Upwork is a great way to start working as a freelancer. It is easy to signup and get job offers. However, when it comes to taxes, it can be confusing to understand how to invoice your customers correctly.
Do I need a VAT number to work with Upwork?
When you signup to Upwork, the platform asks you whether you have a VAT number. You would need a VAT number if you want to take on jobs from clients in the European Union (EU) or if you want to claim back the VAT from Upwork service fees. More on these below.
How do I apply for a VAT number?
If you are just starting as a freelancer in Germany, and haven't registered as a freelancer with the tax office (Finanzamt) yet, you can apply for a tax number and a VAT number at the same time by submitting the tax registration form.
If you are already a freelancer and want to apply for a VAT number, you can use this form to request your VAT number online.
How to invoice clients on Upwork?
Invoicing Upwork clients from Germany
Unfortunately, Upwork does not support country-specific VAT rates when invoicing clients. We generally do not recommend to take on jobs from German-based clients from a tax perspective.
Invoicing Upwork clients from the EU
Upwork has built-in support for invoicing clients from the EU. Once you add your VAT number, they will automatically add the sentence "VAT Reverse Charged" to the invoice.
If you want to learn more about the reverse charge and why it is needed, check out our guide on invoicing services to customers based within the EU and our guide on Reverse Charge.
Invoicing Upwork clients from outside of the EU
When invoicing clients from outside of the EU, you generally don't need to collect VAT and so the standard invoices from Upwork are good enough for tax purposes.
Make sure that your tax number or VAT number is included on the invoice. Check out our guide on how to invoice clients outside of the EU to make sure that you have all the correct details on the invoice.
What if I am a small business owner (Kleinunternehmer)?
Freelancers who fall under the small business regulation don't need to declare VAT on a monthly a quarterly basis. However, if you enter your VAT number and take on jobs from clients on Upwork, you will need to submit quarterly VAT declaration for the periods you were active on Upwork. You can learn more about that in our guide on how to invoice customers as a small business owner.
Can I claim back the VAT on Upwork service fees?
By default, Upwork will charge VAT of 19% on their service fees.
Once your VAT number is approved by Upwork, they will automatically stop charging VAT on the service fees and add the sentence "VAT Reverse Charged" to your invoices.
Keep in mind that once you add your VAT number, Reverse charge applies, and you will need to declare VAT for the transaction, even if you are a Kleinunternehmer (see above).
This is how the invoice would look like in this case:
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