I am trying to understand how to deal with Fiverr’s earnings for tax purposes. I work as a freelancer in Germany and am therefore generally subject to sales tax and income tax.
Now I’m trying to figure out how to prepare my invoice for Fiverr. Whether / which taxes have to be levied, how I list the services, etc. If someone here also works in Germany and has already found a legally compliant contact, I ask for clarification
- Pricing at Fiverr
As far as I know, buyers on Fiverr receive an invoice that does not include sales tax. This corresponds to the explanation in the guide “… all prices and fees that appear on the site are the NET AMOUNTS that will be paid …”
For the seller it says: “The price shown on the Gig page (…) is inclusive of all such taxes and charges that may apply to Sellers.” So, as a seller, I have to set the price in such a way that any tax levies are included.
Perhaps I understand too little about this, or think too complicated, but how can a price be viewed as a gross amount for one side (seller) and this price as a net amount for the other side (buyer) ?! It doesn’t make sense to me.
I have already written to the Chamber of Commerce Abroad in Israel to ask whether the reverse charge procedure should be used, but I have not yet received an answer. The same applies to Fiverr support. They say you should send invoices to support, but I don’t know under which category you should send the invoice (does anyone have any suggestions?).
I get my money transferred in euros, which means that a conversion from to € takes place. This rate changes every month and can be viewed in a table from the European Central Bank. If I display the amount as in my account and then convert it to € using the current exchange rate, I get a difference of about 5% in the result. So what rate is Fiverr expecting here?
I also don’t know whether to what extent I have to break down the services in the invoice. After all, we can only work with fixed prices, at best negotiate retrospectively in order to achieve an hourly rate if the workload has increased, but who does that in practice after 30 minutes? That means I have an amount in my invoice later, let’s say € 1,674.30, which I have to explain somehow. Simply writing “other translation services” will not be accepted by the German tax office. There, a clear indication of the scope of services is required in the form of “30 hour service X at € 25”. The only difference is that the Fiverr service tax, the currency conversion rate and possible tips give us completely weird invoice amounts that can no longer be explained with such a list. With the numbers above I would have to say “66.97 hours at 25 € = 1674.30 €” - no tax officer will NOT question 66.97 hours. It becomes even more difficult if you now have several gigs and want to split the amount between them, for example “20 hours of translation work and 30 hours of logo design”. Usually the package prices differ and I would have to split the invoice amount proportionally and then proceed as above and then at the end of the day I would have to state two odd numbers of hours. At the moment, a possible solution would be to indicate the number of gigs performed and possibly to include tips as a separate item, would that make sense? It is just important to me that I prepare the invoices correctly so that it is also clear that the sales have been stated correctly. Perhaps the information in the address that this is an Israeli company is enough. Then you enter the invoice amount, without sales tax and without reference to reverse charge and everything is legally compliant.
The lady at the tax office said that when working for Fiverr there would be “non-taxable sales (place of performance not in Germany)” (line 41 of the German sales tax return). I have a bit of a stomachache at this thought, even if it seems logical. In practice, I would now generate sales every month on which I do not have to cede sales tax. I can only explain it to myself that although I save sales tax, my income increases as a result and this is correspondingly higher in the income tax return at the end of the year, which means that I have to pay more tax there. Thus, a compensation would exist, even if the levies of both taxes are distributed differently between the federal government and the municipalities.
Congratulations and thank you if you have read this far. I know looking for tax advisors … I did. The offer was over € 2000 per year. If I just want to know what my bills look like and which lines I have to fill out, that’s clearly too much for me, even for Germany. These are explanations that are processed in 2 hours and then everything is clear.
So, if you have ideas on how to handle these things and have been following them in Germany for a long time, I would be happy about some enlightenment.