VAT on internet and website services supplied to Germany


Germany flagThe steady development of the internet has resulted in a whole range of business opportunities for internet services, and the global nature of the internet means that it is easy to provide such services to overseas customers. This page looks at whether a UK business needs to charge VAT on internet services supplied to a customer in Germany.

Internet services are likely to fall into 2 main groups:

Electronically supplied services

Typically these are automated services that are necessarily provided over the internet, to a customer who belongs in Germany. They require minimal human input.

They include:

  • Access to automated online games
  • Providing an online website (but not bespoke website design or development services)
  • Subscriptions to Software as a Service (Saas)
  • Providing automated online education courses
  • Subscriptions to online newspapers, journals and blogs
  • Providing access to standardised downloads, such as software, images, digitised books, music, films and games
  • Supplying web hosting
  • Automated online auction services
  • Providing online news, traffic and weather information
  • Providing advertising space on a web page
  • Providing online data storage or warehousing
  • Web-based broadcasting
  • Providing access to online databases

They do not include:

  • Broadcasting over the internet at the same time as over TV or radio networks.
  • Internet telephone services, such as Skype.
  • The provision of internet access by suppliers who provide little content of their own as part of the package.
  • General services, such as legal services, which just use the internet as a more efficient form of communication than sending documents by post.
  • Goods ordered online from e-commerce websites.
  • Electronic information sent on physical media, such as a tape, CD or DVD.

Where a digital file or document is sold to a customer online, and the only human involvement is to click on a button that sends the file by email, it is likely to be an “electronically supplied service”. Where the email receives some level of human customisation before being sent, it is probably not an “electronically supplied service”.

Other internet services supplied to a customer in Germany

Other services connected with the internet are likely to fall under the ‘general rule’ for VAT purposes. This covers a range of intangible and intellectual services, and in the context of internet business this is likely to include:

  • Creating custom music or sound effects for a website
  • Creating flash or other applications for a website
  • Creating a bespoke complete website
  • General web design, development and coding
  • Providing SEO (Search Engine Optimisation) services on a website
  • Keyword research and other market research for a website
  • Legal or accountancy (excluding basic bookkeeping) services provided to a website business
  • Selling advertising space on a website which relies on some human input, rather than being computer-generated
  • Translating a website into another language
  • Taking a custom photograph for a website
  • Writing content for a website
  • Providing PPC (Pay Per Click) management services, such as managing a Google AdWords campaign
  • Creating a piece of artwork or a logo for a website

In most cases it does not matter whether the service is provided by email, directly over the internet, or by sending papers or CDs in the post. However, the UK treats the sale of standardised software (for example, Microsoft Office) by physical media as a sale of goods rather than a service, and accordingly the VAT situation would be different.

VAT position: sales to a German business

Where a UK business supplies any of these services to a customer who belongs in Germany, who receives them for a business purpose, the supply is treated as being outside the scope of UK VAT. UK VAT does not need to be charged. The customer does not need to be registered for German VAT for the service to qualify as being for business purposes, but some evidence of the business purpose should be obtained.

In this case, the customer will account for German VAT under the reverse charge procedure, which means they have the responsibility for dealing with most of the VAT issues. The UK business needs to:

  • Include an appropriate statement on the invoice, such as “This supply is subject to the reverse charge”
  • Include the net value of the service in box 6 of the UK VAT return
  • From January 2010, include the service on the EC Sales List

If the UK business accounts for VAT on the Flat Rate Scheme, it does not need to pay Flat Rate VAT on the value of services which are not subject to UK VAT due to them being performed in Germany or to a customer based in Germany.

There is an additional rule that applies to electronically supplied services sold to a German business. Where the service is effectively used and enjoyed outside the EC (for example, in Switzerland), the place of supply will also be outside the EC. This takes the service outside the scope of both UK and German VAT.

VAT position: sales to a German consumer

Where a UK business supplies a service which is not an “electronically supplied service” to a customer who belongs in Germany, who receives them for a non-business purpose, the supply is treated as being in the UK for VAT purposes. If the UK business is registered for VAT, and the service is not normally exempt from UK VAT (for example, some gambling, financial or education services), UK VAT must be charged. If the UK business is not registered for VAT, any non-exempt income will need to be included when determining whether the UK business is obliged to register for VAT due to exceeding the turnover threshold.

From 1 January 2015, where any UK business (VAT registered, or not) supplies an “electronically supplied service” to a consumer who belongs in Germany, who receives them for a non-business purpose, the supply is treated as being in Germany for VAT purposes. The UK business will need to charge and account for German VAT, using the Mini One Stop Shop (MOSS) service in the UK. This does not necessarily mean that the UK business will be registered for UK VAT, or have to charge UK VAT to its UK customers.

Please note that we are no longer taking on any new overseas clients or UK clients with significant overseas interests, and we do not give free advice by email or telephone.




8 Comments (oldest first)

  1. Ken

    Hi,

    I will sell online courses to German and other EU countries non-business customers.

    Now that it has entered 2015, I wonder whether I have to pay for Germany VAT no matter how much I have sold to Germany customers, or there is a VAT registration threshold like in the UK?

    If I have to pay VAT for whatever sales to EU countries, it is horrible, and I won’t open my website to EU customers then.

    If there is a VAT registration threshold, where can I find the thresholds for every (or most) EU countries?

    Many thanks!

    Ken

    8 January 2015

  2. Admin

    From the information you have given, I am not clear on whether your online courses are “electronically supplied”, but the basic idea is that as you do not have business premises in Germany, there is a zero registration threshold. I believe the same applies in all the other EU states.

    8 January 2015

  3. Ken

    I would think it is “electronically supplied”, because the courses are online videos allowing customers to pay to watch.

    It is awful, can’t imagine how the politicians came up with such an idea to tackle big corporation’s tax avoidance practices but hurt small businesses the most!

    Thanks for your answer anyway!

    Ken

    9 January 2015

  4. Elle

    Afternoon,

    After reading the above information regarding supplying e-services to Germany, I contacted HMRC to confirm and they disagree with the above - if you sell Business to Business you don’t charge vat providing you obtain their vat number. If you sell Business to Consumer you charge German vat as per MOSS rules.

    Could you please clarify why you advise there is no need to charge vat to Germany?

    I look forward to your reply.

    8 October 2015

  5. Admin

    I don’t think there is any disagreement there. Exactly which bit looks different?

    “Could you please clarify why you advise there is no need to charge vat to Germany?”

    Under what circumstances? VAT is very contingent on exact circumstances.

    8 October 2015

  6. Ian

    Good evening,

    I am about to send an invoice to a German company for my teaching services online. They are asking for a VAT ID number but I don´t have one. I thought I was exempt. Do I now have to register to get a VAT ID number in the UK or for Msw in Germany?

    Also which way is cheaper? If I am based in the UK or in Germany?

    5 November 2015

  7. Admin

    The UK has a much higher VAT threshold than the rest of Europe. Germans are usually sceptical that you do not have a VAT number, because all German businesses are required to register. Just tell them that you are in business, but you are not required to register in the UK. I don’t know why they need your number if you are not charging them VAT anyway.

    “Also which way is cheaper? If I am based in the UK or in Germany?”

    Where you are based is a matter of fact, not a free choice (assuming you are not prepared to move to another country simply to benefit from a lower rate of VAT).

    5 November 2015

  8. Ian

    Thanks for the swift response. It has come at a good time.

    I don´t know why they need the VAT number either but they have said I come under the “reverse charge procedure”.
    It could be a mechanical part of the form that may only apply to other people….

    6 November 2015

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