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Taxation of income via the freelancer platform "Upwork"
First of all, thank you very much for your request, which I will be happy to answer based on your information as part of an initial consultation on yourXpert. The answer will be given in accordance with the description of the facts you have given. Missing or incorrect information on the actual circumstances can definitely influence the legal result. My answer relates to the tax treatment in Germany, the tax obligations in other countries are to be determined according to the law of the respective country.
If you provide other services, the VAT treatment is based on the location of the other service. For the determination of the location, it is essential whether the recipient of the service is an entrepreneur or a non-entrepreneur.
In the case of a service that you provide to an entrepreneur, you must be able to provide evidence of the entrepreneurial status of the service recipient. If you cannot provide this evidence, the sales are to be treated as if the recipient of the service were a non-entrepreneur.
In the case of a service provided electronically to a non-entrepreneur, the place of performance is determined in accordance with Section 3a (5) sentence 2 no. 3 UStG. The place of performance here is with the recipient of the service, i.e. according to your examples in the USA or Switzerland. Accordingly, such sales are not subject to sales tax in Germany.
A service provided electronically is a service that is provided over the Internet or an electronic network, including networks for the transmission of digital content, and the provision of which is highly dependent on information technology due to the characteristics of the other service (Sect.3.12 Para. 1 sentence 1 UStAE), for example digital products such as B. Software and related changes or updates (Section 3.12, Paragraph 2, No. 1 UStAE), including the adaptation of software (Section 3.12, Paragraph 6, No. 7, UStAE).
In the case of a service provided electronically to an entrepreneur, the place of performance is determined in accordance with Section 3a (2) sentence 1 UStG, also at the entrepreneur's location. So it does not remain controllable. Here, however, the so-called reverse charge procedure may apply, in which the recipient of the service becomes the tax debtor.
You do not have to create an invoice, the entry and recording for the purpose of calculating your profit and as evidence for VAT purposes can be done on the basis of the accounting documents from Upwork in connection with the payment documents (e.g. account statement).
The upwork service fee is paid to you because you are a sales tax entrepreneur and upwork also acts as an entrepreneur (stating the EU sales tax identification number ...), the place of performance is in Germany, the performance is taxable here and, in the absence of a tax exemption, also taxable.
The so-called reverse charge procedure is used here, which means that you, as the recipient of the service, are liable for sales tax in accordance with § 13b UStG. These sales are to be stated in your sales tax returns and the sales tax return, but sales tax can be claimed as input tax, unless you make use of the small business regulation.
I am happy to answer any questions you may have and, by the way, if you were satisfied with my advice, I would be very happy to receive a positive rating here on yourXpert.
With best regards
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