How does the Upwork payment work

Freelance opportunities through Upwork: This is how you bill

Upwork is a popular platform for freelancers to find new clients quickly and easily. All you have to do is create a profile and apply to company job listings. However, since you are working with customers from all over the world, the invoicing and especially the organization of sales tax can be quite confusing. We explain how you can get your invoice correct and who has to pay sales tax for projects through Upwork.

What is Upwork?

Upwork is an English-language online platform that brings freelancers and companies together. Companies can create listings listing the project, duration of the job, and pay, and for which registered freelancers can apply.

Most of the jobs come from the areas of Development & IT, Design & Creation, Sales & Marketing, Copywriting & Translation, Admin & Customer Support, and Finance & Accounting.

Although the website itself is in English, you can also find various German jobs in the different project categories.

How can I register with Upwork?

Both freelancers and companies can easily register with Upwork. All you have to do is enter your location and choose whether you are looking for support for projects or want to work as a freelancer.

As a freelancer, you now have to fill out your profile. You can do this manually or alternatively link your LinkedIn profile. You also have to choose the area in which you work and indicate skills for which you will be listed at Upwork.

In addition to information about your education, your previous activities and your language skills, you also have to enter your hourly rate. At the beginning, Upwork takes 20% of your wages for the placement of jobs. However, once you've billed a customer more than $ 500, the percentage drops to 10%.

Finally, you should write a profile text and title for your account, enter your address and telephone number and upload a profile picture.

💡 Tip from Accountable: You can skip some of these steps at the beginning, but your profile will only be visible to the public once you have filled in all the information. However, you can still edit your profile after it has been published.

The first job through Upwork: This is how you submit your invoice

When you've done your first job, you can request your payment. To do this, you have to enter your account details and your tax status in advance. If you are paid above your hourly rate, the weekly billing cycle takes effect: After the week (Sunday), it takes 10 days until your money is ready to be paid out. If you are paid according to a fixed price rather than by the hour, the customer must confirm the payment in advance.

💡 Tip from Accountable: You can find more information about when your payouts are ready here.

You will now receive two invoices from Upwork: an automatically generated invoice in your name to the client and an invoice to the freelancer with the placement fee charged by the platform. This amount is automatically deducted when you pay out.

Danger: Until your VAT ID has been verified by Upwork, 19% VAT will be added to the service charge. However, as soon as the ID has been released, these invoices will be marked “VAT Reverse Charged” and sales tax will not apply.

This is how sales tax works on Upwork

When you register your tax status with Upwork, you must also provide a sales tax identification number. You absolutely need this number if you work with customers from other EU countries. You can apply for the VAT ID directly when you register for self-employment or you can request it from the Federal Ministry of Finance afterwards.

💡 Tip from Accountable: You have not yet registered yourself? Then it's best to fill out the tax registration questionnaire online and apply for your tax number today.

Upwork acts as an intermediary between the client and the contractor and accordingly also handles the payment processing. Since the platform is a US company, the reverse charge procedure is used by default on the invoices. This shifts the sales tax burden to the recipient. This means that no sales tax will be shown on your invoice.

Make money through Upwork as a small business owner

Anyone who makes use of the small business regulation does not have to report any sales tax and thus also do not have to submit any advance sales tax returns. However, if you provided your VAT ID when registering on Upwork and have also worked on projects via the platform, you still have to submit an advance VAT return, as small businesses are not subject to any special regulations with regard to international business.

However, it is sufficient if you only submit the report for the period in which you have also received payments from Upwork.

💡 Tip from Accountable: Simply enter the incoming payment in our app and send your advance VAT return to the tax office in just a few clicks!