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What can craftsmen charge their customers in Germany?

02.11.2023
What can craftsmen charge their customers in Germany?

Craftsmen fulfil an indispensable task in our society. They build our houses, repair technical systems and ensure that our living spaces are functional and aesthetically pleasing. But what does it look like when a craftsman charges a customer for his services? And what do craftsmen and customers in Germany have to bear in mind when so-called “backward invoicing” is used? This comprehensive article addresses these questions and provides insights into the regulations and processes involved in craft invoicing in Germany.

The process of invoicing in the skilled crafts sector

Before we turn to backward-looking invoicing, it is important to understand how the normal invoicing process works for craftspeople in Germany.

In principle, a tradesman has the right to issue an invoice for the service he has provided. This invoice must meet certain formal requirements to be legally valid. These include:

  • Full name and address of the tradesperson and the customer
  • Tax number or VAT identification number of the tradesperson
  • Unique invoice number
  • Date of issue
  • Description of the service rendered or the item delivered
  • Individual prices and the total amount to be paid
  • Reference to turnover tax, if the tradesman is liable to turnover tax
  • Terms or conditions of payment

What does “backward invoicing” mean?

The term “backward invoicing” is not necessarily commonplace in the business world, but it has immense significance in certain contexts. But what exactly does it mean?

With backward invoicing, it is not the performing entrepreneur, in our case the tradesman, who issues the invoice, but the recipient of the service, i.e. the customer. This can be necessary or useful in certain situations, for example in the case of cross-border transactions within the EU or if the contractor is not liable for VAT.

When does reverse invoicing make sense in the trades?

There are some specific cases where backward invoicing is used in the craft sector. These are

  • In the case of cross-border business within the EU: for example, if a German craftsman works for a customer in France, it may be easier for the French customer to issue the invoice in the name of the German craftsman in order to pay the VAT correctly.
  • If the craftsman is a small entrepreneur and exempt from VAT: In this case, the customer can issue the invoice and pay the VAT himself to ensure that everything is done correctly.

Precautions and tips for reverse invoicing

Backward invoicing has some pitfalls and requires a thorough knowledge of the legal provisions. Therefore, some tips for tradesmen and customers:

  • Both parties should agree in advance on the process of backward invoicing and put this in writing.
  • The client should ensure that all necessary information is on the invoice, just as if the tradesman had issued the invoice himself.
  • It should always be clear that the responsibility for the correct payment of VAT lies with the client when they issue the invoice.
  • If there is any uncertainty, both parties should consult a tax advisor or lawyer to ensure that everything is done correctly.

In conclusion, invoicing, be it normal or reverse invoicing, plays an important role in the craft sector and both craftsmen and clients should be well informed to avoid mistakes and possible legal consequences. The key is preparation, mutual understanding and respect for the legal requirements.

What can craftsmen invoice their customers for?

Every entrepreneur, regardless of their industry, relies on invoicing their customers to receive payment for their services or products. Of course, this also applies to craftsmen. However, if you have never written an invoice before, the process can seem a little overwhelming at first. In this article, we provide guidance to tradespeople on how to create an error-free invoice, what elements to include and what items they are allowed to charge their customers for.

A properly prepared invoice should include the following information:

  • Full name and address of the person issuing the invoice
  • Tax identification number or VAT ID
  • Full name and address of the person receiving the invoice
  • Date on which the invoice was issued
  • Sequential numbering of the invoice
  • Date of the service or supply
  • Clear description of the service rendered or product supplied in current commercial terminology
  • Total amount of the invoice, divided into net, gross and VAT amounts
  • Account details of the service provider or seller.

The article explains how traders, especially craftsmen, can create correct invoices. It highlights important points that should be included in every invoice, such as contact details of the invoicing party and recipient, tax identification number, the date the invoice was issued and the service rendered, a clear description of the service and financial details such as net, gross and VAT amounts. The service provider’s account details are also important.

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