Value Added Tax on Brokerage
December 5, 2011 | 20,00 EUR | answered by Oliver Burchardt
Hello, an agency acts on behalf of an artist. The agency is liable for VAT and enters into contracts with event organizers on behalf of the artist, then invoices the organizer. The agency collects the artist's fee from the organizer and passes it on to the artist. The agency issues a separate invoice to the artist for the brokerage services and charges 19% VAT on the net fee.
What happens if the artist only performs occasionally and has not registered with the relevant tax office because his earnings from concerts in the year are below 410 euros? In this case, does the VAT-liable agency not charge VAT to the organizer on the invoice and does not have to pay VAT from the contract with the organizer?
If VAT needs to be paid from the invoice to the organizer, who is responsible - the artist or the agency? The contract is between the artist and the organizer, with the agency acting as a middleman. Does the agency still need to pay the VAT?
Can the artist charge VAT if he has not registered as a freelancer or a business, and as a small business owner, is he required to show VAT on the invoice?
Dear inquirer,
Thank you for your inquiry, which I am happy to answer as part of an initial consultation.
Please note that the tax assessment is based on the information provided. Adding, changing, or omitting information can potentially alter the result significantly.
In this case, since the agency is issuing an invoice to the artist, the VAT for the brokerage service must be separately stated and paid in each of the cases you described.
The agency provides a taxable service to the artist through the brokerage. The fact that the artist is using the small business regulation only exempts him from the obligation to declare and pay VAT himself, but not from paying VAT for services he receives.
The fee collected for the artist is a pass-through item. It is not payment for the agency and therefore the agency is not liable for VAT. Therefore, the artist remains responsible for registering and paying VAT.
The question of whether the artist has registered as a freelancer or a business is irrelevant for the VAT qualification of his activity. If he is considered an entrepreneur (which I assume in most cases), he must register and pay VAT. However, if he opts for the regulation of § 19 (small business), he cannot show VAT on the invoice. If he does so, he must still pay it.
I hope this information has been helpful to you in your inquiry.
Best regards,
Oliver Burchardt
Certified Public Accountant
Tax Advisor
