| Pages in topic: < [1 2 3] > | Working with a German agency Thread poster: Sinae Hong (X)
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| VAT registration | Jan 6, 2016 |
Tom in London wrote:
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]
Yes it does. You paid 20% more than you needed to!
There are no disadvantages to being VAT-registered as a translator. 20% off everything you buy. It's a no-brainer.
OP - German VAT is the client's problem, not yours.
| | | | | VAT and business expenses | Jan 6, 2016 |
My chair cost something like 595 EUR, incl. 19% VAT.
The 95 EUR VAT are refunded to me in full.
The 500 EUR are deducted as a business expense and reduce the amount I pay for income tax, government retirement insurance and government health insurance. All told, that is probably approximately 30-40%. That means that deducting the expense saves me an additional 150-200 EUR.
So, in a sense you are right, if I were VAT-exempt I would still save something like 3... See more My chair cost something like 595 EUR, incl. 19% VAT.
The 95 EUR VAT are refunded to me in full.
The 500 EUR are deducted as a business expense and reduce the amount I pay for income tax, government retirement insurance and government health insurance. All told, that is probably approximately 30-40%. That means that deducting the expense saves me an additional 150-200 EUR.
So, in a sense you are right, if I were VAT-exempt I would still save something like 30-40 EUR on the VAT. So my VAT-registration actually only saves me 55-65 EUR.
(Hopefully we haven't crossed posts again.) ▲ Collapse
| | | | Tom in London
United Kingdom
Local time: 10:19
Member (2008)
Italian to English
Oh well, since an office chair lasts me for at least 4-5 years before it's completely wrecked, it's a very occasional cost. The 20% VAT just gets lost, as compared to all the extra hassle I would have of being VAT-registered. In the UK we don't pay retirement insurance or health insurance; these are all included in our taxes (unless we allow ourselves the luxury of *additional* pension plans or health insurance).
Apart from very occasional "big ticket" items, the everyday purchases ... See more Oh well, since an office chair lasts me for at least 4-5 years before it's completely wrecked, it's a very occasional cost. The 20% VAT just gets lost, as compared to all the extra hassle I would have of being VAT-registered. In the UK we don't pay retirement insurance or health insurance; these are all included in our taxes (unless we allow ourselves the luxury of *additional* pension plans or health insurance).
Apart from very occasional "big ticket" items, the everyday purchases of a translator are so negligible (indeed almost non-existent) that being able to reclaim the VAT hardly makes any difference. In fact in my case, the additional costs of doing so would outweigh the value of the VAT itself!
I never seem to buy anything except paper and printer ink - although these days I print so little that even those costs have become close to zero. Very occasionally (every few years) I might buy some RAM, or software, or a hard drive, a display, or very rarely indeed a new computer.....sometimes a book that relates to my work....
[Edited at 2016-01-06 10:12 GMT] ▲ Collapse
| | | | RobinB 
United States
Local time: 04:19
German to English
| Perfectly legal | Jan 6, 2016 |
Tom in London wrote: I don't think it's legal for invoices issued in the UK to be in any language other than English
It's perfectly legal. Bi- or multilingual invoices in particular are very common nowadays.
or to make reference to the tax legislation (or possible interpretations thereof) applying in other countries.
Again, there are no objections to this in UK law. Or maybe you can point us towards the relevant legislation or HMRC rules?
no German agency has ever asked me for anything like that. I simply issue my invoices as described above.
Maybe they haven't had a VAT audit recently. Or maybe their tax office doesn't mind (OFD Frankfurt really does mind, which is why our freelances have to add the note).
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Tom in London wrote:
I never seem to buy anything except paper and printer ink
What about electricity, heat, water, rent, airfares, hotels, restaurants, software, subscriptions, landline, mobile, website, accountancy...
HMRC repay me about £500 a year on average. Accounting for that takes maybe ten minutes.
| | | | Tom in London
United Kingdom
Local time: 10:19
Member (2008)
Italian to English
| When the Tax Inspector comes calling..... | Jan 6, 2016 |
s/he will want to see your invoices in English.
| | | | Tom in London
United Kingdom
Local time: 10:19
Member (2008)
Italian to English
@ Chris S. - has your accountant told you you can deduct things like airfares, hotels, and restaurants? Wow.....living it large ! Are you telling me that I can fly to Italy (taking a taxi to the airport), stay in a hotel for a week, and eat at the best restaurants with the excuse that I need to "polish up my Italian", and deduct all of those expenses (including VAT) from my taxable income ?
[Edited at 2016-01-06 10:41 GMT]
| | | | | German details | Jan 6, 2016 |
Dear Robin,
Have you been audited for VAT recently? Theoretically I would think that the UK VAT-exempt status and the reverse-charge procedure should not both be on the invoice, because the presence of either one makes the other irrelevant.
Either
(1) the VAT-exempt UK translator exists outside the inner-EU VAT system (= UK VAT is due even though the client is in Germany, but the amount due is zero) or
(2) it is a normal inner-EU transaction and German VA... See more Dear Robin,
Have you been audited for VAT recently? Theoretically I would think that the UK VAT-exempt status and the reverse-charge procedure should not both be on the invoice, because the presence of either one makes the other irrelevant.
Either
(1) the VAT-exempt UK translator exists outside the inner-EU VAT system (= UK VAT is due even though the client is in Germany, but the amount due is zero) or
(2) it is a normal inner-EU transaction and German VAT is due and any UK exemption is beside the point
The problem with the second solution is that then we not only end up with an invoice that is incomplete (missing the service provider's VAT number) but we are also claiming a VAT refund on a service that was never reported in an ESL (EC Sales List = Zusammenfassende Meldung).
That's why Tom's answer that agencies are accepting the first solution interests me. After all, if it makes my life easier, it surely can't be misguided.
Luckily, there are plenty of British translators living outside the UK. ▲ Collapse
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RobinB
United States
Local time: 04:19
German to English
| When the tax inspector comes calling | Jan 6, 2016 |
Tom in London wrote:
s/he will want to see your invoices in English.
"VATREC5070 - VAT invoice: Invoicing in a foreign language
VAT Regulations 1995, regulation 13B says that VAT invoices can be written in any language. However, we can require an English translation of invoices received in the UK by issuing a notice in writing to the person who has received them. The translation has to be provided within 30 days of the date of the notice."
And because there are no other rules governing the format of invoices, a tax inspector will apply the VAT rules to other invoices issued by somebody claiming the small business exemption.
| | | | Erik Freitag
Germany
Local time: 11:19
Member (2006)
Dutch to German
+ ...
| Only business related expenses | Jan 6, 2016 |
Tom in London wrote:
@ Chris S. - has your accountant told you you can deduct things like airfares, hotels, and restaurants? Wow.....living it large ! Are you telling me that I can fly to Italy (taking a taxi to the airport), stay in a hotel for a week, and eat at the best restaurants with the excuse that I need to "polish up my Italian", and deduct all of those expenses (including VAT) from my taxable income ?
[Edited at 2016-01-06 10:41 GMT]
You can deduct more or less every business related expense (and reclaim the VAT if you're VAT registered). The tax office might question whether the expenses you describe are indeed business related. You may have difficulties convincing them.
But let's take a more realistic case: Say you want to visit a conference related to architecture in Italy. As you are a translator in the field of architecture, this is, generally speaking, a business related event, so you can deduct the taxi to the airport (and to the hotel), the flight ticket, the hotel, meals etc. form your taxable income (rules and details may vary in different countries). If you're VAT registered, you reclaim 100% of the VAT first, before the rest lowers your taxable income.
[Edited at 2016-01-06 11:08 GMT]
| | | | RobinB
United States
Local time: 04:19
German to English
| Regular VAT audits | Jan 6, 2016 |
Hi Michael,
We've had VAT audits regularly over the past 20 years. The most recent one was for 2013, I think (as we've only recently filed our 2014 tax return, that makes sense). The most we've ever had to pay in back tax was less than a hundred euros, and sometimes we've even had a slight credit. I think that goes to show just how excellent our tax accountant is!
The German tax authorities want to see the reverse charge "Floskel" on all invoices received from outside G... See more Hi Michael,
We've had VAT audits regularly over the past 20 years. The most recent one was for 2013, I think (as we've only recently filed our 2014 tax return, that makes sense). The most we've ever had to pay in back tax was less than a hundred euros, and sometimes we've even had a slight credit. I think that goes to show just how excellent our tax accountant is!
The German tax authorities want to see the reverse charge "Floskel" on all invoices received from outside Germany, regardless of whether they were issued in another EU member state or a third country (e.g. USA). Our StB has a letter from OFD Frankfurt to that effect, and it has also been confirmed to me by high-ranking tax officials I have had dealings with in project workgroups.
And they are also happy with the reference to the UK VAT rules (small business exemption). Despite what some (many?) websites claim, having a VAT ID is not mandatory to do cross-border business in the EU, provided you're covered by an exemption in your home country, and provided you can otherwise demonstrate that you're a bona fide business. The fact that the tax authorities in some countries (e.g. Spain) don't understand this is probably a good reason for UK-based freelances selling to Spanish clients to get a VAT ID just to save themselves the hassle of arguing all the time with their clients.
Nicht ärgern, nur staunen
Robin ▲ Collapse
| | | | Tom in London
United Kingdom
Local time: 10:19
Member (2008)
Italian to English
Erik Freitag wrote:
The tax office might question whether the expenses you describe are indeed business related. You may have difficulties convincing them.
I'm amused by your very British understatement
Say you want to visit a conference related to architecture in Italy. As you are a translator in the field of architecture, this is, generally speaking, a business related event, so you can deduct the taxi to the airport (and to the hotel), the flight ticket, the hotel, meals etc. form your taxable income (rules and details may vary in different countries)
Yes, of course, I've often done that as an architect (I am a registered architect who also does translating) e.g. for meetings with clients etc. Those are absolutely legitimate business expenses and are supported by documentary evidence such as emails or letters from clients, minutes of meetings, etc.
[Edited at 2016-01-06 11:32 GMT]
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Tom in London wrote:
@ Chris S. - has your accountant told you you can deduct things like airfares, hotels, and restaurants? Wow.....living it large ! Are you telling me that I can fly to Italy (taking a taxi to the airport), stay in a hotel for a week, and eat at the best restaurants with the excuse that I need to "polish up my Italian", and deduct all of those expenses (including VAT) from my taxable income ?
[Edited at 2016-01-06 10:41 GMT]
That's not an excuse. For a translator, it's a legitimate business trip. You might want to look in on a couple of clients while you're there just to make it clear to the taxman that it's business not pleasure, but how much you spend on travel, board and lodging is entirely your affair (you'll still be paying for the bulk of it).
| | | | Tom in London
United Kingdom
Local time: 10:19
Member (2008)
Italian to English
Chris S wrote:
That's not an excuse. For a translator, it's a legitimate business trip. You might want to look in on a couple of clients while you're there just to make it clear to the taxman that it's business not pleasure, but how much you spend on travel, board and lodging is entirely your affair (you'll still be paying for the bulk of it).
That's an interesting interpretation Chris, but have you asked your accountant? It is not permitted to do anything that even *looks like* an intention to avoid tax.
[Edited at 2016-01-06 11:29 GMT]
| | | | Tom in London
United Kingdom
Local time: 10:19
Member (2008)
Italian to English
| I didn't know that | Jan 6, 2016 |
RobinB wrote: Tom in London wrote:
s/he will want to see your invoices in English. "VATREC5070 - VAT invoice: Invoicing in a foreign language VAT Regulations 1995, regulation 13B says that VAT invoices can be written in any language. However, we can require an English translation of invoices received in the UK by issuing a notice in writing to the person who has received them. The translation has to be provided within 30 days of the date of the notice." And because there are no other rules governing the format of invoices, a tax inspector will apply the VAT rules to other invoices issued by somebody claiming the small business exemption.
I see. I didn't know that. Nevertheless I prefer not to write anything on my invoices that the tax inspector might require me to have translated by a third party (since presumably my own translation, as an interested party, might not be acceptable).
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