Tax treatment of a foreign currency account
February 26, 2012 | 40,00 EUR | answered by StB Manuela Ponikwar
As a service provider (sole trader, notary, etc.), I receive fees from my clients (seminar leaders) into a separate bank account (under my name) and after settling the seminars, I pass this on to the clients and transfer my fee to myself in parallel. When accounting, I list "total income, my fee, client payout". I treat the money as their own and do not dispose of it independently - they commission me in each individual case for the payout.
The invoices to the participants are issued "on behalf and on account of (seminar leader, tax number)". The seminar leaders receive an invoice for my fee.
We use this structure, among other things, because I am subject to VAT and the clients are mostly not. If I were to receive the funds, VAT would be due, so this is mostly avoided.
1. Is this generally speaking tax correct?
2. What needs to be considered and potentially improved to be tax compliant?
3. If the construction is completely unsustainable - how can it be done better? (Keyword)
4. Are special documents (invoice, etc.) necessary for the payout of the income to the clients, or is my accounting sufficient?
5. What documents do my clients need from me for their tax return? (participant invoices? seminar accounting? ...?)
Thank you for your professional assessment!
Dear inquirer,
Thank you very much for your inquiry, which has just been released again.
I would like to answer this within the framework of an initial consultation, taking into account the appropriate fee, as follows:
The funds you receive from seminar participants on behalf of and on behalf of the seminar leaders are so-called pass-through items if the following criteria are met:
1) Ideally, it should be clear to the course participants from the beginning that they are entering into a contractual relationship with the seminar leader and not with you. You do not have a contractual relationship with the seminar participants yourself and do not provide any services to them. In the invoices to the participants, in addition to name and tax number, you also list the address of the seminar leader.
2) In the billing to the seminar leader, there should be a list of seminar participants including the seminar fee paid by the participant (ideally with an attached copy of the invoices to the seminar participants).
3) You are not obligated to make any payments to the seminar leader if seminar participants cancel or if there are not enough participants.
4) To avoid queries during a sales tax audit or business audit, the account should be used exclusively for "third-party funds." This payment method should be contractually fixed with the seminar leaders, as well as the conditions for transferring funds. You should only transfer your fee to your actual business account after the expiration of a deadline or upon instruction from the seminar leader.
As long as you follow these rules, there should be no problem with the tax office recognizing the funds as VAT pass-through items. These are therefore not part of your taxable turnover.
Your handling so far is basically correct. At the end of the year, there may be issues regarding differentiation if you have not yet transferred funds to the seminar leader or to yourself. Therefore, I recommend that you try to balance the account to zero before the end of the year for simplicity's sake.
Your customers will need proof of the seminar, a list of participants, a copy of your invoice, and ideally individual invoices.
My personal recommendation would be to give each event a reference number (e.g. calendar year, customer number of the seminar leader, and event number with this seminar leader: 12.367.1), which should be included on both the participant invoices and the customer invoice. This way, the tax office can also recognize a certain order and completeness of the invoiced events, since you probably use consecutive invoice numbers.
I hope this helps.
Sincerely,
Manuela Ponikwar
Tax Advisor
http://www.ponikwar.de
