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Upwork has no shame

naomij1411
Community Leader
Naomi J Member Since: May 15, 2015
61 of 69

Andrei have you ever had one of your international purchases kept back by the post office, with a note delivered saying please come and pay import duties/VAT etc? I don't if that happens in your country, but it does (unevenly) in the UK. 

 

This is a similar kind of thing. We 'buy' the brokerage service from a non-EU company, and pay VAT on it because we do receive that service within the EU. We are sitting in the EU, using the service.

 

What might be lovely, is if there were a way for Upwork to run a parallel platform based in the EU, for EU freelancers and clients. This would mean most of us would not have to pay VAT, bookkeeping would be easier for everyone, and the tyes of work available would be more appropriate.  It would cost Upwork money and infrastructure, but if it's business in the EU is growing as quickly as stated, then it could make sense to invest in a subsidiary EU-based company. Undoubtedly its business and reputation in the EU would grow. Its income from the EU subsidiary would probably quickly overtake that of the global company, as the value of the work it brokers would be much higher overall.

 

I find it all very confusing though to be honest, and I have a law degree.

jmeyn
Community Guru
Joachim M Member Since: Mar 23, 2015
62 of 69

@Naomi J wrote:

Andrei have you ever had one of your international purchases kept back by the post office, with a note delivered saying please come and pay import duties/VAT etc? I don't if that happens in your country, but it does (unevenly) in the UK. 

 

This is a similar kind of thing. We 'buy' the brokerage service from a non-EU company, and pay VAT on it because we do receive that service within the EU. We are sitting in the EU, using the service.

 

What might be lovely, is if there were a way for Upwork to run a parallel platform based in the EU, for EU freelancers and clients. This would mean most of us would not have to pay VAT, bookkeeping would be easier for everyone, and the tyes of work available would be more appropriate.  It would cost Upwork money and infrastructure, but if it's business in the EU is growing as quickly as stated, then it could make sense to invest in a subsidiary EU-based company. Undoubtedly its business and reputation in the EU would grow. Its income from the EU subsidiary would probably quickly overtake that of the global company, as the value of the work it brokers would be much higher overall.

 

I find it all very confusing though to be honest, and I have a law degree.


Sorry Naomi,

 

But you still have to pay VAT, just like when buying an ebook from Amazon. Upwork is viewed as an automated electronic service. VAT charged according to the country of residence of the buyer and to be paid there.

 

http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/telecom/index_en.htm#infosel

 

gd90
Community Guru
Gyan D Member Since: Sep 4, 2014
63 of 69

Hopefully, someone with sound legal training can clarify:

 

Do non-EU freelancers owe VAT when conducting business with an EU client?

 

From my amateur parsing of Joachim's link above, the conclusion is No. The page says that non-EU (and EU) businesses supplying to EU businesses owe no VAT. Non-EU businesses supplying to consumers of "electronic services" do owe VAT, where electronic services is defined in the Explanatory Notes as

 

"‘Electronically  supplied  services’  (hereinafter  ‘electronic  services’)  shall  include services which are delivered over the Internet or an electronic network and the nature of which  renders  their  supply  essentially  automated  and  involving minimal human intervention, and impossible to ensure in the absence of information technology"

 

The part which I bolded, seems to exempt the transactions occuring here between freelancers and clients.

 

jmeyn
Community Guru
Joachim M Member Since: Mar 23, 2015
64 of 69

@Gyan D wrote:

Hopefully, someone with sound legal training can clarify:

 

Do non-EU freelancers owe VAT when conducting business with an EU client?

 

Only if they provide an Electronically Supplied Service e.g. selling e-books or Upwork's fees. It's the buyer located within the EU that has to report the import and pay the VAT on his purchase. To cut a long story short: Nothing has to enter the EU without the buyer paying VAT.

 

From my amateur parsing of Joachim's link above, the conclusion is No. The page says that non-EU (and EU) businesses supplying to EU businesses owe no VAT. Non-EU businesses supplying to consumers of "electronic services" do owe VAT, where electronic services is defined in the Explanatory Notes as

 

"‘Electronically  supplied  services’  (hereinafter  ‘electronic  services’)  shall  include services which are delivered over the Internet or an electronic network and the nature of which  renders  their  supply  essentially  automated  and  involving minimal human intervention, and impossible to ensure in the absence of information technology"

 

The part which I bolded, seems to exempt the transactions occuring here between freelancers and clients.

 


 

dvo_arch
Ace Contributor
Dimitar O Member Since: Jun 22, 2015
65 of 69

I'm a bit confused about this customer-mediator-service provider triangle.. I think first we need to define who is who. As a freelancer, am i a customer for Upwork, buying their services or Upwork is paying for my professional services to sell it to a client? Or the client looking for a service is my client or Upwork client? I don't have a law diploma..

elastella
Community Guru
Ela K Member Since: Feb 9, 2015
66 of 69
@Dimitar O wrote:

I'm a bit confused about this customer-mediator-service provider triangle.. I think first we need to define who is who. As a freelancer, am i a customer for Upwork, buying their services or Upwork is paying for my professional services to sell it to a client? Or the client looking for a service is my client or Upwork client? I don't have a law diploma..


It's all spelled out in the user agreement. There are 2 contracts in place.

 

Contract 1: a freelancer (seller) sells her/his services to a client (buyer).

Contract 2: Upwork (seller) sells their services to the freelancer (buyer).

 

 

How it all goes down (4 parties are involved):

 

  1. Client has a contract with a freelancer (fixed price or hourly rate + bonuses). The provider's bid covers his/her rate/fixed price including the 10% Upwork fee.
  2. Client transfers 100% to EEC (Elance Escrow Corporation).
  3. EEC transfers 90% to the freelancer.
  4. EEC transfers 10% to Upwork as their service fee. European providers owe VAT for said 10% service fee to their local tax authorities as they are the end consumer of said service.

 

And then there is the VAT European providers (unless they are exempt) need to charge their clients - but that is a different story.

 

juvy_ann-palma
Community Guru
Juvy Ann P Member Since: Oct 29, 2015
67 of 69

Dimitar, it is possible that Upwork is the mall and the freelancer owns a boutique or store inside the mall and the client is the customer buying products or hiring someone's services from any of the boutiques or stores inside the mall.  It is also possible that the store owner may behave like a customer.

dvo_arch
Ace Contributor
Dimitar O Member Since: Jun 22, 2015
68 of 69

Nice point of view Juvy, i wish it was simple as that Smiley Happy

jmeyn
Community Guru
Joachim M Member Since: Mar 23, 2015
69 of 69

Dimitar,

 

Ela spelled it out correctly.

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