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EU VAT invoicing for non-EU (US) resident?
Thread poster: Michael Roberts

Michael Roberts  Identity Verified
United States
Local time: 15:10
Member (2002)
German to English
+ ...
Feb 24, 2009

I'm based in the US, but most of my agencies are in Europe. Periodically, one of their accountants worries that maybe everything needs to be changed on my invoices. We always seem to figure out something, but eventually I figure I should see what the Common Wisdom is.

So. The issue of the day is what should appear on my invoices to ensure that VAT accounting is properly taken care of? I know that for a business customer I don't need to charge, or pay, VAT -- but does my invoice need to reflect that?

What is everybody else doing? Only one of my agencies has raised this issue; everybody else seems to assume that it's all covered, but they may be wrong, after all -- they're not lawyers either.


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Jack Doughty  Identity Verified
United Kingdom
Local time: 20:10
Member (2000)
Russian to English
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Add a note to the invoice, give social security number Feb 24, 2009

As a UK resident (not liable for VAT), I put a note on all my invoices
"VAT not required under UK law". In Germany, they want something in lieu of a VAT number, for which my social security number is acceptable, so I give that too.


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RobinB  Identity Verified
Germany
Local time: 21:10
German to English
Boilerplate for customers in Germany Feb 24, 2009

Michael Roberts wrote: So. The issue of the day is what should appear on my invoices to ensure that VAT accounting is properly taken care of? I know that for a business customer I don't need to charge, or pay, VAT -- but does my invoice need to reflect that?


Your invoices to customers in Germany should feature the following boilerplate:

"Auf die Steuerschuldnerschaft des Leistungsempfängers gem § 13b Umsatzsteuergesetz (or: UStG) wird hingewiesen."

And if you're feeling particularly keen, you can add an English translation:

"Attention is drawn to the VAT liability of the recipient of these services in accordance with section 13b of the Umsatzsteuergesetz (German VAT Act)."

The German Floskel at least is required by the German tax authorities. For some reason, a lot of companies in Germany don't seem to understand this, but in fact tax auditors are entitled to disqualify foreign invoices that don't feature the boilerplate (or variations with the same effect).

Presumably a lot more translation agencies will be requiring their foreign freelances to do this once the 2009 tax audit season really gets going.

Other EU countries have different rules, but many of them do seem to insist on some sort of invoice boilerplate.

And before I forget: there is absolutely *no* requirement whatsoever to disclose your SSN on invoices to German customers!



[Edited at 2009-02-24 15:49 GMT]


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Jessica Noyes  Identity Verified
United States
Local time: 15:10
Spanish to English
+ ...
Your number, please.. Feb 24, 2009

In Canada and the US, the SIN (Social Insurance Number) and Social Security Number, respectively, are key information to be used in banking and requesting loans. As such, they are an important part of a person's identity, and the ramifications of their getting into the wrong hands can be cataclysmic. Because of this, they should not be used for mere identification, or for any purpose not related to maintaining official financial records. And of course, European contractors have no duty to report our free-lance income to North American tax authorities, and have no need for the number.
This being the case, a Spanish outsourcer recommended that, since some kind of number is required by her accountant, I use my driver's license number. So this is what I do: VT MVD# -------. (MVD is Motor Vehicles Department). Works like a charm.


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Michael Roberts  Identity Verified
United States
Local time: 15:10
Member (2002)
German to English
+ ...
TOPIC STARTER
Thank you, everyone! Feb 24, 2009

Jack Doughty wrote:

As a UK resident (not liable for VAT), I put a note on all my invoices
"VAT not required under UK law".


I don't get this usage. I always relate it in my head to state sales taxes, which are also a consumption tax. Businesses are exempt from sales tax for their business expenses; sales tax is levied only on the end consumer. When you say that as a UK resident you are not liable for VAT, therefore, I don't understand why that would be. As a non-EU resident, I myself never pay VAT -- that, to me, is what "not liable" means. What does it actually mean in the UK? Because my customer also used this same phrase, and I didn't understand it then, either...

RobinB wrote:

Boilerplate


Thank you!! That is exactly what my customer was looking for -- another international crisis averted!


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RobinB  Identity Verified
Germany
Local time: 21:10
German to English
VAT vs. sales tax Feb 24, 2009

Michael Roberts wrote:

Jack Doughty wrote:

As a UK resident (not liable for VAT), I put a note on all my invoices
"VAT not required under UK law".


I don't get this usage. I always relate it in my head to state sales taxes, which are also a consumption tax. Businesses are exempt from sales tax for their business expenses; sales tax is levied only on the end consumer. When you say that as a UK resident you are not liable for VAT, therefore, I don't understand why that would be. As a non-EU resident, I myself never pay VAT -- that, to me, is what "not liable" means. What does it actually mean in the UK? Because my customer also used this same phrase, and I didn't understand it then, either...


Unlike US-style sales taxes, VAT is a pass-through tax that is levied at all stages in the value chain (in e.g. Canada it's called GST, but it's basically the same as VAT). In a VAT regime, VAT is charged at all stages of the production or services process, so translators charge VAT to their customers in the same way that they get charged VAT by their own suppliers (of just about everything). The VAT they pay their suppliers (called "input tax") is deductible from the VAT they themselves charge - and receive from - their own customers. The balance is then remitted to the tax authorities at regular intervals. Only the end-consumers can't deduct VAT, so the final burden rests with them. In theory it's a clean, simple system - in reality it can get kinda complicated.

(Apologies if you get the impression I'm trying to teach my grandmother to suck eggs. I just don't know how much you know about VAT.)

Most countries that have a VAT regime also have a lower threshold on annual revenue below which businesses (including self-employed people) can be be exempted from charging VAT. In the UK this threshold is pretty high, but it's considerably lower in other countries such as Germany. The downside is that those businesses can't reclaim VAT on their purchases, though of course they can claim the gross amount as a business expense. I imagine this is what Jack is referring to when he writes about VAT not being required under UK law.

I hope this clears things up for you. If you're issuing invoices to Germany, as I said all you need to do is include the boilerplate on the invoice. Don't otherwise mention VAT or any other form of tax, and don't give your SSN. This also applies if you state a German or other EU bank account for payment (which a large number of US-based translators now do).

HTH,
Robin

[Edited at 2009-02-24 21:57 GMT]


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Stuart Hoskins
Local time: 21:10
Czech to English
+ ...
boilerplates Feb 24, 2009

RobinB: are you sure that the provision of the German VAT Act you quote applies to translators outside the EU (just asking because in my part of the woods the relevant section of the law deals specifically with suppliers established in the EU)?

Also, off topic (now I'm talking EU > EU), when I invoice a company in Germany, do I have to cite the German law? I'm in the Czech Republic and I refer to the relevant Czech law at the bottom of my invoices (indicating that the VAT liability rests with the customer in Germany [or wherever in the EU]). I consulted the Czech finance ministry on this and have followed their advice (as no one else was able to tell me what to do). The presumption is that I draw up my invoices according to Czech law and don't have to study the law of the other 26 members (assuming they've all transposed the releavnt EU law).

Now I see perhaps this is wrong.

So far I have avoided working for agencies outside the EU for this very reason - the VAT issue gets me all in a lather!


[Edited at 2009-02-24 21:40 GMT]


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Michael Roberts  Identity Verified
United States
Local time: 15:10
Member (2002)
German to English
+ ...
TOPIC STARTER
You're safe within the EU, Stuart Feb 24, 2009

I may not really get the whole VAT thing, but I do get one principle of European law: if you follow the law of your member nation, you're good to go. It's my non-EU status that makes things difficult.

RobinB: Thank you! That makes a lot of sense.

The thing that really worries me about this issue is that as of January 1, 2003, non-EU retailers selling to end consumers within the EU must register with the tax authorities of each country of residence of their customers, collect VAT, and pay each tax authority. That applies to end consumers, though, not providers of business services, I think. And optionally, merchants can pick a VAT country and register there, optionally with an agent, and then charge that VAT. It's seen as an advantage for low-VAT countries (e.g. Portugal) because the VAT would then be paid to Portugal, and not to the country of residence of the customer.

This specifically applies to services or products sold through the Internet -- which, of course, we are all doing. The reason being that AOL was not charging VAT to European residents, giving them an automatic 20% price advantage over, say, French ISPs. So I certainly see the rationale here.

It might be, going forward, that non-EU service providers will end up having to register with the tax authorities somewhere in Europe, charge VAT, and pay it through -- even though nobody is actually doing that yet, as far as I can tell.



[Edited at 2009-02-24 23:00 GMT]


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RobinB  Identity Verified
Germany
Local time: 21:10
German to English
Quick answers Feb 24, 2009

Hi Stuart,

Stuart Hoskins wrote:
RobinB: are you sure that the provision of the German VAT Act you quote applies to translators outside the EU (just asking because in my part of the woods the relevant section of the law deals specifically with suppliers established in the EU)?


Yes. It applies to all translators outside Germany invoicing customers domiciled in Germany.

Also, off topic (now I'm talking EU > EU), when I invoice a company in Germany, do I have to cite the German law?


Yes. You may also have to cite your local Czech law if that's required there too. Actually, I'll qualify what I just wrote there. You don't **have** to cite the German law. After all, the German tax authorities can't get you (yet....). But: they do insist on the boilerplate being there for the invoice to be tax-deductible in Germany, so the German client can legally refuse to honour the invoice if the boilerplate is missing. So, in a sense, you do *have* to cite the German law, albeit indirectly.

The presumption is that I draw up my invoices according to Czech law and don't have to study the law of the other 26 members (assuming they've all transposed the releavnt EU law).


Reality looks rather different, I'm afraid.

So far I have avoided working for agencies outside the EU for this very reason - the VAT issue gets me all in a lather!


Clients outside the EU are dead simple: you don't charge VAT, you don't quote anything. You add the nominal VAT due on the money you get from your client to the VAT you owe on your VAT return ("output tax"), but at the same time deduct the same amount as input tax, so the end effect on that particular transaction is zero.

But it's certainly true that it's always a good idea to consult a tax adviser/accountant if you're not 100% sure about the VAT rules.

HTH,
Robin


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RobinB  Identity Verified
Germany
Local time: 21:10
German to English
Don't worry about the online selling rules Feb 24, 2009

Michael Roberts wrote: The thing that really worries me about this issue is that as of January 1, 2003, non-EU retailers selling to end consumers within the EU must register with the tax authorities of each country of residence of their customers, collect VAT, and pay each tax authority. That applies to end consumers, though, not providers of business services, I think....

This specifically applies to services or products sold through the Internet -- which, of course, we are all doing.


Unless you have an online shop that sells translations to unsuspecting consumers in the EU, you needn't worry about the VAT registration issue. Simply receiving texts for translation from business clients by e-mail and sending them back by e-mail (or through some online portal) does not trigger a VAT liability for non-EU service providers. But, you never know what the goblins in Brussels might think up next...

Robin


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Michael Roberts  Identity Verified
United States
Local time: 15:10
Member (2002)
German to English
+ ...
TOPIC STARTER
Do you have any links? Feb 24, 2009

Where did you get this boilerplate? Do you have any links I can point worried customers to? I've tried searching at the BMF's site, but oy, I'm a translator and I still find it tough going. (Apparently if I'm not getting paid, my brain refuses to read German legalese. That's sort of pathological.) -- But seriously, I'm not thinking of good search terms, because I'm not finding much useful information there.

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RobinB  Identity Verified
Germany
Local time: 21:10
German to English
Boilerplate redux Feb 25, 2009

Michael Roberts wrote:

Where did you get this boilerplate? Do you have any links I can point worried customers to? I've tried searching at the BMF's site, but oy, I'm a translator and I still find it tough going. (Apparently if I'm not getting paid, my brain refuses to read German legalese. That's sort of pathological.) -- But seriously, I'm not thinking of good search terms, because I'm not finding much useful information there.


I'm not aware of the boilerplate being online, though it's been quoted often enough in various newsgroups and listservs, and on ProZ. We got it from the Oberfinanzdirektion FFM (which is apparently responsible for these matters) through our Steuerberater, who got in touch directly with the OFD FFM. If your (German) customers have any questions about this, then that's what StB are there for! If they don't want to go to the expense of consulting a StB, then they probably shouldn't be in business in the first place...

HTH,
Robin


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Claudia J.
United States
Local time: 15:10
German to English
+ ...
Sure? Jan 17, 2013

RobinB wrote:

Michael Roberts wrote: The thing that really worries me about this issue is that as of January 1, 2003, non-EU retailers selling to end consumers within the EU must register with the tax authorities of each country of residence of their customers, collect VAT, and pay each tax authority. That applies to end consumers, though, not providers of business services, I think....

This specifically applies to services or products sold through the Internet -- which, of course, we are all doing.


Unless you have an online shop that sells translations to unsuspecting consumers in the EU, you needn't worry about the VAT registration issue. Simply receiving texts for translation from business clients by e-mail and sending them back by e-mail (or through some online portal) does not trigger a VAT liability for non-EU service providers. But, you never know what the goblins in Brussels might think up next...

Robin




I have recently come across the same issue and was wondering what makes you say that US-based translators are not liable for VAT on invoices to end consumers under the 2003 directive? I would like to see an official document concerning this. It seems that US-based translators would have to pay VAT on any translations sold to end consumers within the EU and would have to alert businesses in the EU of their obligation to pay the VAT themselves. Please, anyone who has also been dealing with this, clarify!! Thank you!


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Michael Roberts  Identity Verified
United States
Local time: 15:10
Member (2002)
German to English
+ ...
TOPIC STARTER
Not a lawyer or an accountant, but... Jan 17, 2013

Since I asked this in 2009, the worry has died down. Of the twenty or so agencies I do regular business with in Germany, none of them has any requirement beyond the German boilerplate already mentioned in 2009 (only two German agencies even go that far). That's four years and counting of tax seasons where their accountants or the Bundeszentralamt haven't had any problem with it, so I take that as indicating it's no longer considered a risk.

HOWEVER. I only sell translation services to agencies. As I understand EU law, if I were to sell translation services to end customers, I WOULD be liable for charging and properly paying VAT. The way most retailers handle this is by IP detection on their ordering websites. For example, this year I'm based in Budapest. If I buy software online, I get 27% Hungarian VAT added on most sites (yes, the highest VAT rate in Europe! Due to their lack of property taxes and the fact that all 10 million Hungarians lie like rugs on their income tax returns - the government has to get money somewhere).

If I were to dodge that and simply fail to charge VAT to an end customer, I'm not sure what recourse the German tax authorities would have, but I can't imagine it would be great fun for anybody.

As to my duty to alert Europeans to their own law - no, I don't go that far. It's none of my business how you want to organize your finances. If an agency's accountants want anything on their invoices, they need to tell me, and of course any invoices can be corrected at a later date anyway. I always ask new agencies if they have any specific requirements they need to see on their paperwork, and so far nobody's gotten in trouble.

But that's a pretty American view of bureaucracy, ha!


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Claudia J.
United States
Local time: 15:10
German to English
+ ...
Interesting Jan 17, 2013

Michael Roberts wrote:

Since I asked this in 2009, the worry has died down. Of the twenty or so agencies I do regular business with in Germany, none of them has any requirement beyond the German boilerplate already mentioned in 2009 (only two German agencies even go that far). That's four years and counting of tax seasons where their accountants or the Bundeszentralamt haven't had any problem with it, so I take that as indicating it's no longer considered a risk.

HOWEVER. I only sell translation services to agencies. As I understand EU law, if I were to sell translation services to end customers, I WOULD be liable for charging and properly paying VAT. The way most retailers handle this is by IP detection on their ordering websites. For example, this year I'm based in Budapest. If I buy software online, I get 27% Hungarian VAT added on most sites (yes, the highest VAT rate in Europe! Due to their lack of property taxes and the fact that all 10 million Hungarians lie like rugs on their income tax returns - the government has to get money somewhere).

If I were to dodge that and simply fail to charge VAT to an end customer, I'm not sure what recourse the German tax authorities would have, but I can't imagine it would be great fun for anybody.

As to my duty to alert Europeans to their own law - no, I don't go that far. It's none of my business how you want to organize your finances. If an agency's accountants want anything on their invoices, they need to tell me, and of course any invoices can be corrected at a later date anyway. I always ask new agencies if they have any specific requirements they need to see on their paperwork, and so far nobody's gotten in trouble.

But that's a pretty American view of bureaucracy, ha!



I just received this info from a tax authority:

"If you sell services to private people within the EU, there is generally
no VAT threshold, no matter what country you sell to within the EU.
Please note that it is legally required to register for VAT in one of the
EU countries when you sell to private people within the EU.

You will have to register for VAT in one country, and then charge VAT
according to each country's rate.
For example you can register for VAT in the UK, and charge 20% VAT to the
UK customers, 19% to the Germans, 21% to the Spanish, and so on. You
would declare all the VAT to the UK tax authorities."

Great, I guess I will just not sell translations to end consumers anymore, because the administrative burden that would come with it would make this completely prohibitive. It's a complete shame if you ask me, because things for small sole proprietors are already complicated enough as it is.


Food for thought: My understanding is that the 2003 Directive only applies to ecommerce and services that heavily rely on automation. Translation is heavily reliant on the work of the translator and not automated at all (at least not usually). So what rules apply to translations and proofreading then when selling to end consumers in the EU??? Someone has to have a definite answer on this, right?

[Edited at 2013-01-17 23:03 GMT]


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