Are there differences in value-added tax on services in domestic and foreign territories?
November 18, 2022 | 45,00 EUR | answered by Günther Hering
Dear tax advisor,
My name is Wolfgang Voigt and I run a small business offering IT consulting services. Lately, I have been receiving more inquiries from customers abroad who are interested in my services. Since I have only worked with domestic customers so far, I am unsure if there are differences in the value-added tax for services provided domestically and internationally.
Currently, I charge my domestic customers a value-added tax of 19%, as required by law. Now I am wondering if I also need to charge German value-added tax to customers from abroad, or if there are different regulations in place. I am concerned that I may make errors in calculating the value-added tax, leading to potential tax consequences for me.
Therefore, my question to you is: Are there differences in the value-added tax for services provided domestically and internationally? What regulations apply in this case, and how should I correctly tax my services to avoid tax risks? I would greatly appreciate a detailed explanation and guidance on possible solutions to this matter.
Thank you in advance for your assistance.
Best regards,
Wolfgang Voigt
Dear Mr. Voigt,
Thank you for your inquiry regarding value added tax on services in domestic and foreign markets. It is understandable that you are concerned about calculating the VAT correctly and avoiding any tax consequences. Indeed, there are differences in VAT on services in domestic and foreign markets, and it is important to be aware of these in order to avoid errors.
When providing services to customers abroad, the regulations of the so-called reverse charge procedure generally apply. This means that you do not have to invoice German VAT if certain conditions are met. Instead, the VAT is paid by the recipient of the service, your foreign customer.
To correctly apply the reverse charge procedure, it is important that your foreign customer is a business entity that provides taxable services. Additionally, your customer must have a valid VAT identification number, which you must include on your invoice. It is advisable to verify your customer's VAT identification number before providing the service to ensure that you are correctly applying the reverse charge procedure.
If you provide services to private individuals abroad, different regulations apply, and you may need to invoice the German VAT. Therefore, it is important to distinguish between businesses and individuals abroad in order to calculate the VAT correctly.
To avoid tax risks and properly tax your services, I recommend familiarizing yourself with the specific regulations for services abroad and, if necessary, consulting a tax advisor or expert in international tax law. This way, you can ensure that you handle the VAT correctly and avoid any tax consequences.
I hope this information is helpful and supports you in your tax matters. Please feel free to reach out if you have any further questions.
Best regards,
Günther Hering
