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British consultant contracting to German company

My client has been told to register for VAT in Germany to account for VAT on his consultancy fees

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I have a client who is currently employed full time in the UK.  He has been offered a two year fixed term contract with a German company at a much higher rate than he is currently being paid, but as a contractor rather than an employee.  He is UK national, resident and registered for taxes here.  He will be working from the UK.  His annual income won't take him over the UK VAT threshold but it will take him over the German VAT threshold.  I have suggested that his best option would be to set up a Limited Company here in the UK for billing the consultancy fees but his prospective client has said he will need to register for VAT in Germany to account for the VAT on his consultancy fees.  Can anyone please help me understand whether he actually needs to do this, and if so, how to go about it.  Thanks in Advance.

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By The Dullard
16th May 2021 15:13

The solution to any VAT question lies in addressing the question of "who supplies what to whom?" We know who and we know whom.

The missing information arises from the fact that "consultancy" is an incredibly broad term.

Let me stick my neck out though. Is it by any chance land-related consultancy?

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By Emma George
16th May 2021 15:31

No, he's a 'Business Analyst' and the German Co's business isn't land related - I already asked. Thanks though.

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By The Dullard
16th May 2021 20:09

You didn't bother providing that information, so you have no reason to be uooity. I'm out.

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Melchett
By thestudyman
16th May 2021 16:03

Default position for B2B supplies is where the customer is located.

The customer should understand that this will fall under the reverse charge mechanism and account for the vat accordingly.

https://www.gov.uk/guidance/vat-place-of-supply-of-services-notice-741a#...

However please read the sections below if the service is an exception to the rule. If not an exception, then refer to the General rule.

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Replying to thestudyman:
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By Emma George
16th May 2021 16:12

So even if he's not VAT registered in the UK the reverse charge still applies? How does that work then? Sorry if there's something I'm missing.

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By Matrix
16th May 2021 17:11

It may be beneficial to voluntarily register.

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Replying to Emma George:
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By VATs-enough
16th May 2021 20:46

Reverse charge has nothing to do with VAT registration status of supplier.

You would reverse charge services bought from a US consultant, and they wouldn't be VAT registered.

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By Emma George
16th May 2021 16:09

No, he's a 'Business Analyst' and the German Co's business isn't land related - I already asked. Thanks though.

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By frankfx
16th May 2021 16:58

The German customer may be misguided!

Therein lies a problem , the blind leading the blind. no offence .
overall sense of uncertaintly and consquences of getting things wrong can be overwhelming

How are you going to convince the German customer that a German VAT number is not required, more so as your client needs to earn a living !

does this help?:

https://www.accountingweb.co.uk/any-answers/services-to-germany-pre-and-...

But the challenge may be with the German customer.

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By Matrix
16th May 2021 18:52

And if it the supply is subject to the reverse charge then no need to register in Germany.

https://www.avalara.com/vatlive/en/country-guides/europe/germany/german-...

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Jason Croke
By Jason Croke
17th May 2021 08:43

Not land related service, general "consultancy" type stuff. place of supply is where the customer is (Germany) and is outside the scope of UK VAT.

Suspect the German customer is assuming the consultant will operate via a German entity, upon which yes, the UK consultant would need to register for German VAT or they may ne unclear as to rules for services post Brexit (which haven't changed much).

As is often the case when you have conflicting answers, it is almost always because someone has a little bit more information than the other, rather than one of them is wrong. So go back to the German customer and advise the place of supply rules for services indicate this is a reverse charge supply and see what they say.

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Replying to Jason Croke:
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By I'msorryIhaven'taclue
17th May 2021 10:58

Jason Croke wrote:

Suspect the German customer is assuming the consultant will operate via a German entity, upon which yes, the UK consultant would need to register for German VAT or they may be unclear as to rules for services post Brexit (which haven't changed much).

From the German company's viewpoint, I wonder to what extent its interpretation of the following two pieces of guidance might have shifted post-Brexit and/or might shift on 1st July?

If you have a registered business providing services (as an architect or tourist guide, for example) in the country where you live, you can offer those services in another EU country without setting up a company or branch there.
and
Despite this principle, you can't just assume you can provide services without setting up a company locally. Whether you can or not will depend mainly on how often, for how long and how regularly you want to provide services.

Source of both quotes: "Providing Services Abroad"
https://europa.eu/youreurope/business/selling-in-eu/selling-goods-servic...

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