Invoice from small business owners from the UK - no VAT registered in the UK -
March 17, 2015 | 33,00 EUR | answered by StB Patrick Färber
Hello,
We are event organizers and book many DJs and live acts from abroad. In the UK, the small business profit limit is much higher than in Germany. Therefore, many DJs do not have a VAT number. On their invoices it states "not VAT registered in the UK".
Is it correct that here in Germany we have to report and pay sales tax on the fees paid to these DJs, but are not allowed to deduct input tax at the same time (like in the reverse charge procedure)?
We have been struggling with this issue for some time and would be very grateful for a definitive answer.
Best regards,
J. Hinze
Dear questioner,
Based on the information provided, I would like to make the following statement. Missing details could lead to a completely different outcome:
You yourself are an entrepreneur as the organizer and are receiving a service from an EU entrepreneur who, according to the rules of their country, qualifies as a small business, in your example, the UK.
The service provided by the DJs is subject to taxation in the domestic market, § 3a para. 2 UStG. According to § 13b para. 5 sentence 1 in conjunction with § 13b para. 1 UStG, you as the recipient of the service are liable for the tax in the context of a B2B service.
Although according to § 13b para. 5 sentence 3, the reverse charge mechanism does not apply if the providing entrepreneur is a small business, this only applies to DOMESTIC small businesses.
Therefore, it does not matter whether the provider is potentially a small business according to the law of another EU state, as long as they are also considered an entrepreneur for tax purposes (which is assumed for DJs). They trigger a taxable transaction in the domestic market, and you as the recipient of the service are liable for this VAT.
I cannot definitively determine if you are entitled to input tax deduction:
This would be the case if you were exclusively generating tax-exempt output sales, which would exclude input tax deduction.
However, if you are making sales at the standard or reduced tax rates, there is nothing preventing you from claiming an input tax deduction of the same amount from the transaction.
I hope I have clarified the issue conclusively.
Best regards,
Tax Advisor Patrick Färber
