t3n, 07.07.2021: The times when you could offer your products and services exclusively in your local area are long gone. Find out here about how you can save a huge amount in tax costs by collaborating with international customers partners.
It’s 8.19 am. Our fictitious agency boss Anna M. is sitting in her Berlin office, steam is rising from the freshly-poured coffee cup on her desk. Together with her six-person team, she and her agency well known outside of Germany for her print products that are appealing to the eye and to the touch: She and her team design and create posters, business cards, brochures, flyers and much more for their international clients.
Spread out before her: The final prints designed for an art festival in Spain. The special type of paper that she has chosen for the prints, which is highly prized by the customer for its unique tactile quality, was delivered by a Polish company.
Without the reverse-charge method, Anna would now have to deal with the Spanish tax office; for its part, the Polish paper supplier would have to deal with the German authorities.
The infinite possibilities that our globalized world brings have become a basic part of our working day. Markets are no longer limited. Everyone can work, trade, and do business with anyone else. The only downside: the bureaucratic burden. Anyone working with partners and customers abroad unavoidably has to deal with this rough side of the coin.
In particular, tax-related matters often lead to headaches when companies and individuals collaborate across borders. If your partner company is subject to a different tax regime than you are, in theory this means a much greater burden your company, or your tax adviser.
In order to avoid additional efforts and expenses, the reverse-charge method can be used. In the case of a service being provided abroad, the VAT is not owed by the contractor, but by the customer, who can then, where applicable, claim the VAT as input tax.
This doesn’t lead to a difference in costs, but it does ease the bureaucratic burden considerably. Customers and partners abroad don’t have to struggle with the German tax office, and domestic companies don’t have to deal with foreign tax authorities – this saves them a great deal of correspondence, administrative effort, and thus time and money.
- The service provided must be listed in § 13b of the German VAT Act (UStG).
- The services must be provided by a company or a legal person.
- The company performing the service must not show any separate VAT on an invoice.
- In their invoice, the company providing the service must refer to the reversal of the tax burden to the recipient of the service.
If your hair turns grey at the thought of financial management, you should consider outsourcing this area of your business. For over 20 years Berlin-based company nexnet has successfully carried out business process outsourcing for subscription billing, financial and credit management, CRM, and much more. nexnet also provides comprehensive advice on process conversions related to the reverse-charge method; and they also make the necessary adjustments for you, so that you can sit back and relax.
With an ever-rising number of financial statements, billing processes, and customer data, it is important to have a high-quality partner at your side. nexnet GmbH meets the highest quality standards thanks to annual internal and external audits, with a DIN ISO rating of 9001:2015 (in the area of Billing Accuracy and Fee Correctness according to § 45g of the German Telecommunications Act (TKG) – internationally the most common and most important standard in quality management. Find out now about nexnet’s wide-ranging services, and profit from many years of experience in the e-commerce and telecommunications sectors