How European VAT Rules influence translation rates

European VAT rules vary even though the EU has a lot of common rules. So, some VAT rules and regulations have local variations.

While the European VAT rules are similar, they have distinct differences. We have collected rules relevant to freelance translators in the UK, Germany, Spain and Austria as these are the countries in which we currently have resident translators.

Translators living and working in Spain must pay an extra government tax which we have included as a cost when quoting for a translation job.

UK VAT rules

In the UK, one of the advantages freelance translators have over translation agencies is that they are subject to lower taxes. While corporation tax is currently at 19% (2022) and lower rate income tax at 20% of profit, the self-employed translator has a personal allowance of almost £12,570 before this rate applies.

UK freelance translators have a choice whether to register for VAT or not. What is more, the threshold at which freelance translation service providers are legally required to register is very high at £85,000 annual turnover, and a self-employed translator is not likely to reach it. So most freelance translators do not register for VAT in the UK.

In contrast, only very small agencies are likely not to have to register for VAT. Therefore, most agencies have to charge VAT. While this gives them the advantage of reclaiming VAT for goods bought in, it is a great disadvantage to have to increase translation rates by 20% for private clients who cannot reclaim the VAT. So UK freelance translators have an immediate and significant competitive advantage when calculating their translation rates.

Other European countries have varying rules.

German rules for VAT

In Germany there is no exemption from having to charge VAT for traders with a low turnover. So, every entity – single freelance translators and globally active translation agencies alike – must charge VAT on translation jobs. There seems to be some uncertainty as to what rate of VAT translators are supposed to charge. Therefore, some freelancers charge the reduced rate of 7% while others invoice the full rate of currently 19% (2022).  In contrast, if providing work for companies in other EU countries, translators need not charge VAT, but, if working for private clients outside Germany, translators have to add VAT to the cost of the translation.

Post-Brexit VAT regulations

Since the UK has left the EU and become a Third Country,

If you’re in the UK and the place of supply of your service is in an EU country, you do not pay UK VAT. But for some supplies, you may need to register and account for VAT in the country of supply. You must check with the tax authority in that country to find out how to treat the services you’re supplying. More information can be found on the British Government website.

Services are now liable to tax in the country they were delivered, and if you are a company in the EU then that’s where the translation service is deemed to have been delivered.
Translators no longer cross charge VAT, rather, they now state that no VAT applies because the UK is now a third country. You, the customer, are responsible for paying the VAT. A translator in the UK who is not VAT registered will not charge you for this, nor will they pay it to the British HMRC.

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Professionally qualified German translator into English and English into German, offering first class translation services for commercial, industrial, governmental and private clients.

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