VAT in the EU once again
Thread poster: Natalia Elo

Natalia Elo  Identity Verified
Germany
Local time: 12:55
Member (2004)
English to Russian
+ ...
Nov 3, 2004

Hi everybody,

Please help me. The more posts I read, more confused I feel.

I live in Germany, planning to take tax number from the beginning of next year. At the moment I'm negotiating with a potential client in Finland about project which will be a case next year as well.

Do I have to charge VAT from them or not? Will it make my offer more attractive, if I don't have to?

Ralf, please don't tell me that I should contact tax advisor, I don't speak German to that extent and I don't know any of them in Berlin who does speak English (or Russian or Finnish). Instead if you know some of them who speaks any of above mentioned languages, please, do write me in private.

Best regards
Natalia Elo


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Williamson  Identity Verified
United Kingdom
Local time: 11:55
Flemish to English
+ ...
Another try... Nov 3, 2004

No, you do not have to charge VAT because you export a service to another E.U.-country. Your end-customer has to charge the VAT. On your invoice you must mention: Free of VAT persuant artX of the fiscal code... MwStfrei gemäß art. vom ... buch.
Actually, the VAT-principles are simple: if you deliver a service to a customer in the country where you live, you must charge VAT.
If you export a service to another EU-country, your service is free of VAT, but the end-customer must give you his/her VAT-number and charge VAT to its end-customer (agency) or pay VAT (case of direct customer).
If you export a service to a non-EU-country or an international institution, your service is free of VAT.

[Edited at 2004-11-03 21:53]


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Ralf Lemster  Identity Verified
Germany
Local time: 12:55
English to German
+ ...
More details, please... Nov 3, 2004

Hi Natalia,
I live in Germany, planning to take tax number from the beginning of next year.

What do you mean by that? Are you referring to registering for VAT? If so, am I right in assuming that, at the moment, you are not VAT-registered, applying the Kleinunternehmerregelulng?

At the moment I'm negotiating with a potential client in Finland about project which will be a case next year as well.

Is that client a business, and if yes, do they have a EU VAT ID?

Do I have to charge VAT from them or not?

If you're not VAT-registered, you cannot charge VAT to any customer. Does this thread match your situation?

Will it make my offer more attractive, if I don't have to?

VAT doesn't make a difference to a customer who's a business: if they pay VAT on business expenses, they can offset this against their VAT liability. If they don't pay VAT, there's nothing to offset.

Ralf, please don't tell me that I should contact tax advisor, I don't speak German to that extent and I don't know any of them in Berlin who does speak English (or Russian or Finnish).

Fair enough, but quite honestly, I don't think the German tax authorities will follow this line of reasoning if something goes wrong. There are scenarios where you can be liable for VAT which you should have charged. I'm not trying to scare you off - all I'm trying to get across is that telling the Finanzamt that you didn't understand how the system works is not a good idea.

Your local Chamber of Commerce might have some information in English.

Instead if you know some of them who speaks any of above mentioned languages, please, do write me in private.

Sounds much better.


Best regards, and good luck,
Ralf


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xxxsarahl
Local time: 03:55
English to French
+ ...
Nov 3, 2004



[Edited at 2004-11-04 01:24]


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Ralf Lemster  Identity Verified
Germany
Local time: 12:55
English to German
+ ...
Sorry, Sarah... Nov 3, 2004

...but there are a few points which require correction:

VAT is a NATIONAL tax, you charge it to customers in your
country of residence. Then you give the VAT you collected
to your tax authorities.

Although this is true in principle, the VAT system in the EU works across borders.

You cannot charge VAT to anyone outside your borders.

Yes you can - in fact, you have to in certain cases; for instance, where you deliver a translation to a non-business customer resident in another EU member state. Under German VAT law, this is based on the definition of place of performance of "other services" (this includes translations) pursuant to section 3a(1) of the German VAT Act (UStG): pursuant to that provision, other services are provided at the business domicile of the service provider. The exception is where the recipient of the service is a business, in which case the place of performance is deemed to be the domicile of the recipient (section 3a(3) UStG).

A translation delivered by a VAT-registered German translator to a business client in the UK is not subject to German VAT (as the place of performance is in the UK). Note that this doesn't mean it is free of VAT - but the VAT-registered UK business can effectively neutralise the VAT payment as input tax, so there's no VAT cash flow in this case.

In contrast, if the same translation is delivered to a non-business individual in the UK, the place of performance remains in Germany - hence, VAT must be charged.

And no one outside your borders can charge you VAT either.

May I suggest you take a closer look at the thread dealing with subscription payments to ProZ.com being subject to VAT.

To charge VAT you need a VAT number ; your tax authorities
will give you one when you register as a free-lancer.

Not necessarily (again, I focus on the situation in Germany): when registering with the tax authorities, you will get a tax number (mostly for income tax purposes), whereas you need a VAT number (Umsatzsteuernummer) for the purposes of VAT.

You should really register before you start billing customers

Again, not necessarily so. One of the key issues in deciding whether or not to opt out of VAT under the so-called Kleinunternehmerregelung (meaning that you opt out as long as you remain below certain revenue thresholds) is whether you will have significant business expenses subject to VAT: if you decide to opt out, you will not be able to recover the VAT paid on such expenses.

May I take this opportunity to remind everyone that no information provided here constitutes tax or legal advice. Also, I would kindly request to check relevant sources of information (in particulary, the relevant European tax laws and related EU provisions) before making blanket statements.

Thanks, and best regards,
Ralf

[Edited at 2004-11-03 23:43]


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Stuart Dowell  Identity Verified
Poland
Local time: 12:55
Member (2007)
Polish to English
+ ...
If you export a service to another EU-country, your service is free of VAT, but the end-customer mus Nov 4, 2004

Does this also mean that the translator must also include their VAT number on the invoice?

Is it possible to invoice a EU client with a VAT number if the translator does not have a VAT number?

Stuart


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Parrot  Identity Verified
Spain
Local time: 12:55
Member (2002)
Spanish to English
+ ...
'Free of VAT' may be an erroneous concept in the EU Nov 4, 2004

Strictly speaking, in the EU there is a difference between VAT-free and VAT=0% with respect to the exporting country (for a business customer it will still be VAT=X% in the importing country). The term may thus be misleading in an invoicing clause.

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Ralf Lemster  Identity Verified
Germany
Local time: 12:55
English to German
+ ...
Translator's VAT ID Nov 4, 2004

Hi Stuart,
Does this also mean that the translator must also include their VAT number on the invoice?

Yes.

Is it possible to invoice a EU client with a VAT number if the translator does not have a VAT number?

Certainly, as there are translators who are not registered for VAT, and hence don't have a VAT ID. In that case, it's advisable to add a note referring to the relevant legal basis for exemption (section 19 UStG in Germany, for example).

HTH, Ralf


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RobinB  Identity Verified
Germany
Local time: 12:55
German to English
VAT "exemption" Nov 4, 2004

Natalia,

As has already been pointed out, translation services are not VAT-free or VAT-exempt, irrespective of whether they're provided to a customer in Germany (unless you've been officially exempted from VAT) or another EU country.

Although you may have been exempted from VAT by the tax authorities here in Germany (I presume you have the exemption certificate), the situation regarding cross-border transactions is rather different. In these cases (under the "reverse charge" mechanism), VAT is payable by the customer at their national rate. However, they can offset that against the corresponding input tax if the supplier (translator) shows its EU VAT ID No. on its invoice.

The fact that you may have an exemption certificate from the German tax authorities is unlikely to interest the foreign tax authorities very much. This means that there's a strong chance that the foreign client will have to pay VAT on your invoice, without being able to offset the same amount as input tax, effectively increasing the absolute price of the translation by the amount of local VAT.

You may therefore want to consider obtaining your German VAT and VAT ID numbers now to avoid disadvantages to your own customer.

Robin


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Natalia Elo  Identity Verified
Germany
Local time: 12:55
Member (2004)
English to Russian
+ ...
TOPIC STARTER
The details Nov 4, 2004

Thank you Ralf! And everyboody else of course!

I'm afraid this thread will become more like how to do that and that in Germany.

Ralf Lemster wrote:
Hi Natalia,
I live in Germany, planning to take tax number from the beginning of next year.

What do you mean by that? Are you referring to registering for VAT? If so, am I right in assuming that, at the moment, you are not VAT-registered, applying the Kleinunternehmerregelulng?


Sorry if this sounds really stupid: Does getting Steuernummer mean being VAT-registered? I'm not registered in Finanzamt. I live in Berlin for 10 months and so far have neen on maternity leave( which is why I'm able to read my emails so late only) But I am planning to start translating again. The problem is that all my customers are mainly in Finland, where I lived before I moved here.

Is that client a business, and if yes, do they have a EU VAT ID?

It is a state financed organisation, do they have VAT numbers?

Do I have to charge VAT from them or not?

If you're not VAT-registered, you cannot charge VAT to any customer. Does this thread match your situation? [/quote]

Eeeer, I don't have Ich-AG, but I have read that thread, and yes, may be it will be the case. I don't think I will earn much.


but quite honestly, I don't think the German tax authorities will follow this line of reasoning if something goes wrong.

Well, yes this is true. That's why I'm trying get as much information as possible here.

Your local Chamber of Commerce might have some information in English.

Thank you for that link as well.

Hmmm still don't know what to write in the offer

Natalia


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Ralf Lemster  Identity Verified
Germany
Local time: 12:55
English to German
+ ...
Working on the details Nov 4, 2004

Hi again,
I'm afraid this thread will become more like how to do that and that in Germany.

Not a problem - after all, that's what you need to know, right? Also, it's usually safest to deal with the regulations in your own home market (and, as Robin's comment demonstrated, I even got the odd details wrong there...).

Sorry if this sounds really stupid: Does getting Steuernummer mean being VAT-registered?

No (at least not necessarily); the two registrations are separate issues (and hence, you get two different numbers).
If you need to check procedures, you could even check with the tax authorities.

Is that client a business, and if yes, do they have a EU VAT ID?

It is a state financed organisation, do they have VAT numbers?

Possibly, but not necessarily... why don't you ask them?

Do I have to charge VAT from them or not?

If you're not VAT-registered, you cannot charge VAT to any customer. Does this thread match your situation?


Eeeer, I don't have Ich-AG, but I have read that thread, and yes, may be it will be the case. I don't think I will earn much.[/quote]
The start-up support commonly known as "Ich-AG" has no relevance to VAT.

Best, Ralf


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