Sales tax on commission payments from the USA?
July 13, 2011 | 50,00 EUR | answered by StB Manuela Ponikwar
Hello!
I work for a picture agency with its main business address in New York, USA. I sell pictures and graphics over the internet there.
I regularly receive commissions from the agency for this.
There is no VAT shown on the receipts.
An example receipt is attached.
The customers who buy my images from the agency are mostly from Germany.
I currently have a small business registered in Germany and am self-employed. My sales will now permanently exceed 17,500 euros.
Therefore, I will have to switch to a taxable business.
Do I then have to pay VAT on the commissions received to the German tax office?
This would be a significant loss for me, as I cannot increase the price by 19%. The prices are set by the agency.
If I don't have to pay 19%, this would be more advantageous for me, as I can reclaim VAT on expenses (company car, etc.), which is not possible as a small business owner.
Dear inquirer,
Thank you for your inquiry, which I would like to answer in the context of an initial consultation, taking into account the appropriate fee, as follows:
When assessing VAT liability, the first step is to determine if the service is actually subject to VAT in Germany.
This depends on the place of supply. For intermediary services provided to another business, the place of supply is where the recipient is established. In your case, this is the USA, so the intermediary service is not taxable in Germany and therefore not subject to VAT.
Within the EU, the recipient must have a VAT ID and a recapitulative statement must be submitted.
For recipients in non-EU countries (such as the USA in your case), you must provide proof that the contracting party is indeed a business (usually an official document).
As a result, you do not need to show or remit VAT in Germany (subject to providing the necessary proof).
However, it should be checked whether you are liable for VAT in the USA. Within the EU, there is a unified system (Reverse-Charge) where the recipient is responsible for remitting the VAT.
In the USA, your service provided does not seem to be taxable, but the VAT law in the USA is quite complex, with rates between 0% and 11.725%, and the authority lies not at the federal level but at the state or even local level. Generally, sales tax is imposed at the retail level.
I recommend obtaining confirmation from the client that this service is not subject to VAT in the USA.
Now, an interesting point:
If you exceed the threshold for small businesses, you will generally become liable for VAT. Whether your turnover is taxable in Germany in this particular case is another issue.
If you had provided your service in Germany (place of supply), it would have been taxable and (in the absence of exemption) generally liable for VAT.
-- Attention: due to the variety of exemption provisions, a detailed examination may be necessary to classify the exact nature of your activity. However, this is not possible within the scope of this inquiry. --
According to §15(1), you are therefore entitled to input tax deduction, as input tax deduction is also not excluded according to §15(2) USTG. So you have no VAT, but you are entitled to input tax deduction. Congratulations!
I hope this information is helpful to you.
Best regards,
Manuela Ponikwar
Tax advisor
www.ponikwar.de
