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Invoicing your clients on Upwork: This is how it works

Written by Accountable Team
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Upwork is a popular platform for freelancers who are looking for new clients and projects to build their portfolio. All you need is a profile to get immediate access to hundreds of job postings from companies looking for freelance support. But since Upwork is an international platform hosting jobs from clients from all over the world, invoicing can quickly become a tax nightmare. Here’s what you need to know about invoicing clients on Upwork.

What exactly is Upwork?

Upwork is an American freelancing platform that connects corporations and freelancers looking for work. Companies can post a description of their job and a price range (hourly or fixed) they are willing to pay. Then, registered freelancers can apply for the job posting and start working with the client. 

The majority of jobs are in development & IT, design & creative, sales & marketing, writing & translating, admin & customer support as well as finance & accounting.

How can I register for Upwork?

It’s very easy to register on Upwork. All you need to do is add your location and select if you are looking to hire freelance support or are looking for new projects.

Freelancers now have to complete their profile. You can choose to do so manually, or upload your LinkedIn profile. You also must add an area of work and fields of experience. 

After completing the sections about your education, your previous work and your language skills, you have to fill in your hourly rate. Note that Upwork is taking a cut of 20% of your payments, but if an invoice for one client exceeds $500, this will lower to 10%.

Finally, you’ll have to add a profile picture, description and title for your account as well as your address and your phone number before you can apply to job postings.

💡 Tip from Accountable: You can skip some of these steps initially, but your profile will only be visible for clients once you have completed every section. You can edit all your details after publishing your account. 

Your first job on Upwork: This is how invoicing works

Once you have completed your first project, you are eligible to receive your first payment. Be sure to add your bank details and your tax status beforehand though. 

If you are being paid based on an hourly rate, your funds will be available for withdrawal within the weekly billing cycle. Fixed-priced contracts are based on milestones the client has to approve beforehand.

💡 Tip from Accountable: You can find more information about the different billing cycles in Upwork’s help center.

You will now receive two invoices from Upwork: One automatically created invoice in your name to the client and one invoice directed at you, charging the aforementioned agency fee for Upwork. The fee is automatically subtracted from your payment.

Note: Until your VAT-ID has been approved by Upwork, the second invoice charging the fee is subject to 19% VAT. This will be lifted as soon as the platform has verified your ID and the invoice will include the note “VAT Reverse Charged”.

How to manage VAT on Upwork

When setting your tax status on Upwork, you also have to add your VAT-ID. This number is crucial when working with clients outside of Germany. You can apply for a VAT-ID when registering as a freelancer or via the Federal Central Tax Office’s website

💡 Tip from Accountable: You are not registered as a freelancer yet? Our fast guide will help you through the official “Fragebogen zur Steuerlichen Erfassung” and you can start freelancing in no time. 

Upwork functions as the mediator between clients and freelancers and is therefore in charge of the payment process. Since the platform is an American corporation, the invoices will apply the Reverse Charge Procedure. This means that the invoice recipient is responsible for paying VAT in their country of residence and invoices are valid without VAT. 

Making money on Upwork as a Kleinunternehmer 

If you are a Kleinunternehmer, you don’t have to charge VAT and are therefore exempt from handing in quarterly VAT returns. But if you have listed your VAT-ID and completed a project on Upwork, you do have to hand in a VAT return despite being a Kleinunternehmer, as the VAT exemption does not count for international business transactions.

However, you only have to hand in a VAT return for the period in which you received payments on Upwork. 

💡 Tip from Accountable: You can use our free app to keep track of your income and quickly submit your VAT return. 

All your taxes. Done.

Just add your invoices. Accountable generates all of your tax returns without mistakes..
Accountable Team
Accountable Team

This article is presented to you by the Accountable Team, a diverse group of accountants and seasoned freelancers active in Belgium. Thanks to the real-life experience and expertise in topics such as self-employment, taxes, bookkeeping, VAT, and many more, the Accountable Team is able to share insights and practical advice to empower others on their freelance journey. We are dedicated to helping the self-employed thrive in today’s dynamic work environment and fostering a community of independent professionals.

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