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Invoices from US to Germany - new VAT law
Thread poster: TranslationFie

TranslationFie
United States
Feb 23, 2017

Hello,

I am hoping that someone here can help me.
So far, when sending invoices from the US to Germany, I have never dealt with VAT.
I was recently made aware of the fact that, according to the new VAT law in place since 2015, I would have to register in Germany to pay VAT on invoices to private clients and that for business clients I would have to include a statement that says that they have to pay VAT on my invoices in Germany.

Is this correct? If so, do any of you US colleagues still offer translations to private clients in Germany? How complicated is it to register for VAT to pay VAT on invoices for private clients? Have you all abandoned your private clients in Germany? And how did the business clients take it that they have to pay 19% on your invoices?

I really look forward to your answers as I would like to get this resolved as soon as possible. It seems like my entire business is at stake now.


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Sheila Wilson  Identity Verified
Spain
Local time: 02:53
Member (2007)
English
+ ...
It applies to you? Feb 24, 2017

I thought it only applied to companies over a certain size who do a very large percentage of their business with EU-based clients. Companies like ProZ.com.

Edited to say that this is just my personal belief, not founded on any particular knowledge. Don't take it as gospel.

[Edited at 2017-02-24 09:26 GMT]


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Andreas Hild  Identity Verified
German to English
+ ...
"New" VAT law? Feb 24, 2017

So far I understand, VAT registration is voluntary unless you meet certain conditions: e.g. premises in Germany or exceeding a certain turnover threshold (100,000? EUR).

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Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Not sure Feb 24, 2017

You can read more about the question on for example
https://quaderno.io/blog/what-you-must-know-about-vat-if-you-have-customers-in-europe/
and
http://2016.export.gov/europeanunion/build/groups/public/@eg_eu/documents/webcontent/eg_eu_089244.pdf

VAT collection from non-EU sellers selling to EU consumers has been in force much longer than since 2015. In such cases, VAT registration is required, but I think a common EU VAT registration is an option.

One does not have to have premises in the EU for this to apply.

I believe the threshold Andy mentions concerns EU businesses selling to EU consumers in another Member State. The threshold determines if VAT is due in the seller's or buyer's Member State. That's why, if a German consumer buys one widget from a garage shop in France, the garage shop will charge French VAT, whereas Amazon France will charge VAT in Germany (and you will see a German VAT number on related invoices).

Translation is not considered an electronic or digital service even if supplied electronically. Therefore, translators are not concerned by the changes that entered into force in 2015 (or was it 2016?). You need to find out if translation is a service concerned by the duty to collect VAT.

I no longer sell directly to consumers any more because of a never-ending flood of consumer regulations coming out of Brussels, such as for example withdrawal rights and a steadily evolving list of mandatory legal notices one must display everywhere, and to make it much worse, German law entitles just about all and sundry to send me bills for 'legal fees' if they find the tiniest error in my legal notices. Hence, a large number of 'vulture' businesses have mushroomed in Germany, the only purpose of which is to nitpick T&Cs and collect typically €1,000 from each offender. Some even go after consumers selling used items on auction sites. As an additional precaution, my online presence makes it clear that it is not intended for German residents, and there is not a word of German. It is not a German domain.

The US and its Fatca, the EU and its worldwide VAT collection, Germany and its 'vulture' laws – it is getting steadily more complicated for small businesses to keep their noses above these floods of regulations.


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RobinB  Identity Verified
United States
Local time: 20:53
German to English
No and Yes Feb 24, 2017

Hi,

You do not have to register for VAT if you're selling translations to private individuals unless your business from this source is above a threshold that you cannot possibly exceed as a translator. There has been some confusion about whether the new online retail VAT rules apply to translators (see previous discussions on ProZ). They don't.

What you do have to do is include boilerplate (Floskel) on your invoice to German B2B clients that the recipient of the service is responsible for paying VAT on this service. This is not a new requirement: it has been around for many years now.

What the business clients do is to record 19% "import VAT" on your invoice total and - provided you include the boilerplate on your invoice - reclaim the same 19% as input tax.

The basic principle is to ensure that EU businesses have no VAT advantage if they procure services from outside the EU. The proposed U.S. "border adjustment" is designed to achieve the same outcome, but less effectively (and not at all fairly) because it would tax income, not revenue.


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Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
Consumers Feb 24, 2017

RobinB wrote:

The basic principle is to ensure that EU businesses have no VAT advantage if they procure services from outside the EU.


You surely mean "EU consumers have no VAT advantage", as VAT makes no difference to a VAT-registered business.

RobinB wrote:

You do not have to register for VAT if you're selling translations to private individuals unless your business from this source is above a threshold that you cannot possibly exceed as a translator. There has been some confusion about whether the new online retail VAT rules apply to translators (see previous discussions on ProZ). They don't.



According to
https://qz.com/348188/why-some-online-stores-have-given-up-on-european-customers/
there is no threshold for this. Where did you find the information about a threshold? There is an inter-EU threshold for sales of tangible goods to consumers in another Member State, but the rules are different for digital services.

Translations are probably still not be concerned, though.


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RobinB  Identity Verified
United States
Local time: 20:53
German to English
Reference Feb 25, 2017

Thomas T. Frost wrote:

RobinB wrote:

The basic principle is to ensure that EU businesses have no VAT advantage if they procure services from outside the EU.


You surely mean "EU consumers have no VAT advantage", as VAT makes no difference to a VAT-registered business.


No, I meant exactly what I said. It makes no difference to EU businesses if they buy the services from inside or outside the EU, because in the latter case they have to record output tax on the "import" and then record input tax in the same amount. One of the myths that still seems to be very prevalent in our industry is that third-country (meaning non-EU) translators and EU translators who are not registered for VAT because they are below the registration threshold are somehow "cheaper" for B2B clients than VAT-registered translators. As I'm sure you know, that's just not the case.

As far as the 2015 change to the VAT Directive is concerned, see the comments from me and you(!) in this thread:

http://www.proz.com/forum/money_matters/274834-effect_on_translators_of_upcoming_changes_to_eu_vat_laws.html


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Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
What do you mean, then? Feb 25, 2017

RobinB wrote:

Thomas T. Frost wrote:

RobinB wrote:

The basic principle is to ensure that EU businesses have no VAT advantage if they procure services from outside the EU.


You surely mean "EU consumers have no VAT advantage", as VAT makes no difference to a VAT-registered business.


No, I meant exactly what I said. It makes no difference to EU businesses if they buy the services from inside or outside the EU, because in the latter case they have to record output tax on the "import" and then record input tax in the same amount. One of the myths that still seems to be very prevalent in our industry is that third-country (meaning non-EU) translators and EU translators who are not registered for VAT because they are below the registration threshold are somehow "cheaper" for B2B clients than VAT-registered translators. As I'm sure you know, that's just not the case.



If you meant what you said, what exactly did you intend to express when saying this, then?

"The basic principle is to ensure that EU businesses have no VAT advantage if they procure services from outside the EU."

As VAT-registered businesses get the VAT back, how could a situation possibly arise in which they had a VAT advantage by procuring services from outside the EU? It couldn't, so there is no need for a basic principle to ensure that EU businesses have no VAT advantage if they procure services from outside the EU.

The purpose of these VAT changes is to ensure that EU consumers have no VAT advantage if they procure services from outside the EU, and that non-EU businesses selling to consumers in the EU have no VAT advantage.

A large number of foreign companies are completely ignoring the obligation to collect VAT for the EU, but that's another story. International B2C trade would become utterly impossible to handle if more countries started to require that foreign businesses collect VAT or similar taxes on their behalf, except for the largest corporations, which are the only ones that can afford an army of accountants, tax specialists and lawyers to manage it all.

RobinB wrote:
As far as the 2015 change to the VAT Directive is concerned, see the comments from me and you(!) in this thread:

http://www.proz.com/forum/money_matters/274834-effect_on_translators_of_upcoming_changes_to_eu_vat_laws.html


That thread concerned the changes in 2015, which obliged EU businesses to collect VAT on services electronically provided to consumers in other EU Member States on behalf of the Member State in which the consumers are resident. But the changes that oblige at least certain non-EU businesses to collect VAT on sales to consumers in the EU are much older. What I'm not sure about is which services are concerned by the obligation for non-EU businesses to collect VAT.


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TranslationFie
United States
TOPIC STARTER
According to the tax officer I talked to.... Feb 26, 2017

... translators outside the EU would have to register in the EU to collect VAT and pay it to the EU (or Germany in this case) - he referred to UStG 3a (4) "Ist der Empfänger einer der in Satz 2 bezeichneten sonstigen Leistungen weder ein Unternehmer, für dessen Unternehmen die Leistung bezogen wird, noch eine nicht unternehmerisch tätige juristische Person, der eine Umsatzsteuer-Identifikationsnummer erteilt worden ist, und hat er seinen Wohnsitz oder Sitz im Drittlandsgebiet, wird die sonstige Leistung an seinem Wohnsitz oder Sitz ausgeführt. Sonstige Leistungen im Sinne des Satzes 1 sind:

3.
die sonstigen Leistungen aus der Tätigkeit als Rechtsanwalt, Patentanwalt, Steuerberater, Steuerbevollmächtigter, Wirtschaftsprüfer, vereidigter Buchprüfer, Sachverständiger, Ingenieur, Aufsichtsratsmitglied, Dolmetscher und Übersetzer sowie ähnliche Leistungen anderer Unternehmer, insbesondere die rechtliche, wirtschaftliche und technische Beratung;

According to him, by reversing the situation (the supplier is in the Drittland and the recipient in Germany), the Leistungsort would be Germany and therefore the revenue would be subject to German VAT.

I just still don't know if that is true. If it is, I will have to drop all German B2C customers immediately.


As for the reference to the legal notices ... what exactly do you mean? I am only familiar with the requirement to list one's full business name and address etc. and have never found that to be a problem. Did that change?


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Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
You can't you reverse a rule Feb 26, 2017

TranslationFie wrote:

According to him, by reversing the situation (the supplier is in the Drittland and the recipient in Germany), the Leistungsort would be Germany and therefore the revenue would be subject to German VAT.


You can't just reverse a rule like this. Doing so makes no sense. You could reach many absurd conclusions in law if that were legitimate. But I'm not very good at German, so I'm not completely sure what that VAT law article actually says.

TranslationFie wrote:

As for the reference to the legal notices ... what exactly do you mean? I am only familiar with the requirement to list one's full business name and address etc. and have never found that to be a problem. Did that change?



Just mentioning your name and address is not enough on a German website. You can have a look at for example the following sites to get an idea of what is needed to be protected against abusive claims:

https://www.e-recht24.de/

https://www.ihk-wiesbaden.de/recht/rechtsberatung/Internetrecht-und-Werbung/Internetauftritt_Rechtliche_Anforderungen_und_Pflichten/1255572

The worst is that the requirements keep changing, so you can't just set it up once and forget about it. The rules can be applied to foreign companies targeting consumers in Germany too. It adds to the complications and risks when you can't understand all the intricacies in German.

About the Abmahnung risk:

https://en.wikipedia.org/wiki/Abmahnung

http://makesyoulocal.com/take-care-in-germany-it-is-expensive-to-make-mistakes/


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TranslationFie
United States
TOPIC STARTER
Hmm Feb 26, 2017

I wouldn't think you could just reverse the rule either but the tax officer seems to disagree and I have yet to find something that officially proves him wrong so I can lay my worries to rest. So I was hoping other German translators on here would know more than I do and could point me to something that I can use in the discussion.

As for the Legal Notice stuff: Maybe I'm just missing something but I don't see the problem.


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RobinB  Identity Verified
United States
Local time: 20:53
German to English
The German tax official is wrong Feb 26, 2017

They often are, especially when it comes to VAT. But if you really want certainty, you'll have to consult a German Steuerberater. What's probably confusing the German tax official is the fact that you're selling translations to private individuals, which I think is a relatively rare business for US-based translators. I understand that it's more common for US attorneys and CPAs to work for private clients in Germany, and I happen to know that they don't charge German VAT when they do that.

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Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
You also need to be careful with a German Steuerberater Feb 26, 2017

RobinB wrote:

They often are, especially when it comes to VAT. But if you really want certainty, you'll have to consult a German Steuerberater. What's probably confusing the German tax official is the fact that you're selling translations to private individuals, which I think is a relatively rare business for US-based translators. I understand that it's more common for US attorneys and CPAs to work for private clients in Germany, and I happen to know that they don't charge German VAT when they do that.


My Steuerberater first told me interest on foreign bank accounts was not taxable in German (which I knew was wrong), then that it didn't need to be declared if it didn't exceed 801 euros. That was also wrong. Then a less informed Finanzamt official claimed the tax-free limit of 801 euros of interest only concerned German interest, but there is no such distinction in the tax law, so that was also wrong. I finally got in touch with a more competent official.

My Steuerberater first claimed I had to add German VAT if selling to consumers outside the EU, but of course she was wrong about that too. She looked it up because I didn't believe her.

All this to say that consulting a German Steuerberater does not provide certainty. I have sacked this one and asked a local small business owner to recommend a better one.


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philgoddard
United States
Member (2009)
German to English
+ ...
I'm not sure your question makes sense. Feb 26, 2017

You say "according to the new VAT law in place since 2015, I would have to register in Germany to pay VAT on invoices to private clients".

Do you mean "charge VAT"?

If so, surely you can't charge VAT, because we don't have VAT in the United States.


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Thomas T. Frost  Identity Verified
Member (2014)
Danish to English
+ ...
The question makes perfect sense Feb 26, 2017

philgoddard wrote:

You say "according to the new VAT law in place since 2015, I would have to register in Germany to pay VAT on invoices to private clients".

Do you mean "charge VAT"?

If so, surely you can't charge VAT, because we don't have VAT in the United States.


"Charge VAT and pay it to Germany", if you want. You can also register just one place in the EU and deal with all VAT due in the EU through that single VAT registration, according to what I've read.

It's not a question of taxes due in the US, but in the EU. According to EU VAT law, sellers of certain services to consumers in the EU must collect EU VAT and pay it to the relevant authority in the EU.

The question is if translation is concerned by this.


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