How to invoice your client for travel expenses as a Freelancer in Germany
What's up, freelance consultants?
Have you ever wondered if you can have your clients pay for your travel expenses? And if yes, then how can you do it correctly? And do you know how to charge the right VAT?
Wow! So many questions, right? It’s because the German Value Added Tax Act (UStG) can be a confusing topic for both new and experienced freelancers. Even when you read the legal jargon in the official guide, you may end up with more questions than answers.
Well, in this article, we will discuss how freelance consultants in Germany can include travel expenses in their invoices to clients. After all, not doing this correctly may cause you problems with taxation down the line—something that you don’t ever want.
A friendly disclaimer though: This is not legal advice, and you should always seek the counsel of a lawyer, tax expert, or an accountant before making the final decision.
However, the information in this article is rather easier to digest and will help you get started.
So, without further ado, let’s begin.
Glossary of Main Terms
- Gross price: price including VAT
- Net price: price excluding VAT
- Tax amount: share of VAT
- Tax rate: percentage at which the tax is calculated
The difference between Mehrwertsteuer & Umsatzsteuer (VAT and sales tax) is that they are both sales tax but are used differently. The tax used in relation to consumer goods is MwSt whereas Umsatzteuer is the tax used by companies.
What Is VAT for Freelancers in Germany
Basically, VAT is levied on the added value of a product or service along the entire value chain.
This means that if you are a freelancer based in Germany, VAT liable, and have a client in Germany, VAT must be collected at the selling point of their service, i.e. you must charge it to Consultport if you’re a freelance consultant working with us. After you have charged the VAT, you should remember that it’s not for you to keep. You must pay the VAT at your local tax office at the right time.
The amount paid to the tax office can be offset against the VAT that the company (freelancer) itself has already paid on the preliminary products (i.e. any inputs). This is an input tax deduction. The tax office calculates the difference between VAT received & input tax paid.
How You Can Legally Claim Travel Expenses From a Client
You do not have the legal right to invoice your client for travel expenses as such. But don’t worry, there’s a solution for that.
You can have an arrangement within the contract with your client that allows you to invoice travel expenses to them. In most cases, and if previously agreed on, you can invoice all directly incurred travel expenses of your project with a client. For example, travel & flight expenses, such as airplane or train tickets, taxi, or car travel; and accommodation expenses like hotel, hostel, Airbnb, etc.
Now you may think, “If the client has agreed to pay for travel expenses during the project, how do I invoice these expenses?”
Well, in your invoice to the client, you must include the net total of these expenses. You will also calculate the VAT using the VAT rate of the main service, which is consulting. In most cases, the VAT rate for this will be 19%.
According to the German tax law, ancillary services, like travel expenses, must be invoiced to a client at the same rate as the main service, which is consulting, and, as mentioned before, the VAT rate for it is 19%. This applies even when some of your travel expenses were originally charged a different VAT rate, for instance, at a 7% rate.
In the case that you are expensing travel costs relating to using your car, you cannot simply invoice the full cost of fueling the car. Instead, you must agree on a commuter allowance, which is typically around 35 cents per kilometer in 2021. Also, this amount should be previously agreed upon with your client within your contract.
Examples
Now, let’s consider a practical example to help you understand your tax obligation better.
Here’s an example of your original travel expenses:
| Description | Net Amount | VAT/USt 7% | VAT/Ust 18% | Gross Amount |
|---|---|---|---|---|
| Flight from Berlin to Frankfurt | 166,39€ | 31,61€ | 198,00€ | |
| Taxi from Airport to Hotel | 46,73€ | 3,27€ | 50,00€ | |
| Hotel Hilton (3 nights from 3.-5.May 2021) | 280,37€ | 19,63€ | 300,00€ | |
| Travel by car to Workshop (300km a 30ct) | 90,00€ | 90,00€ | ||
| Totals | 583,49€ | 23,00€ | 31,61€ | 638,00€ |
Here’s how you can invoice this to your client:
As you can see in the example above, you originally paid 7% for some of these expenses.
However, you must follow German tax law when invoicing your client. This means that you must add the VAT percentage that is charged on your main service, i.e. consulting service, which is 19%, and apply this rate to your net travel expenses. To make this concrete: imagine that you work ten days for a day rate of €500, your consulting service fee will be €5,000, to which you then add the net travel expenses of €583.49. You add the 19% VAT on top and will then invoice your client for €6.644,35. If you do a consulting project through our Consultport platform , you can simply use our invoicing tool for this, which does the calculation automatically.
How you can share receipts of these travel expenses with your clients
To make your job easier, we have created a template for all our independent consultants on Consultport. Your additional expenses can be easily recorded in this template and you can choose either our English or German version.
You should then create a pdf file which includes your filled-out additional expenses table and also copies of receipts or invoices for these expenses. You should always have it all sent as one single pdf to your client, starting with the table overview of the expenses, followed by all your related receipts.
Conclusion
As a freelance consultant you must understand when and how you can invoice your travel expenses to your client. And remember, to make sure to agree on any potentially incurred travel expenses with your client upfront, and if your consulting fees are including or excluding travel expenses.
So, we hope that this article helps you next time you need to deal with your travel expenses as an independent consultant.
Download our expenses template to make this process extremely easy. And let us know if you have any questions.
Until then, auf Wiedersehen!
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