How to Manage VAT as a Freelancer: Tips and Resources for Different Countries

United Kindom

The Netherlands

Germany

Romania

Portugal

VAT Registration

Businesses with a taxable turnover exceeding the VAT registration threshold (£85,000 in 2023) are required to register for VAT with HM Revenue and Customs (HMRC).

Businesses that meet certain turnover thresholds are required to register for VAT and collect and remit the tax to the government.

If your income is projected to be less than €22,000, you're classified as a small business (Kleinunternehmer) and are exempt from VAT. However, if you expect to earn more than this threshold, you'll need to register for VAT and charge it on your invoices. Expecting to exceed €50,000 turnover in the current calendar year, you'll also need to register for VAT.

VAT registration is mandatory if you reach or exceed the revenue threshold of RON 300,000 during a calendar year, or you can apply for VAT registration voluntarily.

When it comes to VAT registration in Portugal, there are thresholds that determine whether registration is mandatory or voluntary. As of 2023, if your annual turnover exceeds €12,500, you must register for VAT. However, voluntary registration is also possible if your turnover is below this threshold.

VAT Rates

The standard VAT rate in the UK is currently 20%. However, certain goods and services may qualify for reduced rates (5%) or even be exempt from VAT altogether. It is important to understand the applicable VAT rate for your specific goods or services.

21% Tariff: This is the high or general tariff, which is applied when there's no reason for an exemption, the reverse-charge mechanism, or the 0% or 9% tariffs. In most cases, businesses charge 21% VAT on their products or services.

The standard VAT rate in Germany is 19%. However, there's also a reduced rate of 7% applied to specific items such as food, books, hotel accommodation, cultural services, and other goods and services. Some services, like banking, health, and social work, are exempt from VAT.

The standard VAT rate in Romania is 19%. The standard rate applies to most taxable operations that are not eligible for reduced rates or exemptions. There are two reduced VAT rates: 9% and 5%. These reduced rates apply to specific goods and services.

The standard rate is currently set at 23%, but reduced rates apply to specific goods and services. For instance, essential items like food, water, and certain medicines have a reduced rate of 6%. Meanwhile, certain cultural events, books, and newspapers benefit from an even lower rate of 5%. 

VAT Invoicing

When making taxable supplies, businesses must issue VAT invoices to their customers, which include specific details such as the VAT registration number, a unique invoice number, and the amount of VAT charged. Similarly, businesses should retain VAT invoices for purchases made, as they may be needed for VAT reclaims.

You need to know how to charge, collect, report, and pay VAT correctly, depending on the type of service or product you provide, the location of your client, and the amount of your turnover. Invoices must be numbered sequentially and sent by the 15th day of the month following the month in which you supplied the service or product. You can issue and receive invoices in paper or electronic form.

Ensuring compliance with German VAT regulations involves adhering to detailed rules for recording and processing transactions for VAT purposes. These include guidelines on invoice requirements, when to issue a German tax invoice, handling foreign currency transactions, managing credit notes and corrections, maintaining proper accounting records, submitting VAT returns and adhering to monthly or quarterly deadlines.

Follow the provisions of the Fiscal Code and include VAT in invoices issued to customers in Romania. If your customer is a VAT payer with a valid VAT number in VIES, issue the invoice without VAT. If your customer is a non-VAT payer, issue the invoice with VAT.

Issuing VAT invoices is a crucial part of VAT compliance in Portugal. For each taxable supply you make, it is mandatory to issue a VAT invoice that adheres to Portuguese regulations. Key information that should be included on these invoices includes your business details, customer details, VAT identification numbers, the VAT rate applied, and the amount of VAT charged.

Detailed resources about VAT in each country

Key points and important aspects of VAT regulations in the UK

Demystifying Value Added Tax (VAT) for Freelancers and Small Businesses in the Netherlands

Demystifying VAT for Freelancers and Small Business Owners in Germany

Demystifying VAT in Romania: A Comprehensive Guide for Businesses

Understanding VAT in Portugal: A Comprehensive Guide for Freelancers and Small Business Owners