Are you an expat freelancer in Germany? Read this post to learn how you can create German VAT Invoice correctly. Don’t forget to download FREE German invoice templates at the end of the post!
For any freelancer writing the first invoice is a special moment. I remember the first time when I was getting ready to send my first German VAT invoice ever.
I thought that it was going to be a straightforward affair.
But after my tax advisor returned my invoices because they were incorrectly formatted, I had to learn to create them in a legally acceptable form.
So in addition to the joy of the prospect of the first payment, many expat freelancers find themselves confused about how legally valid German VAT invoice must actually look like.
To help you get paid quickly, I have prepared a short guide on how to easily create a German VAT invoice that is compliant with Finanzamt’s requirements.
PS: Don’t forget to download FREE German invoice templates at the end of the post!
Disclaimer: This post contains affiliate links that may earn me a small commission, at no additional cost to you. I only recommend products I personally use and love, or think my readers will find useful.
1. Who Has to Write a VAT Invoice in Germany?
According to § 14 of the UStG an invoice is “any document used to settle a delivery or other service”. In addition, this paragraph defines exactly how and with what information you write an invoice.
In summary, every company that provides delivery or service to another company must write an invoice for it.
2. What Information Goes in Your German VAT Invoice?
In § 14 Abs. 4 UStG you will find the complete overview of all official German VAT invoice elements.
Here is an overview of all compulsory components of a German invoice:
- Name and address of your company
- Name and address of your client
- Your VAT number
- Client’s VAT number
- For customers from other EU countries their VAT identification number
- The date of issue (when was the invoice written)
- A one-off, consecutive invoice number (more details below)
- Quantity and type of products supplied or scope and type of other services
- Time of delivery or service
- The net amount and the related tax amount, the VAT charge and the gross amount
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3. Important Additional Information That You Should Add in Your Invoice
Even if this is not a stipulated requirement, it is always worthwhile to title an invoice as “Invoice” or Rechnung.
This avoids misunderstandings and clearly separates invoices from your expenses, delivery notes, offers and orders.
Provide personal contact details such as your phone number or email address. It will make it easier for your clients to contact you if they have any questions about the invoice received.
3.1 Payment Terms
Invoices are due immediately. It is still advisable to add the payment terms on the invoice so that you do not have to wait too long for your money.
You should clearly specify the pay by date so your clients know the payment deadlines. Generally, you are free to decide this payment deadline. However, it is very common to have 7, 14 or 28 business days payment schedule.
Should your client not make the payment by the set deadline, you can send them an official payment reminder (known as a Mahnung in German).
3.2 Payment Details
To avoid any further delays, specify your bank details or other information about payment details. You should add all the necessary bank details clearly.
If you prefer Paypal, then add your Paypal email id and the instructions. Never assume that your client may know how Paypal or other online payment systems work.
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3.3 Unique Invoice Number
According to § 14 UStG, each invoice includes “a consecutive number with one or more series of numbers, which is assigned by the issuer of the invoice once to identify the invoice”.
Each invoice number must be unique.
That’s why you can not give the same invoice number twice. Furthermore, it must be a consecutive invoice number. So if your first invoice is 0012, the second and third invoices should be numbered as 0013, 0014 and so on.
3.4 VAT Charge Requirement
Not every invoice contains a VAT charge! You can charge VAT to your clients under some circumstances.
- The small business regulation (Kleinunternehmerregelung): As a small business owner earning less than
17.500 €22,000 € per year, you do not have to pay VAT to the tax office.
- Domestic tax exemptions: According to § 4 UStG there are some deliveries and other services that are explicitly VAT exempt. For example, these include the well-known tax privileges for health professionals, local transport or the post office.
- Cross-border deliveries of goods: Many exports are completely exempt from VAT. In the case of export deliveries, the VAT Law distinguishes between deliveries of goods to other EU countries and other foreign countries. There are also differences between business customers (B2B) and consumers (B2C).
- Cross-border services: The rules and exemptions for services for customers in other EU countries are particularly complicated. In doing so, services to final consumers are in principle subject to VAT. For business customers, the reverse charge procedure applies.
Read More About VAT in Germany: How to Charge VAT to Clients in Germany, EU and Non-EU countries
4. How to Write Invoices for Upwork Clients
If you regularly get clients on Upwork you may have noticed that Upwork invoices do not meet the typical German bookkeeping regulations (as described in the above section).
So you will have to extract information from your Upwork transactions and create a legal German VAT invoice that local tax authorities can recognise. Basically, include all the details that are required in a typical German invoice template.
But since you get paid via Upwork, you will add an additional note saying that ‘Payment made via Upwork on DATE’.
I have described this method in this short 4-minute video below. It was recommended to me by my German tax advisor and I have never had any issues with Finanzamt.
5. Why All The Rules?
Because…Germany! OMGLOL just joking 😉
Even if all that sounds pretty complicated, the legal requirements for an invoice make sense.
The information not only helps secure your VAT refund but also helps your customers or their accountants understand the invoices properly. In addition, the German tax office can quickly verify if everything is how it was supposed to be.
You will make your life easier by sticking to the requirements. After all, who wants trouble with the Finanzamt.
Anyway, now that you have some more information about German VAT invoices, go ahead and start creating your own!
6. How to Create a German VAT Invoice
There are TWO ways to create your German VAT invoices.
6.1 Use an accounting or invoicing tool
The right accounting tool will automate the ENTIRE bookkeeping process for you – starting to generating offers, contracts, to creating VAT invoices and also automatically sending payment reminders and Mahnung to your clients (in case of late payments).
Accounting tools offered by German providers are completely compatible with German tax laws and can minimise the risk of expensive bookkeeping errors for you.
I have been using an invoicing tool from day 1 of my full-time freelancing.
In 2020, I switched to Sorted – an invoicing, bookkeeping and online tax filing tool for freelancers in 1 simple platform.
Considering all the manual work, time and headache it saves me from, there is no way I would ever go without a proper accounting tool.
6.2 Use German invoice templates
If you are a freelancer with only a few clients, this may be a better solution. You will have to manually enter data and format it. While it is free of cost to manually create invoices, the risk of errors may be higher.
DOWNLOAD FREE GERMAN INVOICE TEMPLATES
You will find THREE versions of the German invoice templates.
- with VAT
- without VAT
- with VAT Reverse Charge
The files are completely editable and you can simply add in your own details.
Have fun invoicing your clients and remember to enjoy a Weißbier once you get your payment! 😉