Invoice amount, before VAT
You are based in
Your client is in
Your client is
You are selling
Software, hosting, courses, downloads, subscriptions: anything delivered electronically with little or no human intervention.
Your VAT position
On this invoice
£5,000.00
No VAT charged, reverse charge applies
Do not charge VAT
Your client accounts for the VAT themselves.
The question is not the rate, it is whether you charge at all
Working out twenty percent of an invoice takes a second. Working out whether that twenty percent belongs on the invoice at all is what costs people money, because the answer depends on four things: where you are, where your client is, whether they are a business, and what you are selling.
Get it wrong in one direction and you charge VAT that your client cannot reclaim, and they ask for a corrected invoice. Get it wrong in the other and the VAT was always yours to pay, and you find out when you are asked for it.
The reverse charge, and the check that makes it valid
For services between businesses in different countries, the usual answer is that you do not charge VAT: the place of supply moves to your client and they account for it themselves. Your invoice shows the net amount with wording that says so.
The condition is that your client really is a business, evidenced by a valid VAT number. Validate it before you invoice and keep the confirmation. If the number turns out to be invalid, the reverse charge never applied, and the VAT is yours.
- EU to EU: reverse charge under Article 196, and the supply goes on your EC Sales List.
- UK to EU and EU to UK: outside the scope of the supplier's VAT since Brexit, with the client self-accounting.
- Outside the VAT area entirely: generally outside scope, but the client may owe something under their own system.
Selling to consumers is the harder half
There is no reverse charge for a consumer. Someone has to charge the VAT, and for digital services it is charged at the rate where the customer lives, not where you are.
Inside the EU
Below €10,000 of cross-border B2C digital sales a year you may use your own rate. Above it, the customer's rate applies, declared through OSS in a single return.
UK to EU
Register for the non-Union OSS in one EU country and file one return for all twenty-seven.
Outside to inside
No threshold. A seller with no establishment registers from the first sale, in the UK and in the EU alike.
Two non-contradictory pieces of evidence of where the customer lives have to be kept: billing address, IP address, bank country, SIM country. Keeping them is part of the rule, not a precaution.
Goods cross borders differently from services
Goods leaving the country are zero rated with proof of export, and your client pays import VAT and duty when they arrive. Three things decide whether that goes smoothly.
- Proof of export. Without evidence the goods left, the zero rating falls away and the VAT falls back on you.
- Incoterms. DDP means you clear customs and pay the import VAT; DAP means the client does. It belongs on the invoice, because it decides who gets the bill at the border.
- An EORI number for customs declarations, on each side.
Registration thresholds, and the ones that catch people
- United Kingdom: £90,000 of taxable turnover in a rolling twelve months, not a calendar year, which is the part people miss.
- EU domestic: set by each country, from nothing at all to around €100,000.
- EU cross-border B2C digital: €10,000 across the whole EU, after which the customer's rate applies.
- Non-established sellers: no threshold. First sale, first registration.
- GST countries: Australia A$75,000, New Zealand NZ$60,000, Singapore S$100,000 of sales into the country.
Once you know what belongs on the invoice, the invoice generator writes it, including the reverse charge wording, and the quote generator sets the terms before the work starts.
Currency, and the rate you invoice at
Invoicing in your client's currency is a courtesy that costs you the exchange risk. If you do it, state the rate and the date used, and remember that your VAT return is filed in your own currency at an official rate for the period. The two figures rarely match exactly, and the difference is a foreign exchange gain or loss rather than a VAT error.
Cross-border VAT questions, answered
Do I charge VAT to a client in another country?
For services to a business in another country, usually not: the reverse charge moves the liability to them. For consumers it depends on what you sell and where they are, and for digital services you generally charge their country's rate.
What is the reverse charge?
A rule that moves responsibility for the VAT from you to your business client. You invoice without VAT and state that the reverse charge applies; they account for it on their own return, usually claiming it straight back.
What wording do I put on a reverse charge invoice?
Something equivalent to: reverse charge, VAT to be accounted for by the recipient under Article 196 of Directive 2006/112/EC. The calculator above prints the wording for the combination you choose.
Do I need to check my client's VAT number?
Yes, and keep the evidence. The reverse charge depends on the customer being in business. If the number is invalid, the treatment fails and the VAT becomes yours. VIES checks EU numbers and returns a consultation number worth saving.
What is the VAT rate for digital services to EU consumers?
The rate where the customer lives, once you pass the €10,000 EU-wide threshold for cross-border B2C digital sales. Below it you may use your own rate. OSS lets you declare all of it in one return.
Do I charge UK VAT to an EU client after Brexit?
For B2B services, no: the supply is outside the scope of UK VAT and your client self-accounts. For digital services to EU consumers you register for the non-Union OSS and charge their local rate.
What is OSS and do I need it?
One Stop Shop: a single registration and quarterly return covering VAT owed to consumers across the EU. You need it once you charge other countries' rates, which for digital services means once you pass €10,000, or from the first sale if you are not established in the EU.
Is there a threshold before I register abroad?
For a business with no establishment in the country, generally not. The UK and the EU both expect registration from the first B2C digital sale. GST countries do have thresholds: A$75,000 in Australia, NZ$60,000 in New Zealand, S$100,000 in Singapore.
How do I invoice goods sent abroad?
Zero rated as an export, with proof the goods left. Your client pays import VAT and duty on arrival unless you agreed DDP terms. State the Incoterms on the invoice, because they decide who receives the customs bill.
What if I am not VAT registered?
You charge no VAT and reclaim none. Watch your own threshold: £90,000 of taxable turnover in a rolling twelve months in the UK, and separate rules for cross-border digital sales, which can require registration regardless of turnover.
Which country's rate do I use?
For B2B services, none: the client accounts for it. For B2C digital services, the customer's. For most other B2C services, your own. Physical goods follow the destination, with VAT paid on import.
Is this calculator a substitute for advice?
No. It covers the common cases and names the trap in each, but place of supply has real edge cases: work on land, events, transport hire and margin schemes among them. For an unusual supply, check with an accountant in the country concerned.