Meaning of Tax Liability of the Beneficiary
Globalization continues to advance and companies have long been active internationally. In order to ensure proper invoicing, the recipient of the service is liable for tax in accordance with § 13b UStG in some cases . You can find out here whether you fall into the reverse charge procedure.
What does the recipient’s tax liability mean?
The tax liability of the service recipient according to § 13b UStG occurs when internationally active companies work together and are based in different countries. In such a case, as a service provider, you can only issue your invoice in the form of a net invoice . A so-called reverse charge invoice means that your customer must determine the sales tax himself and then claim it from the responsible tax office. This amount can be shown as an input tax deduction . You can find numerous templates for a reverse charge invoice on the Internet. You only need to fill in the pre-filled template with your individual details and you can be sure that all mandatory information on an invoice is included are included.
What causes the change of tax liability of the service recipient?
Paragraph 13b of the Sales Tax Act clearly stipulates which services must be taxed according to the so-called reverse charge principle:
|Entrepreneurs abroad – within the European Union||Entrepreneur or legal person||§ 13b Abs. 1 UStG||This includes other services that are carried out by a company in another EU country.|
|Entrepreneurs abroad – outside the European Union||Entrepreneur or legal person||§ 13b Abs. 2 Nr. 1 UStG||Both other services and work deliveries from abroad must be invoiced as a reverse charge service in accordance with Section 13b (2) No. 1 UStG.|
|Collateral provider||Entrepreneur or legal person||§ 13b Abs. 2 Nr. 2 UStG||The recipient of the service is liable for tax if items are delivered via a security provider. However, this procedure must take place outside of bankruptcy proceedings.|
|Real estate transfer tax||Entrepreneur or legal person||§ 13b Abs. 2 Nr. 3 UStG||All sales that fall under the law of real estate transfer tax and at the same time are waived the VAT exemption.|
|Construction work||Entrepreneur or legal person||§ 13b Abs. 2 Nr. 4 UStG||According to § 13b, all types of construction work are to be invoiced using the reverse charge procedure. This does not include monitoring and planning services.|
|Deliveries of electricity and gas||Entrepreneur||§ 13b Abs. 2 Nr. 5 UStG||If electricity is provided by a supplier based abroad, the recipient of the service is liable for tax. Compare also § 3g UStG|
|Building cleaning||Other building cleaning companies only||§ 13b Abs. 2 Nr. 8 UStG||Building cleaning can only be charged without sales tax if the services are between two companies that are both active in the cleaning industry.|
|Gold ware||Entrepreneur||§ 13b Abs. 2 Nr. 9 UStG||From a minimum of 325 thousandths of a fineness gold goods are to be settled according to 13b with the tax liability of the service recipient.|
|Delivery of certain metals||Entrepreneur||Section 13b (2) No. 11 UStG||All metals that are described in Appendix 4 UStG are to be settled in accordance with 13b.|
|Delivery of scrap metals||Entrepreneur||§ 13b Abs. 2 Nr. 7 UStG||Industrial scrap, scrap metal and other waste materials are subject to the reverse charge procedure.|
|Deliveries of telecommunications equipment||Entrepreneur||§ 13b Abs. 2 Nr. 10 UStG||From a minimum amount of 5,000 euros, the tax liability lies with the recipient of the service.|
|Emissions trading||Entrepreneur||§ 13b Abs. 2 Nr. 6 UStG||Section 3 No. 3 of the Greenhouse Emissions Trading Act describes the transfer of authorizations which, according to Section 13b UStG, must be offset without sales tax.|
When is the tax liability not transferred to the recipient of the service?
According to Paragraph 13b (6) of the UStG, there are some exceptions for which no tax liability of the recipient of the service can be claimed in the invoice. The basic requirement is always that the service provider is based abroad. The following services do not fall under the normal regulations of § 13b UStG:
- Transportation of people by taxi
- Cross-border passenger transport by air
- Passenger transport in accordance with Section 16 (5) UStG “Individual transport taxation”
- Granting of entry authorizations for exhibitions, congresses or trade fairs
- Restoration services that take place on the ship or in the train
- Other services that have to do with the events of exhibitions or trade fairs
In plain English, this means that you submit a normal gross invoice including sales tax to your customers if you are active in the above-mentioned service sectors.
What does this mean for your invoicing?
As a supplier, you are usually responsible for calculating the sales tax for the invoice amount and paying it to the tax office. However, if the recipient of the service is liable for tax in accordance with § 13b UStG, you are not allowed to state any sales tax on your invoice. Only a note for the beneficiary needs to be given. This can look like this:
- “§ 13b Tax liability of the recipient of the service sales tax law.”
- “The invoice amount is stated without sales tax, since the reverse charge procedure applies here.”
- “According to § 13b UStG, the recipient of the service owes the sales tax.”
With an invoice program you can easily create your invoices with reference to the tax liability of the service recipient.
Who has to issue the invoice and who has to pay the sales tax?
The regulations regarding intra-community services are mandatory. As a service provider, you have to issue an invoice with the wording on the tax liability of the recipient of the service. Well, if you issue the invoice properly, your customer will be obliged to submit the sales tax to the tax office. If you issue a gross invoice by mistake, you will have to pay the tax amount in addition.
Briefly summarized: FAQ on the subject of “Tax liability of the service recipient”
Why reverse charge?
The reverse charge procedure is intended to avoid tax fraud based on the carousel principle. Here, the tax liability is reversed. This means that it is not you as the biller but your customer who must pay the sales tax. So you make a net invoice yourself.
What is Clause 13b?
Paragraph 13b UStG stipulates when the recipient of the service is liable for tax. Accordingly, your customer has to pay the sales tax to the tax office if the following cases exist:
- You are based in (EU) countries and have your company headquarters there.
- If it is a sale by the protection seller that takes place outside of bankruptcy proceedings.
- For sales that fall under the Land Transfer Tax Act.
- When construction work is performed on a company that is itself active in the construction industry.
- When you bill for gas or electricity deliveries. The same applies to scrap metal, industrial scrap and other waste materials in accordance with Appendix 3 UStG
- For deliveries of telecommunications equipment with a value of more than 5,000 euros.
- For gold goods with a fineness of at least 325 thousandths.
- If you deliver metals that are listed in Appendix 4 UStG.
- For building cleaning that is carried out for other building cleaning companies.
What is the beneficiary?
The term “recipient of services” is understood to mean the person who uses your services. So, in simple terms, these are your customers.
What is an intra-community other service?
An intra-community service is a service in which the recipient and the provider are located in two different EU member states. Both parties must be active as entrepreneurs. In the UStG, other services are generally understood to mean services. If these conditions are met, the invoice has the tax liability of the recipient of the service. In such a case, the service is considered to have been carried out at the customer’s company headquarters, regardless of where the service provider actually provides the service.
The introduction of the reversal of a tax liability towards the tax office was introduced to prevent possible fraud of various entrepreneurs. According to § 13b UStG, construction work, intra-community services, trading in gold, electricity and much more are invoiced with the so-called reverse charge process under certain conditions. The reference to the tax liability of the service recipient must be clearly legible in the invoice. A tax liability of the service recipient is settled via the SKR 04 account in your annual balance sheet.