Accounting for VAT for non-EU translators working for EU agencies Thread poster: Andrew Zink
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Andrew Zink
United States
Local time: 09:26
French to English
+ ...
Hi everyone,
In light of the current global financial situation, inflation, value of European currencies, etc., I have had to take a hard look at my current pricing and rates - as I'm sure many translators have done or are doing this year. For any non-EU translators working for EU translation agencies - or even EU translators who are well-versed in VAT and general tax law within the EU - should I, as an American and US-based translator (paying US taxes) working for European-based ag... See more Hi everyone,
In light of the current global financial situation, inflation, value of European currencies, etc., I have had to take a hard look at my current pricing and rates - as I'm sure many translators have done or are doing this year. For any non-EU translators working for EU translation agencies - or even EU translators who are well-versed in VAT and general tax law within the EU - should I, as an American and US-based translator (paying US taxes) working for European-based agencies, factor VAT into my per-word price?
To illustrate my question by way of example (and these aren't my real rates), let's say my per-word price is 0.08 EUR/word and I work for a Finnish translation agency. If I know that my EU counterparts are also charging 0.08 EUR/word, but adding a VAT of 22% onto all of their invoices (meaning the agency is ultimately paying 0.098 EUR/word), can I reasonably expect to charge an all-inclusive price of 0.098 EUR/word to compensate for the fact that I don't charge VAT as a non-EU citizen? To phrase my question another way, to an EU agency, is my 0.098 EUR/word and a EU translator's 0.08 EUR/word + VAT the same?
Thanks in advance for any and all help, and please let me know if I need to clarify anything ▲ Collapse
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Andrew Zink wrote: Hi everyone, In light of the current global financial situation, inflation, value of European currencies, etc., I have had to take a hard look at my current pricing and rates - as I'm sure many translators have done or are doing this year. For any non-EU translators working for EU translation agencies - or even EU translators who are well-versed in VAT and general tax law within the EU - should I, as an American and US-based translator (paying US taxes) working for European-based agencies, factor VAT into my per-word price? To illustrate my question by way of example (and these aren't my real rates), let's say my per-word price is 0.08 EUR/word and I work for a Finnish translation agency. If I know that my EU counterparts are also charging 0.08 EUR/word, but adding a VAT of 22% onto all of their invoices (meaning the agency is ultimately paying 0.098 EUR/word), can I reasonably expect to charge an all-inclusive price of 0.098 EUR/word to compensate for the fact that I don't charge VAT as a non-EU citizen? To phrase my question another way, to an EU agency, is my 0.098 EUR/word and a EU translator's 0.08 EUR/word + VAT the same? Thanks in advance for any and all help, and please let me know if I need to clarify anything
No.
The agency will have to report and pay VAT as they import your work. Your rates will be compared against rates net of VAT (i.e. without VAT), meaning your quoted rate should be 0.08 (not 0.098).
[Edited at 2022-07-20 06:11 GMT]
| | | | Samuel Murray 
Netherlands
Local time: 18:26
Member (2006)
English to Afrikaans
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Andrew Zink wrote:
Let's say my per-word price is 0.08 EUR/word and I work for a Finnish translation agency. If I know that my EU counterparts are also charging 0.08 EUR/word, but adding a VAT of 22% onto all of their invoices (meaning the agency is ultimately paying 0.098 EUR/word)...
I'm not sure about the situation in Finland (where the VAT rate is 24%), but if it's the same as in the Netherlands (where the VAT rate is 21%), then: Dutch translators working for a Dutch agency will add 21% VAT to their invoice. Non-Dutch translators in the EU working for a Dutch agency (or Dutch translators working for a non-Dutch agency in the EU) don't add any VAT to their invoice (but the agency will have to pay 21% VAT to the Dutch local tax department). Non-EU translators working for a Dutch agency don't add any VAT to their invoice either, but the agency will also have to pay 21% VAT to the local tax department.
So there's no getting away from the 21% VAT for the agency: they either pay it to the Dutch translator (who then pays it to the tax department) or they pay it to the tax department themselves.
Can I reasonably expect to charge an all-inclusive price of 0.098 EUR/word to compensate for the fact that I don't charge VAT as a non-EU citizen? To phrase my question another way, to an EU agency, is my 0.098 EUR/word and a EU translator's 0.08 EUR/word + VAT the same?
So, if I understand correctly, you want to raise your rate so that the agency pays the same to both you and your Finnish colleagues, is that right? It's very noble of you to try not to undercut your European colleagues.
Well, I'm not sure if the Finnish agency will have to pay VAT when they buy services from outside the EU. But in the Netherlands, according to the tax department's web site, a Dutch agency buying translation services from a non-Dutch translator (regardless of whether they are in the EU) will have to pay 21% VAT on that service.
So if you were to charge the Dutch agency EUR 0.098, the total cost to the Dutch agency would be EUR 0.11858 since they would have to pay EUR 0.02058 VAT on the EUR 0.098.
[Edited at 2022-07-20 07:39 GMT]
| | | | | They also deduct it | Jul 20, 2022 |
Samuel Murray wrote:
So there's no getting away from the 21% VAT for the agency: they either pay it to the Dutch translator (who then pays it to the tax department) or they pay it to the tax department themselves.
As it's a business expense, they also deduct the VAT and get it refunded, so it's only a matter of accounting for the input and output VAT; they don't actually pay it when the provider is not based in the Netherlands. The effective cost, in all cases, to the agency is the net rate, i.e. exclusive of VAT. An agency is not a consumer.
But all this has nothing to do with net rates, as you and Enrique have already said.
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What you and everybody else can do is to keep an eye on expenses to avoid paying over the odds. If you get paid from Europe via PayPal, for example, you could save up to ~7% of your foreign turnover by switching to Wise by opening both USD and EUR balances with them. They also offer local bank account details in many other countries.
PayPal notably offers buyer and seller protection, but this protection doesn’t apply to the provision of services, while the fees are the same, so if... See more What you and everybody else can do is to keep an eye on expenses to avoid paying over the odds. If you get paid from Europe via PayPal, for example, you could save up to ~7% of your foreign turnover by switching to Wise by opening both USD and EUR balances with them. They also offer local bank account details in many other countries.
PayPal notably offers buyer and seller protection, but this protection doesn’t apply to the provision of services, while the fees are the same, so if we use PayPal, we effectively subsidise all sorts of more or less shady sellers and buyers of tangible items around the world. I don’t have a PayPal account any more, as it’s a total rip-off, and if you were to end up with a chargeback due to a fraudulent payment, they'd do zilch to help you.
[Edited at 2022-07-20 10:42 GMT] ▲ Collapse
| | | | Andrew Zink
United States
Local time: 09:26
French to English
+ ...
TOPIC STARTER | Conflicting Information | Jul 20, 2022 |
Hi Thomas, Samuel, and Enrique,
Thanks for your input. Also @thomas, thanks for the tip about (Transfer) Wise - I've been using them for over a year and they've made a HUGE difference in terms of exchange rates, fees, etc.
In conjunction with this forum post, I actually reached out to a Germany agency that I work for, and I received some conflicting information to what you all said. Granted, it's highly probable that each country has its own set of tax laws and regulati... See more Hi Thomas, Samuel, and Enrique,
Thanks for your input. Also @thomas, thanks for the tip about (Transfer) Wise - I've been using them for over a year and they've made a HUGE difference in terms of exchange rates, fees, etc.
In conjunction with this forum post, I actually reached out to a Germany agency that I work for, and I received some conflicting information to what you all said. Granted, it's highly probable that each country has its own set of tax laws and regulations, so I'll just forward the reply.
The agency replied, "[...] we are only required to pay to the tax authority the VAT that amounts to the actual invoices issued with VAT. We don't pay VAT for your projects [...]"
From that reply, keeping in mind the person I spoke with is not necessarily a German tax law expert, it does seem like VAT isn't required in all cases.
Do you guys have any thoughts? ▲ Collapse
| | | | | Cross-border VAT not paid | Jul 20, 2022 |
Andrew Zink wrote:
In conjunction with this forum post, I actually reached out to a Germany agency that I work for, and I received some conflicting information to what you all said. Granted, it's highly probable that each country has its own set of tax laws and regulations, so I'll just forward the reply.
The agency replied, " are only required to pay to the tax authority the VAT that amounts to the actual invoices issued with VAT. We don't pay VAT for your projects [...]"
From that reply, keeping in mind the person I spoke with is not necessarily a German tax law expert, it does seem like VAT isn't required in all cases.
[/quote]
All EU Member States must apply the EU VAT Directive, so VAT law is almost the same in every Member State.
It is correct that VAT due on services and goods from other countries is not actually paid, since the VAT deductible on the same service is the same amount, so the result is zero, just as it is zero after an agency has paid VAT on a local translator's invoice and obtained a refund from the tax authority. VAT does not affect the cost of a service for a VAT-registered business.
None of this affects you, as you just invoice without any VAT or sales tax. Any VAT paid by the final consumer is paid to the tax authority and can't just be paid to you instead.
| | | | Steve Robbie
United Kingdom
Local time: 17:26
Member (2017)
German to English
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| So just to sum it up | Jul 20, 2022 |
- You, as a non-EU seller, cannot charge VAT to EU clients.
- Any VAT the agency has to pay to its government is the agency’s problem. It doesn’t matter what they pay or how they pay it, because it makes no difference to you.
- Being outside the EU doesn’t give you a price advantage over an EU-based translator. The VAT system is designed so that a VAT-registered buyer cannot gain a benefit from employing you instead of a translator based in Europe. So you can't ch... See more - You, as a non-EU seller, cannot charge VAT to EU clients.
- Any VAT the agency has to pay to its government is the agency’s problem. It doesn’t matter what they pay or how they pay it, because it makes no difference to you.
- Being outside the EU doesn’t give you a price advantage over an EU-based translator. The VAT system is designed so that a VAT-registered buyer cannot gain a benefit from employing you instead of a translator based in Europe. So you can't charge them extra.
[Edited at 2022-07-20 14:43 GMT]
[Edited at 2022-07-20 14:47 GMT]
[Edited at 2022-07-20 14:49 GMT]
[Edited at 2022-07-20 14:51 GMT] ▲ Collapse
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… you would be cheaper than an EU translator if you were supplying private individuals or anyone else who is not VAT registered because they can’t offset VAT.
| | | | RobinB
United States
Local time: 11:26
German to English
| Incorrect information | Jul 26, 2022 |
Andrew Zink wrote: The agency replied, " are only required to pay to the tax authority the VAT that amounts to the actual invoices issued with VAT. We don't pay VAT for your projects [...]"
From that reply, keeping in mind the person I spoke with is not necessarily a German tax law expert, it does seem like VAT isn't required in all cases.
Do you guys have any thoughts? [/quote]
Hi Andrew,
The agency is wrong, and they'll have a nasty surprise when they have their next VAT (USt) audit. When they source translations from non-EU translators (now including the UK), they have to calculate the nominal VAT on the invoice total themselves and add it to the VAT they owe to the tax office/Finanzamt. At the same time, though, they can credit exactly the same amount to their input tax (Vorsteuer), so ultimately, they don't pay any additional tax. It's additional paperwork, but no more than that. If they don't do that, the tax auditor will require them to pay the outstanding VAT on invoices from non-EU translators, but will not allow them to reclaim that as input tax. They could also be punished by a fine for tax avoidance.
Remember, please, that VAT doesn't make a translator (or a translation) more expensive. It's a pass-through tax that doesn't "belong" either to the translator charging VAT or the agency paying VAT. The translator has to remit the VAT they receive to their own tax office/Finanzamt, net of any input tax that they have paid. Similarly, the agency has to remit the VAT it receives from its own clients, net of input tax is has paid (e.g. to translators). This regime applies across the board, i.e. in all EU member states.
So, the upshot is, if you add "notional" VAT to your price, you are merely making yourself more expensive than your competitors (19% more expensive in the case of Germany).
Also remember that, if you supply translations from outside the EU (e.g. USA, UK) to private individuals in the EU or other clients who are not registered for VAT, you HAVE to register for VAT under the VAT "mini one stop shop" (MOSS) regime with one of the EU national tax authorities. You have to charge VAT at your client's national rate, and you have to remit to the national authority all VAT you have received from your client(s) in the EU.
One of my clients is a German government agency that is not registered for VAT, but to which I am required by law to charge VAT. This happens a lot in the EU, and also applies to EU institutions. I'm registered for VAT with the Irish tax authorities, because it's really simple (unlike the Bundeszentrale für Steuern) and I can pay by credit card (once a quarter).
I'm aware that there are plenty of myths and untruths surrounding VAT, but I hope I've laid a few to rest.
Robin (sweltering in the heat on the Texas Gulf Coast - yet another week with no rain)
[Edited at 2022-07-26 15:48 GMT]
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