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Taxation / invoicing when based in Europe

Hello everyone,

 

I've looked over multiple threads about taxation when you are working at upWork and based in Europe. 

 

It's still not clear what to do with invoicing / taxation when you are working via upWork. I've read about a lot of difficulties regarding that process and would like to know your experience.

 

So, prerequisites:

 

1) A freelancer is based in the European Union (Germany in my case).

2) A freelancer would like to pay a full amount of taxes on money earned via upWork.

3) Clients of freelancer are coming outside of EU (the USA for example).

4) Freelancer would like to use the possibility not to pay VAT (19% in case of Germany) because of overseas transactions (from what I've read this requires knowing of VAT of the client which is quite complicated).

5) Freelancer doesn't want to bother the client with asking their details, invoicing and stuff like that.

6) Changing the platform to elance is not an option, a freelancer would like to continue working via upWork.

 

My main question is - does anybody from you have real-world experience with submitting needed documents for paying taxes to EU authorities and leaving them happy after that?

 

If so, please share your experience showing steps you are doing when working with upWork from EU to be a nice person from authorities point of view.

 

Thank you!

30 REPLIES 30
owens-phil
Member

Unless you're a US citizen, Upwork won't get involved in tax. By signing the W-8BEN form, you are saying that you will be responsible for all tax implications.

 

Unfortunately, all countries, even within the EU have their own tax rules. Here in Italy, if I do the work in Italy, then it gets taxed. In the UK, where I'm from originally, there is a £15k limit before you become eligible to pay tax.  Most EU countries have a tax agreement so that if you pay in one country you don't have to pay again in your country of residence (that's tax residency, not quite the same as living residency.)

 

Where the transaction takes place is irrelevant for most tax systems, Germany might be different. It's generally where your account is that it gets paid into that is where it gets taxed.

 

If you're looking to pay as little tax as possible, then you should really be looking for an international accountant with expertise in your country of residency.

re: "Unless you're a US citizen, Upwork won't get involved in tax."

 

As a U.S. citizen, living in the United States, I am not sure I would characterize Upwork as "involved" in my taxes.

 

There are tons of taxes and fees that brick and mortar employers withhold from paychecks. Brick and mortar employers involve employees heavily in taxes and other federal, state and local municipal mandatory fees.

 

Thankfully, Upwork doesn't do any of that in connection with the business-to-business service transactions that it processes on behalf of myself and the clients I work with.

 

Upwork actually offers very little tax advice or action, even for contractors who are U.S. citizens. Upwork leaves it up to individual contractors to research and comply with applicable tax requirements based on their own locality.

Cheers for the clarification Preston. As I'm not from the US, I wasn't sure how much detail they asked for, or what they did with it 🙂 I was going to write "... Upwork don't care..." but I thought that might be a little harsh 🙂

I don't know if it would be harsh or inaccurate to say "Upwork doesn't care" about this.

 

Upwork is interested in making money by retaining 10% of the payments clients pay as part of business-to-business service transactions between clients and independent contractors (who are not employees, by the way).

 

So at the most basic level, Upwork is interested in making money.

 

It would not bolster Upwork's bottom line to get heavily involved in taxes. It would cost considerable resources and it would open Upwork up to penalties if they offered the wrong advice or did things the wrong way. It would be virtually impossible for Upwork to understand and administer taxes for every nation, state, and local municipality in the world where clients and contractors live. So it is far easier to do nothing or as close to nothing as possible.

 

Where Upwork does anything along the lines of providing invoices or tax information, it does so out of a desire to service its users and retain both paying clients as well as contractors whose presence attracts paying clients.

 

I assume that Upwork is no more interested in the tax laws of Kasama, Zambia or Udorn, Thailand than I am.

 

My personal opinion is that in communities all over the world (not all communities, but many, and perhaps most), local leaders feel the same way about Upwork and similar freelance work platforms that I would if I was the mayor or governor of those places:

 

"So, you're telling me that this American company set up a way for some of my citizens to earn a bunch of money while sitting in their homes, and I don't need to do anything extra or pay anything extra for them to offer these jobs here? And these Upworkers are obtaining this money from other countries, and spending all that money here? Hmm... That's cool!"

Does Upwork 1099 the freelancer like Elance did on behalf of the employer? Do they 1099 at all? On Elance, we had to go in and download our transactions and add them up, write off fees and all that. Is it the same here?

Jennifer:

 

Short answer: No, Upwork doesn't do this for regular contractors.

 

Who receives a 1099 form from Upwork?.

 

"If you're based in the U.S. and earn money working on Upwork, you do need to report this income. ...most W-9 freelancers... will no longer receive a 1099-MISC from Upwork... One thing to remember -- we're not experts in your tax situation. Please consult your accountant before filing...

 

"Most freelancers will not receive IRS forms, although there are a few exceptions..."

Thanks Preston.

 

 


@Phil O wrote:

Unless you're a US citizen, Upwork won't get involved in tax. By signing the W-8BEN form, you are saying that you will be responsible for all tax implications.

 

Unfortunately, all countries, even within the EU have their own tax rules. Here in Italy, if I do the work in Italy, then it gets taxed. In the UK, where I'm from originally, there is a £15k limit before you become eligible to pay tax.  Most EU countries have a tax agreement so that if you pay in one country you don't have to pay again in your country of residence (that's tax residency, not quite the same as living residency.)

 

Where the transaction takes place is irrelevant for most tax systems, Germany might be different. It's generally where your account is that it gets paid into that is where it gets taxed.

 

If you're looking to pay as little tax as possible, then you should really be looking for an international accountant with expertise in your country of residency.


Hi Phil, do you have concrete experience in showing Italian tax authorities your income from the work performed at upWork? There shouldn't be any big difference between Italy and Germany in that matter.

 

I know about the existence of the minimal non-taxable limit in different countries. In Germany, it's somewhat around 8k euro a year. Unfortunately, I am far beyond this limit, so I have to pay taxes.

 

I am generally interested about the process of doing taxation. I am just wondering about the possibility of doing so without paying 19% extra VAT. As while doing a quick search over upWork forum I've discovered that there are some problems with that process for EU freelancers.

 

That's why I've created this thread - to ask EU freelancers who already have an experience with that thing.

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@Egor S wrote:

@Phil O wrote:

Unless you're a US citizen, Upwork won't get involved in tax. By signing the W-8BEN form, you are saying that you will be responsible for all tax implications.

 

Unfortunately, all countries, even within the EU have their own tax rules. Here in Italy, if I do the work in Italy, then it gets taxed. In the UK, where I'm from originally, there is a £15k limit before you become eligible to pay tax.  Most EU countries have a tax agreement so that if you pay in one country you don't have to pay again in your country of residence (that's tax residency, not quite the same as living residency.)

 

Where the transaction takes place is irrelevant for most tax systems, Germany might be different. It's generally where your account is that it gets paid into that is where it gets taxed.

 

If you're looking to pay as little tax as possible, then you should really be looking for an international accountant with expertise in your country of residency.


Hi Phil, do you have concrete experience in showing Italian tax authorities your income from the work performed at upWork? There shouldn't be any big difference between Italy and Germany in that matter.

 

I know about the existence of the minimal non-taxable limit in different countries. In Germany, it's somewhat around 8k euro a year. Unfortunately, I am far beyond this limit, so I have to pay taxes.

 

I am generally interested about the process of doing taxation. I am just wondering about the possibility of doing so without paying 19% extra VAT. As while doing a quick search over upWork forum I've discovered that there are some problems with that process for EU freelancers.

 

That's why I've created this thread - to ask EU freelancers who already have an experience with that thing.

others

Egor, You can ask other freelancers for advice but you cannot rely on the possibly wrong advice of others. International tax law is difficult and you have to clarify with the help of a tax consultant how to deal with the VAT in your country and in your specific case. It does make a difference if you sell your services to the United States, Australia, China etc, there are also differences in the relations between countries. 

Two different tax professionals who live in the same town as you might give you different advice on exactly the same situation. There are often different ways to file taxes on exactly the same revenue.


@Margarete M wrote:

@Egor S wrote:

@Phil O wrote:

Unless you're a US citizen, Upwork won't get involved in tax. By signing the W-8BEN form, you are saying that you will be responsible for all tax implications.

 

Unfortunately, all countries, even within the EU have their own tax rules. Here in Italy, if I do the work in Italy, then it gets taxed. In the UK, where I'm from originally, there is a £15k limit before you become eligible to pay tax.  Most EU countries have a tax agreement so that if you pay in one country you don't have to pay again in your country of residence (that's tax residency, not quite the same as living residency.)

 

Where the transaction takes place is irrelevant for most tax systems, Germany might be different. It's generally where your account is that it gets paid into that is where it gets taxed.

 

If you're looking to pay as little tax as possible, then you should really be looking for an international accountant with expertise in your country of residency.


Hi Phil, do you have concrete experience in showing Italian tax authorities your income from the work performed at upWork? There shouldn't be any big difference between Italy and Germany in that matter.

 

I know about the existence of the minimal non-taxable limit in different countries. In Germany, it's somewhat around 8k euro a year. Unfortunately, I am far beyond this limit, so I have to pay taxes.

 

I am generally interested about the process of doing taxation. I am just wondering about the possibility of doing so without paying 19% extra VAT. As while doing a quick search over upWork forum I've discovered that there are some problems with that process for EU freelancers.

 

That's why I've created this thread - to ask EU freelancers who already have an experience with that thing.

others

Egor, You can ask other freelancers for advice but you cannot rely on the possibly wrong advice of others. International tax law is difficult and you have to clarify with the help of a tax consultant how to deal with the VAT in your country and in your specific case. It does make a difference if you sell your services to the United States, Australia, China etc, there are also differences in the relations between countries. 


Margarete, I completely understand that. Of course, I will consult a tax consultant. Just wanted to know some shared experience beforehand. 

juliastefan
Member

Hi guys, please let me know if I should open a new thread for this.

 

I'm having the following issue.

 

I'm a freelancer based in Austria. I have done a bit of work via Upwork and now I tried to give this information to my accountants but they simply don't seem to know how to put it in the books, given that there seems to be no invoice for me to actually put in my books. Can anybody else share experience on how to include Upwork work and payments in the accounting?

 

I'm a bit less concerned about the tax, but more about simply documenting properly what I earn. 

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@Julia L wrote:

Hi guys, please let me know if I should open a new thread for this.

 

I'm having the following issue.

 

I'm a freelancer based in Austria. I have done a bit of work via Upwork and now I tried to give this information to my accountants but they simply don't seem to know how to put it in the books, given that there seems to be no invoice for me to actually put in my books. Can anybody else share experience on how to include Upwork work and payments in the accounting?

 

I'm a bit less concerned about the tax, but more about simply documenting properly what I earn. 


We do not receive a copy of the invoice that Upwork sends to the client. So I issue my own invoice and send it to the client and hand it over to the tax authorities. In my case I have to apply 19% VAT as well. Please also look at the discussions before.

https://community.upwork.com/t5/Clients/Name-on-a-received-invoice/m-p/92225#M3982

https://community.upwork.com/t5/Announcements/Frequently-asked-questions-about-VAT-for-EU-freelancer...

Thanks for those links, Margarete. It was hard to get to the right information.

 

I read through a fair bit of that and still am. It is a bit hard to follow sometimes looking at it now. If you don't mind me asking;

 

This essentially means, the issue isn't solved and from what we know at the moment it won't be?

 

So making an invoice for the client directly, which is what my accountants have suggested as well, is probably the only way to do this mostly legally. But in that case don't you have to check the tax laws for every country you deal with? In my case, also because I want to write invoices outside of Upwork, I had to check with the Austrian Federal Economic Chamber in the US to find out what I had to do in order to write legal invoices to the US. Some paperwork and errands are required (to put it shortly). Is this something you do as well for the Upwork work? I imagine if you get a couple of clients from different countries that could be quite tricky in some cases. 

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@Julia L wrote:

Thanks for those links, Margarete. It was hard to get to the right information.

 

I read through a fair bit of that and still am. It is a bit hard to follow sometimes looking at it now. If you don't mind me asking;

 

This essentially means, the issue isn't solved and from what we know at the moment it won't be?

 

So making an invoice for the client directly, which is what my accountants have suggested as well, is probably the only way to do this mostly legally. But in that case don't you have to check the tax laws for every country you deal with? In my case, also because I want to write invoices outside of Upwork, I had to check with the Austrian Federal Economic Chamber in the US to find out what I had to do in order to write legal invoices to the US. Some paperwork and errands are required (to put it shortly). Is this something you do as well for the Upwork work? I imagine if you get a couple of clients from different countries that could be quite tricky in some cases. 


Julia, to answer your question, I would say yes. Your invoices mainly have to follow Austrian and EU taxation laws. Yes, you have to check how the invoices have to look like for each country. For EU-members the invoices follow the same pattern. I do not do any paperwork but all invoices to foreign countries need to be reported separately to the tax authorities. This is something my tax consultant does for me. I hope this helps.

Thanks Margarete, this has helped me to solve my issues for now.

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@Julia L wrote:

Thanks Margarete, this has helped me to solve my issues for now.


Good luck! This procedure is not ideal, not exactly what the tax authorities want and a lot of additional work and costs. However, at least we cannot be suspected for money laundering or other bad things. It is also helpful to work only for clients whose companies can be verified. If a client tries to hide his country or pretends to live in another country than shown on his profile and/or hides his address I abstain from the work.

I will have to consider if I will keep using Upwork. While I have found a good client through it, there is generally very little good work for me on this platform. I don't know if this extra effort is going to make it worth it for me, unless these issues get fixed.

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@Julia L wrote:

I will have to consider if I will keep using Upwork. While I have found a good client through it, there is generally very little good work for me on this platform. I don't know if this extra effort is going to make it worth it for me, unless these issues get fixed.


If it is a good client, the extra effort could make sense. However, it does not make sense for any ill-paid job. 

Hi Margarete, would appreciate a clarification on one aspect. Does the amount on your invoices include the Upwork fee? 

 

If so, do you then additionally show the invoices Upwork sends you (service fee) so that they are deducted as business expenses?

 

Thank you

Jake

lontrus
Member

Hi there, I've read a bunch of threads on the issue and it seems to me that currently, the easiest way for a freelancer to operate from the EU and avoid the whole invoicing mess for book-keeping is to take on clients from the US and invoice them separately for payments received. I would just like some clarifications on the overall process, (I will also confirm this with my tax consultant but I'd like to form an initial view before meeting her).

 

This is the process as I understand it:

 

1. Receive payment from Upwork

2. Send separate invoice to each client with their US address and name. State that this payment has already been received via Upwork.

 

 

Here are my questions:

 

1. Since we receive a sum of XXX euros which is a combination of the weekly invoices to clients, how can we match the received payment to the sent invoice? In fact, I can't even match the received payment to the transaction on the upwork interface because the only things they have in common are the Upwork name and amount. (There is no ID or reference number.)

 

2. Since the client receives two invoices, is the one I send him just going to be ignored by him and used purely for my book-keeping purposes?

 

3. Finally, since the amount received is less than the billed invoices (due to upwork fees) do you show your invoices from Upwork for the fees as business expenses to explain why the amount received is less than the amount billed?

 

Thanks in advance for the clarification. And I apologize if I haven't explained any part of it clearly, I'm VERY new to all this.

 

Best

Jake

 

PS: If it helps to know, my business is registered in Estonia.

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@Jake T wrote:

Hi there, I've read a bunch of threads on the issue and it seems to me that currently, the easiest way for a freelancer to operate from the EU and avoid the whole invoicing mess for book-keeping is to take on clients from the US and invoice them separately for payments received. I would just like some clarifications on the overall process, (I will also confirm this with my tax consultant but I'd like to form an initial view before meeting her).

 

This is the process as I understand it:

 

1. Receive payment from Upwork

2. Send separate invoice to each client with their US address and name. State that this payment has already been received via Upwork.

 

 

Here are my questions:

 

1. Since we receive a sum of XXX euros which is a combination of the weekly invoices to clients, how can we match the received payment to the sent invoice? In fact, I can't even match the received payment to the transaction on the upwork interface because the only things they have in common are the Upwork name and amount. (There is no ID or reference number.)

 

2. Since the client receives two invoices, is the one I send him just going to be ignored by him and used purely for my book-keeping purposes?

 

3. Finally, since the amount received is less than the billed invoices (due to upwork fees) do you show your invoices from Upwork for the fees as business expenses to explain why the amount received is less than the amount billed?

 

Thanks in advance for the clarification. And I apologize if I haven't explained any part of it clearly, I'm VERY new to all this.

 

Best

Jake

 

PS: If it helps to know, my business is registered in Estonia.


1. It is not relevant which amount of money you receive from Upwork per week. Your invoices have to refer to the amount of money you have received from the client (for yours hours per week or for a milestone). Each time something is charged to the client this appears in your account and has a specific invoice number you can refer to.

 

2. That the client receives two invoices is only a less-than-ideal-solution. The client should only use one of them. The invoice he receives from Upwork is probably ok for a US client.

 

3. No, you have to invoice 100% to the client and the 10% Upwork fee are your expenses.

 

I hope this helps. Anyway you should get in touch with a tax consultant. What I have described is only a less-than-ideal-solution. 

One point remains unclear, the first one. Are you saying I should just add it to the note in the invoice I send, for example "Received payment via Upwork. Ref ID: 123456789"

 

Is it okay that the deposit to my bank account makes no mention of this ID? 

 

Or..... perhaps I missed your point entirely and you're saying it's irrelevant because the tax office doesn't care about specific transactions but deals with total income/expenditure?

 

Thank you for your patience!

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@Jake T wrote:

One point remains unclear, the first one. Are you saying I should just add it to the note in the invoice I send, for example "Received payment via Upwork. Ref ID: 123456789"

 

Is it okay that the deposit to my bank account makes no mention of this ID? 

 

Or..... perhaps I missed your point entirely and you're saying it's irrelevant because the tax office doesn't care about specific transactions but deals with total income/expenditure?

 

Thank you for your patience!


Question 1: Yes, exactly. You can also add the a print of the screenshot where the payment is shown in your Upwork account. 

 

Question 2: I understand what you mean. However, the only info that appears in our bank account is still Odesk (for the payment from Upwork). As long as you can prove that the money derives from your legal business, proved by your invoices, this should not be a big problem. However, each country has its specific tax regulations. You should invest some money for a tax consultant to avoid big mistakes from the beginning. 

Hey Guys, I have the same issue, getting clear now. One thing I cannot find out: how do you get the billing address and the client's VAT number?

Do you always ask them for that? That seems to be suboptimal from the client's point of view: to send billing details to someone who they already received the invoice from and receive another invoice that they don't even need... It's like connecting the client directly which Upwork policy does not allow. Or is it different? 

 

My invoice is in Hungarian so it's totally worthless for them to send...

 

What's the reason we cannot see the invoice that Upwork sends to the client "on behalf of us"? All the details I need should be on that.

 

Thanks!

 

Hi Gergely, did you receive any useful information on this. I am precisely in the same position right now, about to accept a job here and I'm fearing not to be able to invoice it properly (ie as the law asks here in The Netherlands) and ending having troubles on my tax return. 

Hi Elsa

Did you receive any useful information on this? I am about to accept my first job and I am totally lost regarding payment and invoices. I live in EU - Greece and I am doing some work for a Spanish client.

Is it possible to accept work from inside EU without paying VAT? The tax should of course be paid but how do we declare it? 

Jorun, how did this work out for you? I am in the same situation, working in one European country and client is in another EU country.

I did not accept the task since I did not know how to invoice......

I consider my Upwork "Available" account to be a USD bank account, so when money becomes available it's registered in my bookkeeping as earnings received into a foriegn currency account. When I then withdraw that money to my bank, which I generally do once a month, it's just registered as a transfer between two bank accounts, (adjusted for currency exchange profits/losses)

 

This way, I can just print out the Transaction History page and save it along with the bank statements from my bank for each month. Since the reference ID is in the Transaction History, it's good enough to follow the money trail, I think.

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