A fee invoice is an invoice issued by freelancers or other service providers for services rendered. It documents claims against the client and contains all information required for tax purposes. The fee invoice forms the basis for recording income, for the recipient’s input VAT deduction (if subject to VAT) and for income determination under the EStG.
When is a fee invoice required?
As a rule, you as a freelancer or small business owner should issue a fee invoice whenever you provide services to entrepreneurs or public clients, or when your client needs an invoice to reclaim input VAT. For tax recognition and input VAT deduction the invoice must contain the statutory mandatory information.
- Legal basis: Pay attention to the provisions of the UStG, in particular the requirements for invoices under §14 UStG.
- Mandatory information: Without complete information, the input VAT deduction is at risk.
Important mandatory information includes:
- Name and address of the supplier and the recipient
- Issue date and a unique invoice number
- Description of the service, time of performance
- Net remuneration, applicable VAT rate and the tax amount, or a note on the small‑business scheme
- Tax number or VAT identification number
VAT, small‑business scheme and reverse charge
Whether you show VAT on your fee invoices depends on your VAT liability. Two central points:
Kleinunternehmerregelung (§19 UStG)
If your previous year’s turnover did not exceed the threshold for small businesses and you are not expected to exceed it in the current year, you can refrain from showing VAT. The invoice must then include the note: “No VAT shown due to application of the small‑business scheme (§19 UStG)”.
Reverse‑Charge (§13b UStG)
For certain cross‑border or specific services, the recipient is liable for the VAT (reverse‑charge). In this case you do not show VAT, but you must indicate the shift of tax liability and provide the correct documentation.
Accounting treatment and posting
The fee invoice is relevant in accounting both for the income surplus statement (EÜR) under §4 Abs.3 EStG and for companies that prepare financial statements. Key points:
- Recording: Record invoices promptly as receivables in your accounts receivable ledger.
- Posting: Post the net fee to a revenue account, the VAT to VAT accounts and the receivable to customer accounts.
- Example entry (simplified):
| Vorgang | Soll | Haben |
|---|---|---|
| Invoice EUR 1,000 net, 19% VAT | Accounts receivable EUR 1,190 | Revenue EUR 1,000 / VAT payable EUR 190 |
| Payment received | Bank EUR 1,190 | Accounts receivable EUR 1,190 |
For the EÜR, cash receipts are recorded as business income. Pay attention to correct periodization: services rendered must be allocated to the time of performance.
Retention: Keep fee invoices in accordance with the Tax Code. The retention period is generally 10 years (cf. AO §147).
Practical examples and useful tips
Practical examples make daily work easier:
- Example 1 – Freelancer to company: You issue a fee invoice for EUR 1,000 net. As a VAT‑liable entrepreneur you charge 19% VAT. The customer can claim the EUR 190 as input VAT.
- Example 2 – Small business: You make use of §19 UStG. The invoice contains the note on the small‑business scheme; no VAT is shown. You record EUR 1,000 as business income.
- Example 3 – Reverse‑charge: For certain services to entrepreneurs in Germany or B2B services to foreign clients the recipient may be liable for the VAT. The invoice is issued net with a note referring to §13b UStG.
Further tips:
- Use sequential invoice numbers and correct date management.
- Electronic invoices are permitted; ensure authenticity and integrity.
- Regular dunning and clear payment terms reduce default risks.
Conclusion: A proper fee invoice is not only mandatory but an important tool for liquidity management and tax documentation. If you are unsure about VAT liability or correct posting, consult your tax advisor, particularly with regard to the UStG and EStG.