Value added tax for services provided abroad
July 16, 2010 | 40,00 EUR | answered by Matthias Wander
Issue:
My business registration is in Germany.
Activity: Finishing of textiles (printing, flocking, etc.).
Textiles and materials for finishing are purchased in Germany, German invoice including VAT.
I can reclaim this VAT in Germany.
Textiles are ordered abroad (at motorsport events) and individually finished by me abroad. Clients are mainly private individuals (non-German, EU members).
Sales range between 15€ and 30€, therefore invoices would be too complex for me in bulk.
Question:
Do I have to pay VAT to the German tax office in these cases?
How do I declare to the tax office? For example, if a customer pays 20€ for a T-shirt, do I declare 20€ to the tax office without paying VAT?
Thank you.
Dear Client,
Thank you for your inquiry, which I would like to answer based on the information you provided and in the context of your situation in a preliminary consultation.
The key factor for determining whether the service is taxable in Germany is the location of the service being provided.
The service you are providing is considered a works contract, as you are not only providing the finishing touches but also sourcing the main material (textiles) yourself. The object of the delivery is generally the finished work. Splitting the service into a delivery of materials used and the execution of another service is not considered due to the principle of the unity of the service.
If the textiles are finished abroad and then delivered to the client abroad, the service is not taxable in Germany. However, if the textiles are finished in Germany and then delivered to the client as a finished work, the service is taxable and subject to tax in Germany. Under certain conditions, such deliveries may be tax-exempt if they are made to another business.
Non-taxable services should be reported in line 42 (Code 45) of the VAT return.
Please note that for services provided abroad, you may be required to pay VAT in the foreign country.
I hope this gives you an initial overview.
Kind regards,
Wander
Tax Advisor
