Rights of use

When artists based in Germany grant rights of use (miscellaneous services as described in Section 3 (9) UStG) to licensees abroad, the question of whether the licensees are businesses/entrepreneurs (B2B: Business to Business) or private individuals (B2C: Business to Consumer) is significant.

As with all cross-border transactions, it is necessary to determine the country in which value added tax must be paid (where) and who must pay this tax (who).

Please note: EU – third country (outside the EU)
When granting rights of use to licensees from abroad who are business persons (B2B), it makes no difference whether they are based in an EU Member State or a third country (outside the EU).

However, when granting rights of use to licensees from abroad who are private individuals (B2C), the question of whether the licensees from abroad are based in an EU Member State or a third country is relevant under German law for the purpose of determining the place of performance (where).

B2B refers to a delivery or miscellaneous service performed by a business person in return for a fee as part of his or her business. Theatres, concert organisers and artists are also usually businesses/business persons.

If licensees based in the EU do not use a VAT ID number in transactions with artists, the artists can generally assume that the licensees are not business persons unless informed otherwise (section 3a.2. UStAE).
In this case, the explanations regarding Business to Consumer (B2C) transactions apply.

A VAT ID is assigned to any business person within the EU upon request (only in his or her own country of residence) and is regarded as an attribute of a person's entrepreneurial status.
The VAT ID must be checked at the time of delivery. The qualified confirmation procedure (only available in German) of the German Federal Central Tax Office (BZSt) is recommended for this purpose.

In which country must value added tax be paid (where)?

Three distinct principles apply when determining the place of performance: the Registered Place of Business principle, the Place of Supply principle and the Place of Performance principle. The Place of Supply principle is significant with respect to B2B transactions.

Place of Supply principle

When an artist based in Germany grants rights of use to a business person abroad (B2B), the place of performance under German law is not Germany. Whether value added tax must be paid abroad depends on the national laws of the country in which the licensee is based.
Within the EU, the place of performance is often determined in accordance with German legislation, since this is based on an EU directive (Art 44 Directive on the VAT system). The place of performance is therefore based on the Place of Supply principle, i.e. the place where the licensee is based.

Who has to pay value added tax (who)?

The party responsible for paying value added tax for the granting of rights of use in the B2B sector is determined based on the national laws of the country in which the value added tax must be paid.

Within the EU, the tax liability (who) is generally determined pursuant to the German regulation specified in Section 13 b (5) UStG, since it is based on an EU regulation (Art 64 (1) Directive on the VAT system). Accordingly, when granting rights of use in the B2B sector within the EU, the recipient of the service, i.e. the licensee, is usually liable to pay the value added tax. This procedure is called the reverse-charge procedure.

If the place of performance is in a third country (where), the question of "who", i.e. of the tax liability, is determined by the national laws of the third country. Some countries have regulations comparable to those in Germany (e.g. Switzerland).

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Note on invoicing:
No value added tax is listed on the invoice. The author should list her own VAT ID, the theatre's VAT ID (or if she is based in a third country, comparable proof of her entrepreneurial status) and a note referencing the reversal of the tax liability (reverse-charge procedure). The reference to the reverse-charge procedure should be included in the respective national language.

The recipient of the service in France should therefore request a VAT ID so as to be able to provide this number to the service provider (the artist) (section 3a.2. UStAE). Otherwise, the artist providing the service runs the risk of having to pay the value added tax again in her country (Registered place of business principle). The VAT ID must be checked for validity at the time of the event. The qualified confirmation procedure (only available in German) of the German Federal Central Tax Office (BZSt) is recommended for this purpose.

Sample wording regarding tax liability:
What is certain is that the place of performance is not Germany. This could be phrased as follows on the invoice: "According to Section 3 a (2) UStG, the place of performance is not Germany."
The following sample wording only applies if the reverse-charge procedure applies under the national law of the place of performance. The reference to the reverse-charge procedure must be included in the respective national language. To this end, the service provider should contact the licensee in order to ascertain the national regulation. The IHK offers translations of the phrase "reverse charge" in all EU languages here.

English sample wording (we cannot accept any liability for the correctness of the English translation): "According to Section 3 a (2) UStG, the place of performance is not Germany.  This invoice is issued without value added tax, as the reverse-charge procedure applies. VAT must be declared and paid by the recipient of the service."

Note on the small business regulation
The specific rules regarding the small business regulation depend on the national law of the foreign country in question.
From 1 January 2025, the member states of the European Union must implement a directive according to which artists and businesses established in Germany can also invoke the small business regulation of another EU member state. It should be noted, however, that in this case, the thresholds of the other member states apply. In contrast to the threshold in Germany (from 1 January 2025: 25,000 euros), these can be lower or amount to up to 80,000 euros. It is expected that businesses established in Germany will have to register with the Federal Tax Office (BZSt) in an electronic procedure to utilise the EU small business rule. As a result, the BZSt will issue the EU small business number. The turnover must then be reported quarterly to ensure that the EU-wide turnover limit of 100,000 euros is not exceeded.

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In which country must value added tax be paid (where)?

Licensees from an EU Member State.

Registered Place of Business principle

When an artist based in Germany grants rights of use to a private individual in an EU Member State (B2C), the place of performance is determined by the place where the artist is based (Registered Place of Business principle, Section 3a (1) UStG). For artists based in Germany, the place of performance is Germany. The value added tax must therefore be paid in Germany.

Who has to pay value added tax (who)?

Licensees from an EU Member State.

The reverse-charge procedure does not apply to the B2C sector. Therefore – just as if the transaction did not involve a foreign country – the artist must pay the value added tax if she is performing a service that is subject to value added tax under German law. If you are subject to the small business regulation in Germany, you therefore issue an invoice without value added tax.

Note on invoicing:

The photographer issues a "regular" invoice which lists the value added tax applicable in Germany.
If the artist is subject to the small business regulation, she should refer to her status as a small business in the invoice and not include value added tax.

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In which country must value added tax be paid (where)?

Licensees from a third country (outside the EU).

Place of Supply principle

When an artist based in Germany grants rights of use to a private individual in a third country (outside the EU) (B2C), the place of performance is determined by the place where the licensee is based (Place of Supply principle, Section 3a (4) UStG).

The third country is therefore the place of performance, and the value added tax must be paid in the third country.

Who has to pay value added tax (who)?

Licensees from a third country (outside the EU).

If the licensee is based in a third country, the tax liability is governed by the national law of that third country.

However, the reverse-charge procedure does not apply to the B2C sector under the national legislation in most third countries. Artists based in Germany must therefore check whether they must register in the third country and pay value added tax there.

The question of whether value added tax must be paid and who must pay it depends on Chinese law. If the artist based in Germany is not required to pay value added tax under Chinese law, the artist does not have to pay value added tax at all.

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