-abiding are doing meanwhile...

J

[17408c64]

Hi Julie,

Do you still pay VAT even if you are Kleinunternehmer?

[goodmorningjulie]

You pay it when you buy something with VAT in the price. But you don't need to charge it to your clients until  you are VAT-registered / no longer a klein unternehmer. 

[17408c64]

Thank you. At the moment I left VAT number details empty and I already see Upwork invoices for VAT in gained earnings. Is this how it is supposed to be? I thought Kleinunternehmers don't have VAT ID but only steuerid.

[goodmorningjulie]

Correct. IF you had a VAT number, Upwork would not charge you VAT on their service fee. But since you don't have one, you have to pay VAT to upwork.

[17408c64]

Cheers. Do you have experience around what is the smartest way to go while working full-time at a company?

1-Kleinunternehmer without VATID
2-Kleinunternehmer with VATID
3-Freelancer(not Kleinunternehmer, also not sure if that's possible while working elsewhere)