Value Added Tax (VAT) on Freelancer Fees

Since the Upwork community is international, it is important for us to stay in compliance with tax laws in each country so that you can continue to collaborate through Upwork no matter where you live and work. One of the ways we do this is by collecting the Value Added Tax.

Value Added Tax, or VAT, is a consumption tax assessed on Upwork’s supply of digital services.

Upwork charges VAT to freelancers and agencies in certain countries unless specific exemption requirements are met. Upwork is required to collect this tax and pay it to the appropriate government agency.

VAT is assessed on digital services provided by Upwork (i.e. freelancer service fees, membership fees, and Connects purchases), not on services freelancers and agencies provide their clients. VAT rates are calculated according to the local rate of the freelancer’s country of residence.

Please see country-specific tabs to further understand how VAT applies to you. We encourage you to consult your tax advisor with questions that relate to your specific situation.

 

European Union (EU)

VAT is applied to the Upwork service fee, premium Upwork memberships, and purchases of Connects. The tax is collected by Upwork and remitted to the respective EU government. We remit the VAT payment we collect to your government through the Mini One Stop Shop (MOSS) mechanism instituted by the EU.

VAT is shown on your invoices, which can be found under Reports  ›  Transaction History.

 

Calculating VAT

The tax rate varies by country, which means your tax percentage will depend on your country's VAT rate. You can find the current VAT rate for your country here.

Upwork doesn't require anyone to have a VAT number but we will charge VAT on the services above to freelancers and agencies within the EU unless they provide a valid VAT number. If you don't have a VAT number, here's an example of what this would look like:

Entering your VAT Number

We will not charge VAT if a freelancer or agency has a valid VAT number.

Freelancers and agencies with VAT numbers can add them by going to Settings  ›  Tax Information. The tax ID that you submit must be in the format provided by VIES, or Upwork won't be able to validate it.

If you submit a tax ID for a business, you must provide a document showing you own the business for VAT to be approved. You can check if your VAT number will be validated on the VIES website here. After you submit your VAT number to Upwork, we will validate the number, then email you to confirm whether it was validated or declined. It typically takes up to 3 business days for Upwork to validate your VAT number.

After validation, we will print "VAT Reverse Charged" on your invoices. Please note you may be required to self-assess VAT on your VAT return under the reverse-charge mechanism applicable to electronically supplied services (ESS).

If your VAT number was declined, it was likely because:

  • The country on VAT ID doesn’t match the country on your Upwork profile
  • The name on VAT ID doesn’t match the name on your Upwork profile
  • Your VAT ID is expired
  • Your VAT information was entered in an invalid format (check correct format for your country)

Note: Upwork will charge VAT on any invoices created before and during the validation process. We can't refund you this amount. You may be able to claim credit for such amounts on your VAT return; please check with your tax advisor.

Changing VAT Number or Location

If you need to change your VAT number in the future, please contact Upwork Support.

If you change the location listed in your account by visiting Settings  ›  My Info  ›  Contact info, we will automatically adjust your VAT to correspond with the rates in your new country of residence or stop collecting VAT if you have left the EU.

Frequently Asked Questions

Why is VAT being collected?

Upwork is an online platform that brings freelancers and clients together. As our membership and activity have continued to grow in the EU, assessing VAT is an important element to continue providing services there.

Based on Directive 2006/112/EC ("EU VAT Directive") Upwork's services qualify as electronically supplied services (ESS), which are subject to VAT at the place where the customer (i.e. the freelancer) is established or resides.

Therefore, the services supplied by Upwork to freelancers who reside, have a permanent address, or are established in the European Union are subject to VAT there. Upwork is responsible for charging, collecting and remitting this VAT when providing these services to our EU customers.

Note: When a freelancer submits a valid, EU formatted VAT number to Upwork we don't charge VAT. In these cases, the VAT may still be due but would be "reverse charged" to the freelancer. In other words, these freelancers will have to personally report any VAT that is due for Upwork's services.

I'm exempt from paying VAT in my country. Are you still going to charge me?

Example: I am a declared auto-entrepreneur in France. I have a number, but I don't pay VAT.

No, Upwork won't charge VAT to anyone who has provided a valid VAT number. When Upwork is audited by your government, we are required to substantiate that we have charged VAT to all VAT non-taxable persons and that we have reverse-charged VAT to all taxable persons.

The only way we can confirm and prove to your government that you are a taxable person is by collecting and validating your VAT number. Otherwise, your government will assume that Upwork is providing services to a non-taxable person and will require us to assess VAT, regardless of your personal status as an auto-entrepreneur.

What if I'm only residing in the EU temporarily?

Upwork is required to assess VAT on services provided by our company to anyone residing in the EU. This applies even if you are a digital nomad and only temporarily residing in an EU country.

Every time you officially register in an EU country, you should update your address information on Upwork. For example, if you move to and spend 6 months in South Africa you may be entirely subject to South African laws. If you then move to Germany, and you are officially registered there, you should update your Upwork address, and VAT will be assessed accordingly or reverse-charged if you provide a valid VAT number.

Mexico (MX)

Calculating VAT

As a freelancer registered in Mexico you will be assessed a 16% VAT on the following:

  • The amount you pay for Connects
  • Membership fees (for example, for a Freelancer Plus plan)
  • Freelancer service fees

For example, let’s say you earn $100 from a new client. You’ll be charged the regular 10% freelancer service fee of $10. Under Mexican law, we will then apply the 16% VAT to that $10 fee. This means we would collect $1.60 in VAT from you.

Note: You will not be charged VAT on your earnings.

You can see the VAT amounts we collect on your invoices, which can be found under Reports Transaction History.

Entering your RFC

In order to claim credit for any VAT paid in Mexico, you must have your Registro Federal de Contribuyentes (RFC) on file with us. You can add your information and RFC number by going to Settings Tax Information.

If you have already added your RFC for purposes of Mexican income tax withholding, you do not have to add it again.

Frequently Asked Questions

Why is VAT being collected?

A law was passed in Mexico which requires VAT to be collected from individuals and businesses operating from Mexico when they purchase electronic services from non-Mexican businesses (like Upwork). To comply with this law, we need to collect VAT on the services we provide to freelancers and agencies in Mexico and forward this tax to the Mexican tax authorities.

Upwork is an online platform that brings freelancers and clients together. Upwork's services qualify as electronic services, which are subject to VAT at the place where the customer (i.e., the freelancer or client) is established or resides.

Therefore, the services supplied by Upwork to freelancers and clients who reside in, have a permanent address in, or are established in Mexico are subject to VAT there. Upwork is responsible for charging, collecting, and remitting this VAT when providing these services to our Mexican-based customers.

I'm exempt from paying VAT in Mexico. Are you still going to charge me?

Upwork is required to collect VAT from freelancers and clients who reside in, have a permanent address in, or are established in Mexico. If you are exempt from VAT in Mexico, you must claim a credit from the Mexican authorities when you file your taxes. In order to do so, you must have your Registro Federal de Contribuyentes (RFC) on file with us — any VAT collected from you during a time when your RFC was not on file with us will not be claimable. Consult with a tax expert if you are uncertain as to how the VAT in Mexico and any exemptions apply to you.

What if I'm only residing in Mexico temporarily?

Upwork is required to assess VAT on services provided by our company to anyone residing in Mexico. This applies even if you are a digital nomad and only temporarily residing in Mexico.

Every time you officially register in a different country, you should update your address information on Upwork. For example, if you move to and work from South Africa, you may be entirely subject to South African laws. If you then move to Mexico, you should update your Upwork address, and VAT will be assessed accordingly. Please consult a tax professional if you have questions as to whether and how the VAT applies to you and your business.

What is an RFC?
An RFC is the Registro Federal de Contribuyentes, the tax ID for Mexico. It is similar to Social Security Numbers in the U.S. If you have recently arrived in Mexico and need to acquire an RFC, click here for more information and to start the process. When you have it, file it with us here.
Do you share my information with the Mexican tax authorities?

We do not share any freelancer information with the Mexican government. We only report the VAT amount collected by Upwork.

Ukraine (UA)

Upwork will collect VAT on specific transactions if you don't provide us with a valid VAT ID Number. You can enter a 12-digit VAT ID or 8-digit business registration number to be considered exempt. Note: A 10-digit personal Tax ID is not a VAT number.

If you don’t have a VAT ID Number verified by Upwork, we will be required to assess a 20% tax on the following:

  • Freelancer service fees (not your earnings)
  • Connects purchases
  • Membership fees

You can see the VAT amounts we collect on your invoices, which can be found under Reports › Transaction History.

Frequently Asked Questions

What if I’m only residing in Ukraine temporarily?

We are required to assess taxes on services provided by our company to anyone receiving such services in Ukraine. This applies even if you are a digital nomad and only temporarily residing in Ukraine.

Any time you move to a different country, even if temporarily, you should update your tax residency information on Upwork. For example, if you move to and work from South Africa, you may be subject to South African laws. If you then move to Ukraine, Ukrainian taxes will be assessed accordingly once you update your address. Please consult a tax professional if you have questions on how the taxes apply to you.

Do you share my tax information with the government?

We only report the amount in taxes collected by Upwork.

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