Pricing question to Freelancers/Solopreneurs? (EU)
From all the services you purchase and use for work, how many of them let you enter your VAT ID number, so you don't get charged the VAT?
Does it make a big difference for you, if a service charges you VAT without letting you enter your VAT ID vs letting you enter your VAT ID and thus not charging you VAT?
I mean, from an accounting perspective, what is the big difference here or what is the crucial point for you?
From an account perspective in the end it doesn't matter at all.
First, Even if you are a B2B company in EU country A and your business customer is also from EU country A, you must charge VAT on the invoice even though they provide their VAT Id.
Second, Deducing the VAT between B2B in EU is only allowed in diffent countries based on the reverse charge process, however that doesn't mean you don't pay VAT, on the contrary you must enter your intereuropean revenue at the tax office and its taken into account into your taxes.
What the VAT ID helps with is to only sell to businesses. Its a good filter.
I use aws, github, g suite and egghead and for all these services I take VAT invoice (I provided them with my VAT ID) because it's my tax-deductible expense. I even think that for some companies it's a deal breaker if a service charges you VAT without letting you enter your VAT ID (really depends on the cost of a service).
If they wouldn't allow you to enter your VAT ID and thus charge you the VAT, would you still be able to file the invoice as an expense for your business? If so, to what portion?
Yes you can.
The reverse charge procedure is designed to reduce overall VAT reporting and VAT-related cash flows. In the end, however, the same amount of VAT is reported and paid / deducted whichever system is used.
For a VAT-registered business, VAT is added to most sales and the business pays the VAT element over to its government on the next return. The amo7nt to be paid is netted off against the amounts of VAT which the business has been charged by other businesses.
So, from a financial perspective, overall it does not matter whether reverse charging is used or not. Eventually, the VAT will be reclaimed.
From a cashflow perspective, however, matters are a little different. If you charge me under the reverse charge procedure, I only pay you for the net amount and then do the accounting entries in my own books for the VAT. If you charge me under normal VAT rules, then I must pay you the gross amount. I can still reclaim the VAT but, if my returns are quarterly, I will have to wait for up to three months before I can do so.
The cashflow difference at the U.K. rate of VAT is £20 per £100 net. In other words, it is the difference between paying you £120 instead of £100. Some countries charge even higher rates of VAT so you can see how quickly the cashflow penalty can build.
The only bit of any invoice that you can post as an expense in your accounts is the net amount. The VAT element never forms part of your sales or your expenses. It is Government money, not yours.
The only exception to this rule is if you are not registered for VAT. In this case, you do not charge VAT on your sales but, equally, you cannot reclaim VAT on your purchases. The whole novice amount is then posted as a business expense and reduces your profit or increases your loss accordingly.
You cannot normally choose whether to register for VAT. Once your sales hit the legal thresholds for your country, you must register. If selling into another EU country, you must register even if, otherwise, you would not meet the minimum requirement in your own country.
In Germany: Yes. In Fact most of the invoices are with VAT and I just deduct the right amount and then do my monthly Bank transfer alongside with the tax form
This comment was deleted 18 days ago.
This Should help :)
https://goo.gl/images/J2ujUQ