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How do I use VAT on Elance?

Garnor M
posted this on September 11, 2012 09:36 AM

If you are a Freelancer in Europe, Australia or Canada and you are hired by a Client from these countries, you may be required to submit a Value Added Tax (VAT) to your government at the end of the tax year.

Elance enables Freelancers in countries listed here to add Value Added Tax (VAT) to their proposal amounts and, as a result, to the invoices they submit to their Clients. When adding VAT to invoices, Elance will provide Freelancers with invoice formats that are compliant with EU countries invoice requirements.

How does the VAT feature work on Elance?

For Freelancers:

To enable the VAT feature and allow you to start assessing VAT on proposals, log in to your Elance account and follow the steps below:

  1. Click on your username in the top right corner of the Elance website and select the Settings link.

  2. In the left navigation, click Billing & Payment.

  3. Click on the Invoice & Tax Settings link.

  4. Provide the tax / VAT ID then select the option to enable the VAT on invoices.

  5. Select a Tax Label and enter any Tax Notes.

  6. Click Save to enable the feature.

Here is an example of how a Freelancer will see VAT applied to their project costs:

  • Proposal amount submitted by Freelancer = $100

  • VAT Rate added by Freelancer = 10%

  • Elance Service Fee automatically applied by Elance = 8.75%

  • Amount invoiced to Client = $110 ($100 + $10 VAT Amount)

  • *Amount invoiced to Freelancer by Elance = $110 * 8.75% = $9.63

*Elance Service Fee is charged on the total amount being processed from Client to Freelancer, including the VAT Amount.

For Clients:

Clients who want to receive VAT compliant invoices, you can indicate the purpose of job from settings, log in to your Elance account and follow the steps below:

  1. Click on your username in the top right corner of the Elance website and select the Settings link.

  2. In the left navigation, click Billing & Payment.

  3. Click Invoice & Tax.

  4. Enter your Tax/VAT ID and click Save.

Who can use the VAT feature on Elance?

Only freelancers in countries listed here can add VAT to their proposal amounts/invoices. Freelancers must also be working with clients based in one of these countries.

Are there any restrictions or limits to using VAT?

  • Only freelancers residing in countries listed here can add VAT to their proposal amount
  • There is a maximum limit to the VAT can be added to your bid. VAT cannot exceed 26% of the final project cost.

Using VAT: Tutorial Video

Need more information? Local VAT Resources

The links below can provide you with more information about VAT in general and for specific countries:

General    
Value Added Tax Wikipedia http://en.wikipedia.org/wiki/Value_added_tax
     
European Union    
VAT in the European Union European Commission http://en.wikipedia.org/wiki/European_Union_value_added_tax
     
How VAT Works European Commission  http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/index_en.htm
VAT exemptions European Commission  http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/exemptions/index_en.htm
VAT number validation European Commission  http://ec.europa.eu/taxation_customs/vies/vatRequest.html
VAT e-learning course European Commission  http://ec.europa.eu/taxation_customs/common/elearning/vat/index_en.htm
VAT in European Union countries (see links to documents listed under “Vademecum on VAT obligations” European Commission  http://ec.europa.eu/taxation_customs/taxation/vat/traders/vat_community/index_en.htm
     
Australia    
Goods and Services in Australia Wikipedia  http://en.wikipedia.org/wiki/Goods_and_Services_Tax_(Australia)
Guide to GST in Australia Australian Taxation Office  http://www.ato.gov.au/corporate/pathway.aspx?sid=42&pc=001/003/103&mfp=001/001&mnu=44803#001_003_103
Australian Business Register (ABR) lookup Business.gov.au  http://www.abr.business.gov.au/
     
Canada    
Goods and Services Tax in Canada  Wikipedia  http://en.wikipedia.org/wiki/Goods_and_Services_Tax_(Canada
GST/HST-General Information Canada Revenue Agency  http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/gnrl/menu-eng.html
Imports and Exports Canada Revenue Agency  http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/gnrl/txbl/mprtsxprts/menu-eng.html
GST number validation (Canada): Canada Revenue Agency  http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/gsthstrgstry/menu-eng.html
     
Norway    
Guide to Value Added Tax in Norway Skatteetaten  http://www.skatteetaten.no/en/Brosjyrer-og-boker/Guide-to-Value-Added-Tax-in-Norway/
     
Switzerland    
What is Value Added Tax (VAT)? Swiss Federal Tax Adminstration FTA  http://www.estv.admin.ch/mwst/themen/00153/index.html?lang=en
 
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