VAT and German freelance working on international project

Question

I am a freelance in Germany ("freiberufler" is the term here). I have developed a website for a Spanish company and I have written them a bill for it.

Now they are trying to put their finances in order and they are asking me for a VAT number with the format "DE123456789". I dont have such number. I only have a number with the format "11 / 111 / 11111"

After some research I think Ive learned that these numbers are only given to GmbH which I am not.

The customer insists that I have to provide him with this number. How should I proceed in this situation?

Answer 1

11 / 111 / 11111 looks like the (old) tax number: it is used by the tax office to know who you are, it isn't good at all for the spanish company. It would even change when you move inside Germany.

VAT IDs are not exclusive to GmbHs (but a GmbH always has one). As freelancers you can get at VAT ID but you don't always have to.

The tax office offers a "small business" treatment (§ 19 UStG) for freelancers, kind of an opt-out for the VAT ID. As you do not have a VAT ID, this is probably your case.

It means

• your bills are without VAT
• you cannot claim VAT deduction for things your buy.
• the company cannot claim VAT decuction on your bill (because there was no VAT paid).

So what to do?

• If I were you, I'd write them that according to
  §19 UStG and the European Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, TITLE XII CHAPTER 1 "Special scheme for small enterprises"
  you were not assigned a VAT ID, and VAT is not applicable to your bill.

• The fact that VAT is not applicable in this case does not mean that they are allowed to refuse payment.

• I heard a rumour (but don't really know) that a number similar to the VAT ID is planned also for freelancers (Wirtschafts-IDNr.). You could go to your tax office and ask them about. Maybe that yields a number that satisfies spanish burocracy.

• AFAIK, you can go to your tax office and ask them to give you a real VAT number. But careful: that has the serious drawback that you have to do do an advance VAT estimate and pay that to the tax office at least quarterly (for bigger business monthly). And (AFAIK) you are not allowed to change back to the small business treatment for several years.

Answer 2

The VAT number should be equivalent from the point of view of your client. The fact that you are a sole trader and not a limited liability doesn't matter when it comes down to pay VAT.

They should pay the VAT to you and you will pay it to the government.

I'll guess that their issue is with tax breaks, it is a bit more tricky to receive a tax break on paid taxes if you buy something abroad (at least it is here in Finland).

If they won't pay you because of that, you could open a LTD or contract the services of a 'management company' which will do the job of invoicing, receiving the money and passing it back to you, for a fee.