VAT for small businesses on services provided abroad
March 19, 2013 | 30,00 EUR | answered by StB Patrick Färber
Dear tax consultant,
I am a small business owner, so I do not charge VAT domestically and I do not have a VAT ID, I only list my tax number on my invoices. I work as an artist (illustrator), creating drawings, sometimes directly upon request, and selling the usage rights to them (all online or via email, so no physical goods).
I understand how this works domestically. Recently, I have also had interest from customers abroad. Here are my questions:
1) Does the place of supply of such services also apply to artists and small business owners, with the customer's place of business being the determining factor?
2) Can I issue an invoice without VAT, similar to how I do domestically, with a reference to the small business regulation and without listing a VAT ID (since I don't have one)? Does this apply within the EU and non-EU (third countries)?
3) Are small business owners providing services also bound by the reverse charge mechanism, meaning I need to indicate this on my invoices and provide a VAT ID?
4) How does this work for the sale of usage rights on image platforms like Alamy or Shutterstock, which are based in the EU and non-EU countries as well? I receive payments there, which I would simply record as profit on my income statement?
I have found conflicting information on the internet, including from tax authorities, chambers of commerce, and tax consultants, and I hope to receive a tailored answer through this channel :).
Thank you in advance!
Dear Illustrator,
I would like to answer your question according to the rules of the platform and taking into account your presentation of the facts:
Facts as I understand them: You are a small business owner and recently also provide other services to foreign customers, all of whom are ENTREPRENEURS.
Regarding question 1:
YES, because the new regulation according to the VATSystRL from 2010 is based on the entrepreneurial status of the RECIPIENT. You are already an entrepreneur within the meaning of § 2 UStG. According to § 18 (4), you do not have to report this turnover in a Recapitulative Statement.
Regarding question 2:
a) EU customer
Even small business owners are obliged to issue invoices in the legally regulated cases. The reference to the small business regulation is not legally required, but recommended. Invoice should be net! The obligation to provide (own) ID number is excluded in § 19 UStG (you don't have one either).
b) Third country
Here the result is that the service is taxable in the third country. So you need to find out in the third country how they deal with "service imports" (Is it Switzerland, USA? I can inquire with my cooperation partners...)
Regarding question 3:
The destination principle applies to EU services even for small business owners, i.e. the reference to Reverse Charge for intra-Community services remains mandatory, only the ID number does not need to be provided (as above). The service recipient pays the VAT there (hopefully).
Regarding question 4:
You sell rights of use to platforms, correct? This is another service, the above applies, the location of your service recipient (contract partner) is crucial for determining the place. In the case of a third country, inquire in the respective country!
Attention: Special rules apply for use rights granted to NON-entrepreneurs!
Are all doubts cleared? :-) How do I compare to tax authorities, tax advisors, and chambers of commerce?
Best regards,
Patrick Färber
Tax Advisor
patrickfaerber@arcor.de
