Sales Tax for a German customer

[crodev]

Hello, I'm a Software Developer from Croatia. I need to register a L.L.C in Wyoming. I will have only one Customer (Business) that is based in Germany, the anual income will be about $80k, $6500/month. Far as i know, I have to pay State and Federal taxes, but do i need to apply a Sales Tax (19% German VAT) on the Invoice every Month?

 

[chrisgerth]

Depends, if your customers are business so the transaction is Business-to-Business then you can avoid it by applying Reverse-Charge mechanism.

 

[bigdaddyleon]

Reverse Charge would apply for B2B

 

[mickey]

As already explained, I repeat it in similar worlds:
General Sales Tax only applies to end-customers (B2C) but in your case it's a B2B transaction, so GST does not apply.

But another risk could rise up in the future: As Germany is the North Korea in tax-questions and global trading they could come after the US-Offshore company approach which is so widely used these days. If this happens some local tax offices could list up several US-States (like Delaware) as offshore tax havens which will prevent your client from declaring your invoices as expenses.

There have already been some talks between tax hunters, but it will take some years before this comes into effect.

 

[bigdaddyleon]

But another risk could rise up in the future: As Germany is the North Korea in tax-questions and global trading they could come after the US-Offshore company approach which is so widely used these days. If this happens some local tax offices could list up several US-States (like Delaware) as offshore tax havens which will prevent your client from declaring your invoices as expenses.

the tax office can refuse any invoice, whether it is between German companies or foreign ones.

 

[crodev]

Can I put the German Tax (19%) on my Invoice?

 

[mickey]

the tax office can refuse any invoice, whether it is between German companies or foreign ones.

Theoretically yes. Even shutting down the whole company for months for tax investigations are also common in socialist states like Germany, Sweden, Denmark, Finland, Norway. But everything is a game of odds, chances, gain and risk.

Can I put the German Tax (19%) on my Invoice?

This has been already answered, 2 times by 2 different people to be exact.

 

[crodev]

So what should i do? What is the best option for me so that the costumer is satisfied and me also.

 

[bigdaddyleon]

So what should i do? What is the best option for me so that the costumer is satisfied and me also.

do not display vat and write on the invoice:

"
Der Leistungsempfänger ist im Rahmen des Reverse-Charge-Verfahrens Schuldner der
Umsatzsteuer §13b UStG“
"

 

[Mike Forman]

do not display vat and write on the invoice:

"
Der Leistungsempfänger ist im Rahmen des Reverse-Charge-Verfahrens Schuldner der
Umsatzsteuer §13b UStG“
"

This is incorrect, art 13 is only valid between corporations of EU memberstates.

If you provide services in Germany or any EU country you need to apply for a Vat number and do monthly tax filings to the Finanzamt.

https://www.avalara.com/vatlive/en/...c-services-books-video-apps-and-software.html

 

[uplana]

Can I put the German Tax (19%) on my Invoice?

If you sell in Croatia you have to apply the tax rate from Croatia and no other.

If it is B2B you can do the reverse charge.

That simple!

 

[crodev]

With Reverse charge it means that the customer has to pay the VAT in his country?

 

[Jerry1911]

Croatia. I need to register a L.L.C in Wyoming.

Take a look at Croatian CFC rules before doing stuff like this. You'll end up paying personal income taxes on all of the LLC's income. I've verified this with a tax advisor with close to 30 years of experience.

So what should i do? What is the best option for me so that the costumer is satisfied and me also.

If you want to keep things legal... since the German company is in, well, Germany (an EU member state), the company will need to hire you directly via work contract, through the Croatian pension insurance system. They'll need to obtain a local (Croatian) tax ID (OIB) to do that.

There is also another solution, which is to invoice the German company directly (each month) through a local (Croatian) company (LLC). That will work, but your salary will have to match the invoice amount, otherwise you're risking getting fined for being non-compliant with the Croatian equivalent of UK's IR35 rules (the problem of having a single client / off-payroll working).

 

[RealDude]

Google „Scheinselbständigkeit in Germany“ too. I can't believe that a German company would hire a sole proprietor these days. The pay is also not exactly exhilarating for a full-time self-employed IT professional.