VAT for same EU country - how to do invoice?

f957c3ae · ‎11-16-2020

Hello,

I am familiar with the reverse charge handling by upwork, and in case customers have a VAT in their details and if they are from any other EU country than yours it seems quite clear what to do.

What happens instead if a client is in the same country (for instance, NL)? I understand the invoice will be without VAT indication, hence you will have to:

- 1) Pay VAT yourself on the amount received (e.g. upwork fee 100€ - you will have to pay 21% yourself, around 17€)

- 2) Agree with client to add VAT on top of that in a separate invoice. Would this even be compliant to upwork tos, as we're only talking about taxes? I think in theory this is the most fair solution otherwise you would end up paying the upwork fee on the Vat amount as well, which would be weird (and the VAT again on the Upwork fee part).
But i'm not sure how it fits with the terms of services.

In any case, I will have to do an invoice with VAT, for both my records and my client (that clearly has to take care of his VAT as well, and it can't be done with the current UW documents).
Should the invoice done with VAT only (e.g 17€) or the whole amount but referencing the uw invoice and just asking the payment for the VAT part (83+17€)?

Thanks

JoanneP · ‎11-16-2020

Hi Massimo,

VAT is assessed on digital services provided by Upwork (i.e. service fees, membership fees, and connect purchases), not on services freelancers and agencies provide their clients. VAT rates are calculated according to the local rate of the freelancer’s country of residence. Please check this help article and see country-specific tabs to further understand how VAT applies to you. It would also be best to consult with your local tax advisor with questions that relate to your specific situation so that you can be guided accordingly.

~ Joanne

f957c3ae · ‎11-17-2020

Thanks for the answer, it's a quite standard one though and it does not solve my problem, unfortunately. I'm in touch with a tax consultant of course, just wanted to share advices with the upwork community. This "escrow" approach is not really common in europe, so even tax consultants are sometimes in doubt about how to handle it.

I understand Upwork is doing his VAT correctly, my question is more how us freelancers/agencies can also be compliant, as the current upwork structure does not provide a full-solution for clients-freelancers deals that are from the same EU country 🙂

hill_tracey · ‎02-11-2021

It seems to me that Upwork's response is a bit of a cop-out. On the one hand Upwork says that you shouldn't talk to clients outside of the Upwork platform. On the other hand it says that if you are registered for VAT you need to be charging clients VAT (or maybe you do, but it's not their responsibility). There is no mechanism within Upwork for freelancers to charge clients VAT. They simply say it's not their problem and you should speak to a tax adviser. The only way to do it, it seems to me, is to invoice separately outside of the Upwork platform which is against Upwork's own terms of use.

f957c3ae · ‎02-11-2021

Exacty, it's frankly a s***show, one of the reasons why I'm using the platform less and less. If they want to do invoices for myself, they should at least do them right, there are cases of invoices that are not compliant (for instance, intra-same EU country where they say VAT REVERSE CHARGED, which is not ok).

I spent a lot in accountancy fees to try to sort this out, but this is a quite complex matter and everyone has his own point of view. There is even a point of view that says upwork should pay VAT as they can be seen as the client (they make payment, have exclusivity, etc).

It's too bad that EU freelancers are probably not considered that important to work on a compliatnt and easy solution for everyone involved.

martina_plaschka · ‎02-11-2021

Massimo G wrote:
Exacty, it's frankly a s***show, one of the reasons why I'm using the platform less and less. If they want to do invoices for myself, they should at least do them right, there are cases of invoices that are not compliant (for instance, intra-same EU country where they say VAT REVERSE CHARGED, which is not ok).

I spent a lot in accountancy fees to try to sort this out, but this is a quite complex matter and everyone has his own point of view. There is even a point of view that says upwork should pay VAT as they can be seen as the client (they make payment, have exclusivity, etc).

It's too bad that EU freelancers are probably not considered that important to work on a compliatnt and easy solution for everyone involved.

They will probably not do something about it, but I expect the delivery of digital services on upwork within the EU B2C to be actually pretty slim, because most of your customers will be B2B, right? It really is a very small issue overall.

martina_plaschka · ‎02-11-2021

Tracey H wrote:
It seems to me that Upwork's response is a bit of a cop-out. On the one hand Upwork says that you shouldn't talk to clients outside of the Upwork platform. On the other hand it says that if you are registered for VAT you need to be charging clients VAT (or maybe you do, but it's not their responsibility). There is no mechanism within Upwork for freelancers to charge clients VAT. They simply say it's not their problem and you should speak to a tax adviser. The only way to do it, it seems to me, is to invoice separately outside of the Upwork platform which is against Upwork's own terms of use.

I don't believe it is. Upwork strictly forbids payment outside of the platform, not invoicing. If you need to invoice including VAT, you are still able and allowed to create your own invoice based on the payment you received on the platform and add VAT to that.