How is value added tax regulated for cross-border services?
January 5, 2024 | 40,00 EUR | answered by Lina Sauer
Dear tax advisor,
I have a question regarding value added tax on cross-border services and hope that you can help me. I run a small business that offers services in different countries. So far, I have mainly focused on the national market, but now I would like to expand my business to international customers.
However, I am unsure about how value added tax is regulated for cross-border services and what tax obligations I need to consider. I am worried that I may make mistakes in invoicing value added tax and potentially risk high tax payments or even fines.
Could you please explain to me how value added tax works for cross-border services? Are there specific regulations or exemptions that I need to be aware of? What steps do I, as a business owner, need to take to correctly invoice and pay value added tax?
I would greatly appreciate it if you could provide me with specific information and possible solutions on this topic so that I can expand my business internationally smoothly and in compliance with the law.
Thank you in advance for your help.
Sincerely,
Phillip Schottmann
Dear Mr. Schottmann,
Thank you for your inquiry regarding value added tax on cross-border services. It is understandable that you are concerned about the tax obligations and risks when expanding your business internationally. I will gladly explain in detail how value added tax is regulated in this context and what steps you, as an entrepreneur, should take into consideration.
In general, cross-border services are subject to value added tax in the destination country, that is, the country where the recipient of the service is located. This means that as an entrepreneur, you must account for and pay the value added tax according to the regulations of the respective country where your customers are located. However, there are some specific rules and exceptions that need to be observed.
First, you must check if there is a value added tax identification number for the respective country that you need to apply for in order to correctly invoice cross-border services. Additionally, you should carefully study the value added tax regulations of the respective country to ensure that you fulfill all tax obligations.
There are also special rules, such as the reverse charge mechanism, which can apply to cross-border services. In this case, the recipient of the service is responsible for paying the value added tax to the tax authorities, instead of the service provider. This should be appropriately reflected in the invoicing.
To correctly account for and pay the value added tax, I recommend seeking advice from a tax advisor who specializes in international tax matters. They can help you understand the tax obligations and assist you in avoiding potential errors.
I hope this information is helpful to you and supports your endeavors. If you have any further questions or need assistance, please feel free to contact me.
Sincerely,
Lina Sauer
Tax Advisor
