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How to correctly issue a VAT invoice for a foreign contractor in Germany?

29.06.2023

How to correctly issue a VAT invoice for a foreign contractor in Germany?

Issuing invoices is one of the more enjoyable obligations for every entrepreneur. The rules regarding generating invoices in domestic transactions are usually not a problem. Doubts arise when it comes to invoices for foreign contractors. Invoices issued by a German entrepreneur to a foreign company and received by them from a foreign contractor are subject to special regulations. Below are the most important information regarding this matter.

What data should be included in the so-called EU VAT invoice? Not only invoices in domestic transactions, but also those issued to customers from EU member states or third countries must contain certain mandatory data (such as invoice sequential number, date of service provision or goods delivery, date of invoice issuance) in order to be accepted by the tax office. Since the regulations within the EU and outside its territory differ significantly, it is always necessary to check in which country the recipient of your goods or services is based. The following points are particularly important:

  • German VAT is not listed on the invoice.
  • In the case of intra-community supplies made to entrepreneurs from other EU countries, VAT is generally not listed in the country of origin. Its collection takes place at the destination country by the recipient.
  • It is necessary to provide the VAT identification number – both of the invoice issuer and their counterparty.

Important: The tax office requires you, as the issuer of the invoice, to verify the validity and correctness of the VAT identification number and address data of your customer. If you neglect this obligation and it later turns out that the data is incorrect, in the worst case, you will be responsible for the VAT due. Each VAT-exempt intra-community supply must also be reported in a so-called summary information, which includes the transaction amount along with the counterparty’s VAT identification number. The above rules also apply to supplies within the same company.

If you supply goods for your own use, for example, because you operate a branch of your company in another EU member state, the same regulations apply to you. In such cases, the tax office requires the issuance of a “pro forma” invoice and self-taxation of the purchase in the other country.

Special rules for other services

If we are not dealing with a classic supply of goods but with so-called other services, it may turn out that in certain specific cases, they will be subject to different VAT taxation rules. Such special regulations apply, for example, to services provided by artists and athletes during cultural events, installation services, as well as passenger transport services or restaurant services.

Foreign VAT as an operational expense of the company

If you do not receive a refund of foreign VAT or do not take advantage of the right to reclaim it, it should be included as an operational expense of the company along with other costs. Foreign consumers are treated on an equal footing with domestic ones in other EU countries. This means that as a German company, you issue an invoice to a foreign consumer in accordance with German guidelines. Therefore, the obligation to pay VAT must be fulfilled in Germany. This only deviates in a few situations (e.g., in the case of vehicle acquisition).

Note: Mandatory data can be formulated in other official languages

Recently, the German tax administration accepts invoice concepts and formulations (such as credit note) typical for invoices, which are written in other official languages of the EU. This significantly facilitates work in accounting and helps avoid errors that are difficult to correct later.

Consequences of providing incorrect or incomplete data

Incorrect or incomplete data in invoices for foreign contractors can have unpleasant tax consequences. In the worst case, you will be responsible for the VAT due if, for example, it turns out that the customer’s VAT identification number was incorrect. On the other hand, minor shortcomings are unlikely to have negative consequences, as long as the invoice contains all the required data and there are no doubts about its correctness.

Obligation to keep a register of foreign invoices and their storage

It is essential to keep invoices for a period of 10 years. It is also recommended to keep duplicates of invoices in a separate binder created for this purpose. In addition, as a supplier, you are obliged to have documents confirming the actual delivery of goods to another EU member state. Therefore, in addition to invoices, you should also keep any receipts of delivery, shipment insurance, waybills, or dispatch confirmations from post offices or forwarders. A confirmation of the intra-community delivery can also be a document filled out by the final recipient confirming the arrival of the goods (German: Gelangensbest├Ątigung).

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