Mobile menu

Pages in topic:   [1 2] >
Do US translators pay VAT for European clients?
Thread poster: Kurt Beals

Kurt Beals
Local time: 15:14
German to English
Oct 17, 2003

I'm translating a book for a flat fee for a German client, and he asked me if the price I quoted him includes the VAT.

Agencies I've translated for in the past have never mentioned VAT, and I've read descriptions of it, but haven't quite figured out who pays what to whom (or if anyone pays anything to anyone) when the client is in the EU and the translator is not.

Needless to say I don't have anything like a VAT number, and don't quite know what I would do about getting one.

I'm drawing up a contract now, so any help would be much appreciated.

Thanks,
Kurt


Direct link Reply with quote
 

Andy Lemminger  Identity Verified
Canada
Local time: 16:14
Member (2002)
English to German
Nope Oct 17, 2003

US-translators are not allowed to charge VAT for German customers, so just tell him this fact.

Direct link Reply with quote
 

Kurt Beals
Local time: 15:14
German to English
TOPIC STARTER
Just for clarification... Oct 17, 2003

One further question - if I'm not allowed to charge VAT, does that mean that he pays it? Or does that mean that no VAT is charged?
The client asked in this case whether the VAT was included in the flat rate that I quoted him, and I responded that I've always received a bank transfer for the entire amount quoted from other clients, and then paid American taxes on that amount, but that I would investigate further.
The website of the German Embassy seemed to indicate that VAT is paid on services provided by foreign companies to German companies or individuals, but it's a bit unclear & I'm not entirely sure what rules apply in this case. (The website is http://www.germany-info.org/relaunch/business/taxes/german_tax_vat.html).

Thanks for your help,
Kurt


Direct link Reply with quote
 

Ralf Lemster  Identity Verified
Germany
Local time: 00:14
English to German
+ ...
You have no involvement with VAT Oct 17, 2003

Hi Kurt,
The exact answer you can give to your (prospective) customer is that your price is exclusive of VAT, and you're not going to charge any (recently-introduced legislation regarding the charging of VAT by non-EU providers refers to broadcasting and web-based services, IIRC).

The way I would interpret section 1 of the German UStG, your service is outside the scope of VAT. I assume your customer is a VAT-registered business - you should include the following wording on the invoice:

[quote]
Gem. § 13b Abs. 2 USTG sind Sie als Leistungsempfänger Schuldner der deutschen Umsatzsteuer.[quote]

Given that VAT-registered businesses can deduct VAT paid as input tax, the service is, in effect, tax exempt, but due to a quirk in German VAT regulations, this wording is required to avoid any VAT levy at all.

The safest route is for your customer to contact their tax advisors in order to clarify the situation.

HTH, Ralf


Direct link Reply with quote
 
ntext  Identity Verified
United States
Local time: 17:14
Partial member
German to English
+ ...
Ralf, would you please clarify? Oct 17, 2003

Ralf Lemster wrote:

The way I would interpret section 1 of the German UStG, your service is outside the scope of VAT. I assume your customer is a VAT-registered business - you should include the following wording on the invoice:

Gem. § 13b Abs. 2 USTG sind Sie als Leistungsempfänger Schuldner der deutschen Umsatzsteuer.

Given that VAT-registered businesses can deduct VAT paid as input tax, the service is, in effect, tax exempt, but due to a quirk in German VAT regulations, this wording is required to avoid any VAT levy at all.


Ralf:

I'm confused now. You're saying that, in effect, a German business does not have to pay VAT on services purchased from a US provider — correct?

Are you also saying that, in effect, a German business does not have to pay VAT on any services they purchase, even if the provider is located in Germany?

More specifically: Assume that two translators, one based in Germany and one in the US, charge the exact same net fee for a service. In this case, is cheaper for a German based client to hire the US provider (disregarding the payment transfer issue)?

Greetings, Norbert


Direct link Reply with quote
 

Ralf Lemster  Identity Verified
Germany
Local time: 00:14
English to German
+ ...
Trying to clear the fog... Oct 17, 2003

Norbert,
If you find the whole issue of German (and, for that matter, EU) VAT rules confusing - welcome to the club.
Maybe our ProZ-resident VAT expert (Rod, are you there?) can add a few clarifying notes as well.

I'm confused now. You're saying that, in effect, a German business does not have to pay VAT on services purchased from a US provider — correct?

Not de jure, but de facto, yes. Here's the relevant section 13b USTG:

(1) Für folgende steuerpflichtige Umsätze entsteht die Steuer mit Ausstellung der Rechnung, spätestens jedoch mit Ablauf des der Ausführung der Leistung folgenden Kalendermonats:

1. Werklieferungen und sonstige Leistungen eines im Ausland ansässigen Unternehmers;
relevant here...]

(2) In den in Absatz 1 genannten Fällen schuldet der Leistungsempfänger die Steuer, wenn er ein Unternehmer oder eine juristische Person des öffentlichen Rechts ist. Dies gilt auch, wenn die Leistung für den nichtunternehmerischen Bereich bezogen wird. [/quote]
Bear in mind that even though the business is liable for VAT incurred, it does not actually have to pay it since a business can always deduct VAT paid (check in the KudoZ glossary for "input tax" for an explanation of that concept).

Are you also saying that, in effect, a German business does not have to pay VAT on any services they purchase, even if the provider is located in Germany?

The VAT is actually paid in these cases, but can be offset against VAT due - leaving aside the interest effect between paying VAT on purchases and getting a refund (or deduction), the VAT is a pass-through.

More specifically: Assume that two translators, one based in Germany and one in the US, charge the exact same net fee for a service. In this case, is cheaper for a German based client to hire the US provider (disregarding the payment transfer issue)?

Assuming that the client is a VAT-registered business, there's no difference between the two. The slight interest disadvantage (see above) is probably more than offset by transfer costs.[/quote]

Hope this clarifies a few things...

Best, Ralf


Direct link Reply with quote
 
pascie  Identity Verified
Local time: 18:14
English to French
+ ...
No VAT at all Oct 19, 2003

In the translation business whether inside or outside ths US, there is no VAT at all.

Direct link Reply with quote
 

Ralf Lemster  Identity Verified
Germany
Local time: 00:14
English to German
+ ...
How can you say that? Oct 19, 2003

Hi pascie,
pascie wrote:

In the translation business whether inside or outside ths US, there is no VAT at all.

Agreed as far as business within the US is concerned, but your statement regarding translations outside the US is simply untrue, I'm afraid. From a tax point of view, translation is a service like any other service rendered, and is thus subject to VAT within each members state of the EU, and in certain cases (where the customer isn't a business)also for cross-border business.

Best regards, Ralf


Direct link Reply with quote
 
Rod Darby  Identity Verified
Ghana
Local time: 23:14
German to English
+ ...
Umsatzsteuer: steuerbar, steuerpflichtig, steuerfrei Oct 19, 2003

Sorry to kick in so late: I was junketing in Hamburg most of yesterday.

Thank you for designating me as a VAT-expert, Ralf, very flattering!

Let me start with a story: once upon a time, all sorts of spivs (mainly Brits, I have to admit) started prancing round Germany, amongst other things laying what was alleged to be their last little bit of asphalt very cheaply on firm's driveways. They then wrote out bills e.g., for 2,000 DM + VAT, pocketed the whole money and disappeared for ever. German entrepreneurs (Unternehmer) then claimed the VAT in the invoice back off the tax authorities, who lost a lot of money this way. This eventually led (I won't bore you with the intermediate stages) to the situation whereby the German receiver of services owes VAT on services rendered (please note the terminology, Ralf) by non-residents, even though VAT isn't stated in the invoice. However, as an entrepreneur, the receiver can also deduct this (self-calculated, self-imposed) VAT from the VAT he otherwise owes on his own outward goods and services, so it doesn't hurt him.
This is what Section 13b was introduced for (replacing the rather unsatisfactory §§ 51-58 UStDV, for fans of German tax legislation!)

However, there is a prior question to be settled: is the turnover ueberhaupt "steuerbar"? This is where § 1 I no. 1 UStG comes in: "Der Umsatzsteuer unterliegen . . . die Lieferungen und sonstigen Leistungen, die ein Unternehmer im Inland gegen Entgelt im Rahmen seines Unternehmens ausfuehrt . . ." (I'm expanding the umlauts in case there are problems).

Now if you think you can guess *where* you are rendering your services (perhaps in the States?), then you reckoned without German tax law.

§ 3a III UStG (Ort der sonstigen Leistung) says: "Ist der Empfaenger einer der in Absatz 4 bezeichneten sonstigen Lesitungen ein Unternehmer (i.e., your German publisher), so wird die sonstige Leistung . . . dort ausgefuehrt, wo der Empfaenger sein Unternehmen betreibt" (i.e., in Germany).

Needless to say, Absatz 4 includes "die sonstigen Leistungen aus der Taetigkeit als . . . Dolmetscher und Uebersetzer . . .", so your work is "steuerbar" in Germany.

This is where § 13b UStG kicks in and says you don't have know anything about German VAT and/or indeed pay it, you just put on your bill that it's the responsibility of the receiver of the services to look after VAT.

What changed on 1 July 2003, BTW, was that "die auf elektronischem Weg erbrachten sonstigen Leistungen" got added to the catalogue in § 3a Absatz 4 UStG.

OK, has that cleared this one up FTTB?

ATB,
Rod

P.S. to all you translators in Germany: I have deliberately not addressed the issue of "Kleinunternehmer", since this only concerns you and not translators abroad. BTW, the turnover limit for that has been raised from 16,620 to 17,500 euro.


Direct link Reply with quote
 

Ralf Lemster  Identity Verified
Germany
Local time: 00:14
English to German
+ ...
Thanks, Rod... Oct 19, 2003

...very helpful and enlightening, as usual.

Cheers, Ralf


Direct link Reply with quote
 

Daina Jauntirans  Identity Verified
Local time: 17:14
Member (2005)
German to English
+ ...
Follow-up question Oct 20, 2003

I have been asked by one client to include the blurb Ralf mentioned on my invoices to them. However, my other clients in Germany have not - should I be including it on all of my invoices to Germany anyway?

Direct link Reply with quote
 

Ralf Lemster  Identity Verified
Germany
Local time: 00:14
English to German
+ ...
Not everyone's aware of this Oct 20, 2003

Hi Daina,
Daina Jauntirans wrote:

I have been asked by one client to include the blurb Ralf mentioned on my invoices to them. However, my other clients in Germany have not - should I be including it on all of my invoices to Germany anyway?

Not everyone is aware of this issue - including it without mentioning it beforehand is likely to cause some confusion... OTOH you may want to point this out to those who are unaware - sell it as value-added customer service.

Cheers, Ralf


Direct link Reply with quote
 

Daina Jauntirans  Identity Verified
Local time: 17:14
Member (2005)
German to English
+ ...
Thanks! Oct 20, 2003

Thanks for the information - very useful!

Direct link Reply with quote
 

Parrot  Identity Verified
Spain
Local time: 00:14
Member (2002)
Spanish to English
+ ...
You may find this useful reference Oct 21, 2003

We published it in the Spanish forum around the beginning of July:

http://europa.eu.int/comm/taxation_customs/taxation/ecommerce/vat_en.htm



Direct link Reply with quote
 

Kurt Beals
Local time: 15:14
German to English
TOPIC STARTER
Further question - VAT as part of total? Oct 21, 2003

One more question, just for clarification.

It sounds like I personally don't have to concern myself with the bureaucracy of the VAT. In this case, though, there is a particular amount in Euros (say 1000 EUR) that is acceptable to both me and the client. That is to say, I would be satisfied to receive a bank transfer for 1000 EUR for this project (on which I would then pay US taxes), and the client would be satisfied to spend a total of 1000 EUR.

Is this actually possible? Or does he have to pay extra money to the government on top of the 1000 EUR he pays me? It sounds from what has been written here like the client has to pay VAT on his end - but can he then recoup all of that, so that he's actually only out 1000 EUR (and a bit of time spent doing paperwork) when all is said and done?

Sorry if these questions seem either pedantic or clueless, I just want to make sure I'm not misinterpreting anyone's answer.

Thanks,
Kurt


Direct link Reply with quote
 
Pages in topic:   [1 2] >


To report site rules violations or get help, contact a site moderator:


You can also contact site staff by submitting a support request »

Do US translators pay VAT for European clients?

Advanced search


Translation news





Anycount & Translation Office 3000
Translation Office 3000

Translation Office 3000 is an advanced accounting tool for freelance translators and small agencies. TO3000 easily and seamlessly integrates with the business life of professional freelance translators.

More info »
SDL Trados Studio 2017 Freelance
The leading translation software used by over 250,000 translators.

SDL Trados Studio 2017 helps translators increase translation productivity whilst ensuring quality. Combining translation memory, terminology management and machine translation in one simple and easy-to-use environment.

More info »



All of ProZ.com
  • All of ProZ.com
  • Term search
  • Jobs