Paying freelancers abroad from a German GmbH: reverse charge, records and payment rails

A Berlin product studio works with nine freelancers: developers in Kraków and Bucharest, a designer in Buenos Aires, a copywriter in Lisbon, a data engineer in Nairobi. Each month brings nine invoices in four currencies. Before anything is paid, two entries go into the VAT return and one question sits in the background: are these people really freelancers?

The reverse charge entry

When a GmbH buys services from a business abroad, German VAT usually shifts to the buyer under the reverse charge (§13b UStG). The freelancer's invoice should show no German VAT. For EU freelancers it should carry their VAT number and a note that the reverse charge applies.

The GmbH reports the VAT due in its return, and if it has full input tax deduction, deducts the same amount in the same return. The net cost is zero, but the entries must be there. Missing them is one of the most common findings in German tax audits of small companies.

The status question

German law watches for Scheinselbstständigkeit, bogus self-employment. A freelancer who works full time for one company, follows its schedule, uses its equipment and sits inside its team looks like an employee, whatever the contract says.

For freelancers abroad there are two systems to think about. German social security rules generally attach to work done in Germany. The freelancer's home country has its own rules, and Poland, Spain and Argentina all have them. The practical safeguards are the same everywhere:

• The contract defines deliverables, not hours.
• The freelancer can and does work for other clients.
• They use their own tools and set their own schedule.
• They invoice, rather than receiving a fixed monthly amount regardless of output.

Records

For each payment, keep the contract, the invoice with the freelancer's name, address, service, date and amount, and proof of payment. For non-euro payments, record the exchange rate used. A payment confirmation that shows the rate saves a step at month end.

Choosing the rail

In the eurozone, SEPA is cheap and often instant. Outside it, the choice matters more. A euro SWIFT transfer to Kraków arrives as zloty converted by the freelancer's bank, minus whatever it charges to receive. A local zloty transfer arrives as the invoiced amount.

In Argentina, many freelancers prefer dollars in an account they control rather than pesos. In Kenya, local shillings to a bank account or mobile wallet. Ask each freelancer which they prefer and put it in the contract.

Paying into Germany: the local rail

Source: European Payments Council: SEPA Instant Credit Transfer. Checked when this guide was last updated; the scheme's own page has the current figures.

Where Rivet fits

A Rivet business account pays freelancers in 120+ countries, on local rails where available, from balances in euros, dollars and other currencies. Bulk payouts send the month's invoices together, and from the Growth plan a second person can be required to approve them. Each payment shows the rate before you confirm and keeps it on the statement. Rivet is not a bank; regulated partner institutions hold the funds.

See also how to pay international contractors.