There is a difference between services and goods. Economically services are seen as intangible assets, which in contrary to goods and materials, can not be stored and physically shipped. Another characteristic is that the production, provision and consumption of services happen at the same time e.g. a visit at a hair dresser, a taxi ride, the designing of a website etc. Due to the above mentioned points services are treated differently to goods when it comes to invoicing services to clients outside of Germany.
We wrote another tax guide on how to invoice delivery of goods within the EU.
If your client is based in the European Union (EU) the first thing you have to check is whether your customer is a private individual or a business.
Invoicing a private person
Since services are intangible assets it is important to know where the service was provided i.e. where the service is taxable. In general the place of performance is where your office is registered and you have performed the service. This means your invoice is usually with the German value-added-tax (VAT) rate.
Invoicing a business
In the case your customer is another business based in the EU the place of performance shifts to where your client has his or her registered office. This specific regulation is called Reverse-Charge. It was implemented for simplification, but also to prevent VAT fraud in connection with cross-border business activities.
What do I need to write on the invoice?
In addition to the details required on a regular invoice, your invoice has to include the following details
- Your net invoice amount and no VAT
- Your VAT-Identification number (VAT-ID)
Starting with DE and followed by numbers, if you do not have one already get yours here.
- The VAT-ID of your client
Be aware that it is your duty to check if the number is valid, which you can find out via this website. Otherwise there is a risk that you have to cover the VAT.
- A statement that your customer is liable for the VAT like "Reverse-Charge - tax liability of the recipient" / "Reverse-Charge - Steuerschuldnerschaft des Leistungsempfängers"
The Zusammenfassende Meldung (ZM) report
The ZM quarterly report was introduced by the EU tax offices to check that VAT for transactions between EU countries is declared correctly. To declare transactions within the EU you will need your and your clients VAT-ID. Sorted automatically prepares the ZM report for you when you record your income.
Keep in mind that in both cases it is a general rule and that there are some cases in which the VAT should be charged in the country where the service was performed.
Sorted tax guides are provided without liability and do not replace a tax advisor.
To get an accurate answer for your specific case, please consult a tax advisor.
You can always ask one of tax advisors on the Sorted platform.