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Working with a German agency
Thread poster: Sinae Hong

Sinae Hong
Local time: 22:49
English to Korean
+ ...
Jan 5, 2016

Hi,

Thinking back I shouldn't have accepted a job from someone off LinkedIn.
However the job was quite straight forward and I had some spare time.

This guy is based in Germany and apparently you need to have VAT number for him to pay me.

I've explained to him that I'm not VAT registered as I earn less than 85000 pounds and any number related to tax is UTR or NI.

I found about https://ec.europa.eu/taxation_customs/tin/tinRequest.html and sent the screenshot of the website. But this guy is still insisting on me not having a correct 'tax' number.

Could you share your experiences working with agencies in Germany or in EU where they insisted either on VAT number or Tax number...?

Thanks.


 

Onur Inal  Identity Verified
Germany
Local time: 23:49
Member (2015)
English to Turkish
+ ...
VAT number or tax number Jan 6, 2016

Hi Sinae,

As far as I understand, you have done everything right so far. I live in Germany and I am a registered freelancer here. The rules are the same here. If you are a small business owner (Kleinunternehmer in German) and if you don't earn more than X amount of Euros per year, you don't pay the VAT. Tha means, your don't have a VAT number and you are VAT exempt.

I am a small business owner and I don't have a VAT number, either. But I do have a tax identification number.

I have worked with clients from Germany and other European countries before. Maybe you should tell your client that he should stop insisting on the VAT number. A simple Tax-ID should work.

Best wishes,
Onur


 

Soonthon LUPKITARO(Ph.D.)  Identity Verified
Thailand
Local time: 04:49
Member (2004)
English to Thai
+ ...
Communication issues Jan 6, 2016

Sinae Hong wrote:

Could you share your experiences working with agencies in Germany or in EU where they insisted either on VAT number or Tax number...?

Thanks.


My experience with a Tubingen agency is poor communication in English as well as distortion of issues. For instance, I asked about work contract, the agency sent me a university lecture-like document. I asked for tax exemption, the agency copied me a German tax law.
I also had a number of headaches with further email communication.
The agency is a good Blue Board recorder among German-speaking European professionals, though.
I decided to cancel the job even the project was related to a well-known firm's engineering interpretation.

Soonthon L.


 

Meriadec Perrin  Identity Verified
France
Local time: 23:49
English to French
+ ...
European VAT number for freelancers not needing one Jan 6, 2016

Hi Sinea,

I am under the same scheme as you, thou registered in France.

It is normal they ask you this, since they cannot deal with intracommunity VAT transfer (or rather, lack of) without a VAT number from their service vendors.

This situation has been anticipated at the EU level, and the process is quite easy: you just have to ask for an intracommunity "mock" VAT number, from the UK administrative services (I did so in France, it was very easy -- I got it through the equivalent of your HMRC). I found the form on line, sent it by email with my freelancer registration number and got the VAT intracommunity number in a few days.

Then you indicate this number on your invoices, and do not charge any VAT (of course, since this is intracommunity sales -- but companies in Germany and Spain [at least] need it mentioned in any cases), plus add the reference to the law in your country stating that you are VAT-exempted (there is a compulsory "administrative sentence" for that in France, even if you sell in France). Then your German client is happy since they can work according to their country's rule, and so do you.

The only thing to do then on you side (I guess it's the same thing in all EU countries) is to report all your intracommunity sales of services in a specific place (there is a web service for that in France, you'll need to check about that in the UK). This is a EU requirement, to check if there is no cheating at the VAT level, from the companies which buy services outside their own country.

That's it!

Mériadec


[Edited at 2016-01-06 04:10 GMT]

[Edited at 2016-01-06 04:12 GMT]


 

Michael Wetzel  Identity Verified
Germany
Local time: 23:49
German to English
freelancers from the UK Jan 6, 2016

The issue is this:
(1) The German business has to report and "pay" (it is immediately refunded) German VAT on your services.
(2) An inner-EU invoice without the service provider's VAT number is invalid for purposes of a VAT refund.
(3) This means that the invoice would at least theoretically be rejected if they are ever audited by the tax authorities (= they would then have to pay back their refunded VAT, leading to a real loss of 7% or 19% of the value of the invoice plus penalties).

The problem is that the UK, in a misguided attempt to make life easy for small businesses, has set an astronomically high threshold for VAT-exempt status and (unlike the other 27 countries of the EU) refuses to give VAT-exempt businesses a VAT number.
If you search the forums, the issue is discussed here several times, maybe there is a solution somewhere.
However, I just wanted to make clear that, even though you are presumably both perfectly intelligent people, what you are saying to your client and what your client is saying to you makes each of you sound like a misinformed moron in the other's ears (even though both of you are actually more or less right in what you are saying). So try to do your best to keep your cool while working out a solution and hopefully your client will do the same.


 

Edward Vreeburg  Identity Verified
Netherlands
Local time: 23:49
Member (2008)
English to Dutch
+ ...
OR ... use a colleage's VAT number Jan 6, 2016

If this is not a large job I can invoice the customer for you and transfer the money as soon as it comes in.

Technically since you are outside of the EU, they don't need your VAT number, and even if you where inside the EU, you might even be considered an "incidental" translator.

The only problem could actually be when THEY do not have a VAT number - YOU would have to charge VAT...

But a lot of these small companies simply don't have a clue...

Greetings
Ed


 

Erik Freitag  Identity Verified
Germany
Local time: 23:49
Member (2006)
Dutch to German
+ ...
VAT ID and VAT exemption Jan 6, 2016

In Germany, getting a VAT ID does not depend on your income crossing the VAT threshold. In other words: You can have a VAT ID and still be exempt from VAT. I guess this should be possible in the UK as well.

 

Dan Lucas  Identity Verified
United Kingdom
Local time: 22:49
Member (2014)
Japanese to English
Is it misguided though? Jan 6, 2016

Michael Wetzel wrote:
The problem is that the UK, in a misguided attempt to make life easy for small businesses, has set an astronomically high threshold for VAT-exempt status and (unlike the other 27 countries of the EU) refuses to give VAT-exempt businesses a VAT number.

I'm not sure I agree with that "misguided", Michael. The UK authorities understand that adding the additional systems, people or capacity to issue every business with VAT numbers would have a very real and concrete cost. Somebody has to pay for that, either the business or other taxpayers.

The fact that the authorities haven't blindly just added yet another requirement and another layer of bureaucracy is something to celebrate and encourage. I think it would be fairer to point the finger of blame at the inflexibility of a German system that is unable to accept that other countries may just do things differently.

Regards
Dan


 

Heinrich Pesch  Identity Verified
Finland
Local time: 00:49
Member (2003)
Finnish to German
+ ...
It's called USt-IdNr. Jan 6, 2016

VAT = valued added tax.
USt-IdNr. = Umsatzsteueridentifikationsnummer

Perhaps there is a misunderstanding because of different terms. Perhaps you should get your own number for doing business outside UK. It does not mean you have to pay any VAT. It only makes things easier for customers in bureaucratic countries like DE.
Some German customers even insist to have this on my invoices:

Schuldner der Umsatzsteuer ist [name and place of the customer]

Otherwise the bookkeeper will be very very angry.


 

Michael Wetzel  Identity Verified
Germany
Local time: 23:49
German to English
It's not Germany, it's everyone but the UK Jan 6, 2016

Hi Dan,

I'm all for a lack of regulations, but if a regulation is made, then I'm all for a lack of exceptions.
I would say that the "system" being added here is the absence of a VAT number for VAT-exempt UK businesses (in contrast to more or less every other country in the EU). I see this as an added layer of bureaucracy within an otherwise simple and uniform system.

Coming from the US, where sales, use and other related taxes are a complete mess (particularly once state lines are crossed), I think the EU system is an elegant and simple solution to a more or less complex problem.

The basic principle in the EU is to make sure that businesses (not private individuals) are responsible for collecting VAT and turning it over to tax authorities, to make things as simple for possible for businesses working across EU borders to get their VAT refunded and to be able to keep tabs on what is going on in order to avoid fraud.

So I really do think that the UK exception here is "misguided" = outwardly plausible and well-intentioned, but not thought through and very impractical.

I had actually never seen this issue discussed in relation to Germany. Usually it seems like Spain has been at issue.
And personally, I very rarely outsource, but I am also not really sure how I am supposed to handle the UK freelancers that I work with. I look the other way, because negligible amounts of money are involved, but I have the same issue.


 

RobinB  Identity Verified
United States
Local time: 16:49
German to English
Shouldn't be a problem Jan 6, 2016

We work with a couple of UK-based freelancers who are also exempt from charging VAT under the small business rule, and they simply add a note with the following (or highly similar) wording at the bottom of their invoices:

Für den Rechnungsbetrag fällt keine Umsatzsteuer an, da ich (wir) gemäß den britischen VAT-Richtlinien (§3.1 VAT Notice 700/1) nicht umsatzsteuerpflichtig bin (sind). Auf die Steuerschuldnerschaft des Leistungsempfängers gem. § 13b Umsatzsteuergesetz wird hingewiesen. Attention is drawn to the VAT liability of the recipient of these services in accordance with section 13b of the Umsatzsteuergesetz (German VAT Act).

This has been accepted by the German tax authorities for years now, and your client also has no alternative but to accept it. Provided that your invoice otherwise indicates that you are a professional translator (and thus a bona fide business), that's all that's required.

Your German customer then treats this invoice as a "normal" reverse charge invoice for VAT purposes, in other words he adds the notional VAT due on the invoice ("Einfuhr-USt") and at the same time records an offsetting entry in the same amount as input tax ("Vorsteuer"). His claim that you "need to have a VAT number for him to pay" you is misinformed, but it's a pretty widespread misunderstanding, I'm afraid.

You can also mail me privately if you need more information.

HTH,
Robin


 

Tom in London
United Kingdom
Local time: 22:49
Member (2008)
Italian to English
How is that misguided? Jan 6, 2016

Michael Wetzel wrote:

..... the UK, in a misguided attempt to make life easy for small businesses, has set an astronomically high threshold for VAT-exempt status....


I wouldn't say it's misguided. I find it makes my life a whole lot easier. I work with agencies in various other EU Member States,including Germany, and I've never had any problems about VAT.

My invoices simply show my UK Tax Reference and state "VAT exempt in compliance with UK tax legislation". End of story. As a UK resident I am required to comply with UK tax legislation ONLY - not with any other country's tax legislation.

The UK's "misguided" legislation has drastically reduced the adminstrative costs for hundreds of thousands of small businesses. Perhaps you should be seeking similar legislation in your own country.

[Edited at 2016-01-06 09:35 GMT]


 

Tom in London
United Kingdom
Local time: 22:49
Member (2008)
Italian to English
English Jan 6, 2016

RobinB wrote:

....they simply add a note with the following (or highly similar) wording at the bottom of their invoices:


I don't think it's legal for invoices issued in the UK to be in any language other than English, or to make reference to the tax legislation (or possible interpretations thereof) applying in other countries. Perhaps the wording you suggest would need to be not on the invoice itself, but in a covering document, e.g. an email - although having said that, no German agency has ever asked me for anything like that. I simply issue my invoices as described above.

It's more likely that in various EU Member States, including Germany and (notoriously) Spain, there are many accountants who are used to working in their own jurisdiction and don't really understand the international provisions.

[Edited at 2016-01-06 09:42 GMT]


 

Michael Wetzel  Identity Verified
Germany
Local time: 23:49
German to English
Don't know if my second post is visible Jan 6, 2016

Hi Tom,

I don't know if my second post is visible yet or not, but that is why I consider the UK policy misguided.

At any rate, the argument "X makes my life much easier, therefore it is not misguided" certainly sounds very misguided. (However, if it isn't misguided, my life may be about to become much easier.)

Seriously though, what do you write on your invoices to German agencies? Do you write that you are exempt from VAT or do your write that the reverse-charge procedure applies or nothing of the kind? I've never really been able to figure out what UK invoices should say.
(Tom: Thank you for answering my question before I was able to post it. That is a logical solution and if it's good enough for major agencies it's good enough for someone like me.)

I don't know what the administrative costs of filling out my quarterly EU reports is (all told, maybe 1 minute per inner-EU invoice), however, being forced to charge VAT earns me a significant amount of money each year at a very good hourly rate. I don't have a lot of business expenses, but I bought a chair last year and will be buying a computer and some other hardware this year and the little things like my telephone bills also add up over the course of a year.



[Edited at 2016-01-06 09:46 GMT]


 

Tom in London
United Kingdom
Local time: 22:49
Member (2008)
Italian to English
Already explained Jan 6, 2016

Michael Wetzel wrote:

....what do you write on your invoices to German agencies?


I have explained this above - sorry if there is a delay in the posting.


BTW I have just bought a new office chair and the whole cost of such items is tax deductible. VAT doesn't come into it.

[Edited at 2016-01-06 09:44 GMT]


 
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