Tax rules scare a lot of freelancers, and they vary enormously by country — but the underlying questions are the same everywhere. Here's what generally matters when you're invoicing clients, and why it belongs in your contract.
Sales tax, VAT, or GST: when do you need to register?
Most countries set a turnover threshold above which freelancers must register for a consumption tax (called VAT, GST, or sales tax depending on the country) and charge it on invoices. Below the threshold, registration is often optional. Thresholds, rates, and rules for cross-border or export work vary widely — always confirm your specific situation with a local accountant.
Withholding: why some clients deduct a percentage
In many countries, business clients are required to withhold a percentage of professional fees and remit it directly to the tax authority on your behalf. This isn't money lost — it's usually credited against your annual tax liability, and you'll typically get a certificate or statement to claim it when you file your return.
Put it in the contract
- State whether your fee is inclusive or exclusive of any consumption tax.
- Note whether the client may withhold tax, and that they must share any relevant certificate.
- Clarify who bears payment-gateway or currency-conversion charges, if any.
How Pakkawork handles this
Pakkawork's generated contracts include a clear tax and invoicing clause so there's no awkward surprise at invoice time. The contract states the treatment up front, and the client acknowledges it along with everything else — keeping the money conversation clean.
This guide is general information, not legal advice. For high-value or complex disputes, consult a qualified advocate.