{"id":969,"date":"2020-08-20T17:02:29","date_gmt":"2020-08-20T15:02:29","guid":{"rendered":"http:\/\/interstellar.accountable.de\/?p=969"},"modified":"2023-04-27T11:14:54","modified_gmt":"2023-04-27T09:14:54","slug":"which-vat-rate-should-i-charge-my-german-clients","status":"publish","type":"post","link":"https:\/\/interstellar.accountable.de\/en\/blog\/which-vat-rate-should-i-charge-my-german-clients\/","title":{"rendered":"Which VAT rate should I charge my German clients?"},"content":{"rendered":"

In Germany, there are two different VAT rates: 19% is the general rule, but there\u2019s also a reduced rate of 7%. Due to the Corona crisis, the government has temporarily reduced the two rates to 16% and 5% for the second half of 2020. A very small number of services are charged with no VAT at all.<\/span><\/p>\n

But which rate gets charged where and for what? As with many aspects of German tax law, this is, as our tax consultant Andreas Reichert explained, \u201cdefinitely too complicated\u201d. A reassuring comment from a professional, to be sure.<\/span><\/p>\n

Thankfully he has shared with us some tips to ensure you charge the correct VAT rate as a freelancer in Germany.<\/span><\/p>\n

19% VAT is charged on most invoices<\/span><\/h2>\n

There is one easy rule of thumb, according to Reichert: \u201cFor 95% of services it\u2019s clearly 19% VAT. It\u2019s only in a few cases that the reduced rate will be charged.\u201d These are good odds, indeed.<\/span><\/p>\n

The German Basic Law includes a list of services that should be charged with a reduced VAT rate, but the text is inaccessible to the average German, let alone newcomers. Thankfully registered tax consultants are on hand to interpret the law for us.<\/span><\/p>\n

\u201cUsually you don\u2019t need to ask a tax advisor what to charge, because in nearly every case it\u2019s 19%,\u201d says Reichert. He says that within the professions that work with reduced VAT rates, you\u2019ll generally hear about it from your network.\u00a0<\/span><\/p>\n

When can I charge 7% VAT?<\/span><\/h2>\n

\u201cThen we have some special cases with 7%,\u201d says Reichert. \u201cLike artists, for example. In these cases you need to check the details and that\u2019s when it makes sense to ask a tax advisor.\u201d<\/span><\/p>\n

Reichert explains that if you are working as an artist, you can generally charge 7% VAT \u2013 but there are a handful of artistic services that are charged at 0% VAT. Doctors charge 0% VAT, too.<\/span><\/p>\n

What makes the difference isn\u2019t your job title (\u201cdoctor\u201d or \u201cartist\u201d) but the specific services you provide.<\/span><\/p>\n

\u201cIt\u2019s also possible that it\u2019s mixed,\u201d he continues. \u201cLet\u2019s say two of my clients are working as public speakers. Some of their services are taxed at 19% and others at 7%. It depends on what specifically they are doing.\u201d<\/span><\/p>\n

How to check your VAT rate<\/span><\/h2>\n

If you\u2019re still unsure which VAT rate to charge on your invoices, your network can\u2019t provide the answers you need or you\u2019re still too new in Germany to know who to ask, it\u2019s probably time to contact your local tax office (<\/span>Finanzamt<\/span><\/i>) to clarify your VAT rate \u2013 you can find the contact details and opening hours on your city\u2019s Finanzamt info page, <\/span>like this one<\/span><\/a>. The <\/span>Finanzamt<\/span><\/i> is legally obligated to offer you free advice.<\/span><\/p>\n

Reichert recommends contacting them in writing rather than visiting in person, in order to have your VAT rate clarified in writing. However, \u201cthis can take some time, so it might be better to ask a tax advisor.\u201d <\/span>Accountable<\/span><\/a> can help you find a certified tax consultant.<\/span><\/p>\n

What happens if you charge the wrong VAT rate<\/span><\/h2>\n

If you charge the wrong VAT rate to your clients, there are a couple of possible scenarios.<\/span><\/p>\n

\u201cIf all your clients are companies, then it doesn\u2019t really matter,\u201d says Reichert. \u201cIf you charge someone 19%, but you actually should have charged them 7%, it doesn\u2019t make a difference as long as the client can deduct it from their own VAT return.\u201d<\/span><\/p>\n

Because VAT is a cost passed through businesses to the end-user, then as long as your client is a business or organization charging VAT itself, this won\u2019t be such a hassle for them.<\/span><\/p>\n

In any case, charging 19% VAT with help keep you covered. \u201cIf your client received an invoice from you with 19%, and this is wrong, then the <\/span>Finanzamt<\/span><\/i> could adjust it so they only pay 7%,\u201d explains Reichert. Ideally, you would avoid these administrative errors, but in this case, all that would happen would be that your client would get a small refund from the tax office.<\/span><\/p>\n

Where things get trickier is if you are not charging enough VAT.\u00a0<\/span><\/p>\n

\u201cIf the Finanzamt audits you and they say you should have charged 19%, rather than 7%, then you\u2019ll have to pay the 12% to the Finanzamt,\u201d says Reichert. \u201cIn most cases it\u2019s not possible to go back to your client and change the invoice.\u201d This would have you paying out of your own pocket.<\/span><\/p>\n

\u201cIn those cases, it\u2019s better to clarify at the beginning,\u201d he says.<\/span><\/p>\n

Quick tips for the correct VAT rate<\/span><\/h2>\n

Here are Andreas Reichert\u2019s quick tips for ensuring you charge the correct VAT rate:<\/span><\/p>\n

    \n
  • Check with colleagues to see what they\u2019re charging for the same services<\/span><\/li>\n
  • Clarify with the Finanzamt or a tax consultant if you are unsure<\/span><\/li>\n
  • If all else fails, charge 19% VAT to err on the side of caution<\/span><\/li>\n
  • Only charge a reduced VAT rate if you are very certain it matches the services you provide<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

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A very small number of services are charged with no VAT […]<\/p>\n","protected":false},"author":5,"featured_media":970,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"_themeisle_gutenberg_block_has_review":false,"footnotes":""},"categories":[9,182],"tags":[323],"class_list":["post-969","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-insights","category-invoice-your-clients","tag-vat"],"acf":[],"yoast_head":"\nWhich VAT rate should I charge my German clients? | Accountable<\/title>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Which VAT rate should I charge my German clients? | Accountable\" \/>\n<meta property=\"og:description\" content=\"In Germany, there are two different VAT rates: 19% is the general rule, but there\u2019s also a reduced rate of 7%. 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