Miscellaneous services (such as graphics services, translations, remuneration for transfer of usage rights) provided to foreign customers
Whether the service is provided within the EU or to a customer outside the EU and whether the customer is a business or private individual is also relevant with regard to VAT in case of miscellaneous services.
An artist liable to VAT and living in Germany translates a novel that is to be published by a publishing house in Paris.
The place-of-supply-principle applies to transactions with a business (B2B). The transaction is then taxed in France and is considered a non-taxable transaction in Germany. The translator issues an invoice without VAT.
The translator should add the following note to his/her invoice: “not taxable pursuant to § 3a Abs. 2 UStG – reverse charge procedure.”
The invoice must also include the value added tax identification number (VAT ID no.) of the recipient, i.e. of the publisher in Paris. Otherwise, the German tax office does not know that the recipient is a business and will retroactively charge VAT.
A VAT ID no. is assigned to any entrepreneur within the EU upon request and is therefore regarded as an attribute of a person’s entrepreneurial capacity. In general, the respective fiscal authority is responsible for issuing a VAT ID no. In Germany, this is the Federal Central Tax Office in Saarlouis www.bzst.de. The VAT ID no. usually includes the country code and a series of numbers, for example, DE123456789 or GB987654321.
However, the translator must specify the revenue in the VAT return in the line for tax-free sales. In addition, he/she must file a “Zusammenfassende Meldung” (English: recapitulative statement). This allows the tax authorities to retain control.
If the translator is subject to the small business regulation (annual turnover below €17,500) he/she should add a different note to his/her invoices: “Small business pursuant to § 19 UStG.” This is necessary to ensure that the translator’s customer in France can properly record the transaction.
A German director transfers the rights of use to the performance of a play to a commercial event organizer in Spain.
As this is a B2B transaction, the place-of-supply principle applies, i.e. the transaction is taxable in Spain and not in Germany.
However, to prevent German VAT liability, the director must also specify the VAT ID no. of his/her Spanish customer on the invoice.
An Italian artist liable to VAT sells the right to reproduction of his/her media installation to a German company.
This is considered an intra-community service, which is taxable in Germany under § 13b Abs. 1 UStG. The German company is liable to pay the VAT and must list it in its advance VAT return form. The reduced rate (§ 12 Abs. 2 Nr. 7c UStG) of 7% applies. If the artist has included his/her Italian VAT ID no. on the invoice, the German company can deduct the tax as input tax, so that on balance the German company does not owe any tax to the authorities. To avoid Italian VAT, however, the German company must communicate its German VAT ID no. to the Italian artist.
Supplies and services provided to private individuals in other EU countries are taxable domestically. The registered-place-of-business principle applies. The translator in Germany, the director transferring usage rights, and the Italian artists must list the VAT on their invoices and pay it to the tax authorities in their respective home country.
Supplies and services provided to customers outside the EU are not taxable domestically if the customer is a business (place-of-supply principle).
A Ugandan musician transfers the rights to use of his/her music to a German photographer (entrepreneur), who uses it as background music for his/her slideshow.
Again, the place-of-supply principle of § 3a Abs. 2 UStG applies. According to § 13b Abs. 2 Nr. 1 UStG, the photographer must declare the transaction and can deduct the calculated VAT as input tax. The reduced VAT rate of 7%, pursuant to § 12 Abs. 2 Nr. 7c UStG, applies to the granting of rights of use.
The rules are less clear when it comes to supplies and services provided to private customers outside the EU. Certain services, such as transfer of usage rights and translations are not taxable in Germany. The place-of-supply principle, pursuant to § 3a Abs. 4 UStG, applies. Other services that are not covered by the list under § 3a Abs. 4 UStG (such as graphics services) may be subject to domestic tax, because the registered-place-of-business principle, pursuant to § 3a Abs. 1 UStG, applies to them.