Do I Need to Pay German or Thai VAT When Engaging German Experts?
1. Introduction
When Thai beneficiaries inherit assets in Germany, they often require professional services, such as legal, tax, or real estate assistance. A common question is whether Value Added Tax (VAT) applies to these services, and if so, whether it is charged under German or Thai tax laws. This article provides a comprehensive guide to understanding VAT implications when engaging German experts from Thailand.
2. Understanding VAT in Germany
2.1 German VAT Basics
Value Added Tax (VAT), known as Mehrwertsteuer (MwSt) in Germany, is a consumption tax applied to most goods and services. The standard VAT rate is 19%, with a reduced rate of 7% for specific services.
2.2 Services Subject to VAT
Professional services, such as legal advice, tax consultation, and real estate management, are generally subject to 19% VAT when provided by German experts.
2.3 Place of Supply Rule
Under EU VAT rules, the place where the service is supplied determines whether German VAT applies. For services provided to a non-business client outside the EU, like a Thai individual, the service is often deemed supplied in Germany, making German VAT applicable.
3. Do Thai Beneficiaries Need to Pay German VAT?
3.1 General Rule for Private Individuals
Thai beneficiaries engaging German professionals as private individuals are typically charged German VAT on services rendered, as the service is deemed supplied in Germany.
3.2 Exemptions for Cross-Border Services
Some services, particularly those involving cross-border tax or legal matters, may qualify for VAT exemptions. This depends on the type of service and whether it relates directly to assets located in Germany.
4. VAT Implications in Thailand
4.1 Thai VAT Basics
Thailand imposes VAT at a standard rate of 7% on goods and services consumed in Thailand. However, this generally applies to services provided by Thai businesses, not foreign professionals.
4.2 No Double VAT
Thai beneficiaries are not required to pay Thai VAT on services rendered in Germany. However, if additional services are provided by Thai professionals, those may be subject to Thai VAT.
5. Common Scenarios
5.1 Engaging a German Lawyer for Inheritance Matters
If a Thai beneficiary hires a German lawyer to assist with probate or tax matters, German VAT at 19% will likely apply, as the service is supplied in Germany.
5.2 Real Estate Services for German Property
Services like property management or appraisals for German real estate will typically include German VAT, as they relate to assets physically located in Germany.
5.3 Cross-Border Tax Advisors
If the tax advisor is based in Germany but provides guidance on Thai tax obligations related to inheritance, German VAT may apply unless the service qualifies for cross-border exemptions.
6. How to Confirm VAT Applicability
6.1 Request a VAT Invoice
German professionals are required to provide a detailed VAT invoice, indicating whether VAT is included or exempt. Ensure the invoice aligns with German tax regulations.
6.2 Clarify the Service Type
Certain services, such as mediation or international legal advice, may qualify for VAT exemptions. Confirm this with the service provider before proceeding.
6.3 Consult a Tax Advisor
A tax advisor familiar with German and Thai regulations can clarify VAT obligations for specific services and help identify potential exemptions.
7. Strategies to Minimize VAT Costs
7.1 Choose VAT-Exempt Services
Some services, such as certain types of mediation or asset valuation for cross-border estates, may not be subject to German VAT. Verify with the service provider.
7.2 Negotiate Service Packages
Bundling services under a single agreement may reduce overall costs by optimizing VAT applications across related services.
7.3 Reclaiming VAT (If Applicable)
Under certain circumstances, VAT paid in Germany can be reclaimed by non-EU residents. This process typically applies to businesses rather than private individuals but may be worth exploring with a tax advisor.
8. Key Considerations for Thai Beneficiaries
8.1 Asset Location Matters
VAT is often tied to the location of the assets being serviced. For German-based assets, VAT is typically charged under German rules.
8.2 Professional Documentation
Ensure all service agreements and invoices clearly state VAT charges to avoid disputes or overpayment.
8.3 Budget for VAT Costs
When hiring German professionals, budget for VAT costs as part of the overall service fee, especially for high-value services like legal or real estate management.
9. Conclusion
Thai beneficiaries engaging German professionals for inheritance-related services are generally subject to German VAT at 19%. However, exemptions may apply depending on the service type and scope. Thai VAT does not typically apply to these services. By understanding the rules, requesting clear documentation, and consulting a tax advisor, Thai heirs can manage VAT obligations effectively and ensure compliance while minimizing unnecessary costs.