Value Added Tax (VAT) is charged in more than 170 countries, including all EU member states and the UK. If you’re VAT-registered, your invoices are not just requests for payment — they’re tax documents that your business customers rely on to reclaim VAT. This guide explains the essentials: when to charge VAT, how to calculate it, what a VAT invoice must show, and how cross-border sales and the reverse charge work in the EU.
VAT is complex and every country has its own rules, thresholds and exceptions. This guide explains the general framework, mainly for the EU, and is not tax advice. Check with your tax authority or an accountant before relying on it.
Do you need to charge VAT?
You charge VAT only if you’re registered for it (or required to be). Registration depends on your country’s rules:
- Most countries have a registration threshold based on annual turnover. Below it, small businesses can usually stay unregistered — and then they must not charge VAT.
- Some countries have no threshold, or a very low one, for certain businesses.
- You can often register voluntarily below the threshold, which lets you reclaim VAT on your costs but means you must charge VAT on your sales.
Examples: the UK’s registration threshold is £90,000 of taxable turnover (since April 2024). In the EU, each member state sets its own small-business threshold, and since 2025 an EU scheme also lets qualifying small businesses use exemptions in other member states. Thresholds change — check the current figure for your country.
If you’re not registered, your invoices show no VAT — and some countries require a statement explaining why, e.g. Germany’s small-business rule is usually referenced as “Gemäß § 19 UStG wird keine Umsatzsteuer berechnet” (“No VAT charged under § 19 UStG”).
How to calculate VAT
VAT is a percentage of the net (taxable) amount:
- VAT = net amount × VAT rate
- Gross = net + VAT
Example at 20%: net £1,000 → VAT £200 → total £1,200.
To extract the VAT from a VAT-inclusive (gross) price:
- VAT = gross × rate ÷ (1 + rate)
Example: £1,200 including 20% VAT → VAT = 1,200 × 0.20 ÷ 1.20 = £200.
Multiple rates on one invoice
Many countries have a standard rate plus one or more reduced rates (for food, books, transport and so on). If an invoice contains items at different rates, show the net amount and VAT amount per rate:
| Rate | Net | VAT |
|---|---|---|
| 21% (standard) | €1,500.00 | €315.00 |
| 9% (reduced) | €200.00 | €18.00 |
| Totals | €1,700.00 | €333.00 |
| Total due | €2,033.00 |
Some EU standard VAT rates
| Country | Standard rate |
|---|---|
| Germany | 19% |
| France | 20% |
| Italy | 22% |
| Spain | 21% |
| Netherlands | 21% |
| Ireland | 23% |
| Hungary | 27% |
EU law requires a standard rate of at least 15%. Rates change from time to time, so verify the current rate before invoicing. Our invoice templates by country list local tax names and rates.
What a VAT invoice must include (EU)
The EU VAT Directive sets out the details a full VAT invoice must contain. Member states implement it nationally, but the core list is:
- Date of issue
- A unique sequential number (see invoice numbering)
- The supplier’s VAT identification number
- The customer’s VAT number, where the customer is liable for the tax (reverse charge) or for intra-EU supplies of goods
- Full names and addresses of supplier and customer
- Quantity and nature of goods, or extent and nature of services
- Date of supply (or of payment on account) if different from the invoice date
- Taxable amount per rate or exemption, unit price excluding VAT, and any discounts not included in the unit price
- VAT rate applied
- VAT amount payable
- Where no VAT is charged: a reference to the exemption, or the words “Reverse charge”, or other wording required for the specific case
The UK’s rules for VAT invoices are very similar. See our broader checklist in what to include on an invoice.
Domestic vs. cross-border sales
The key question for every sale is the place of supply — which country’s VAT applies. Simplified, for a seller established in the EU:
| Sale | Typical VAT treatment |
|---|---|
| To a customer in your own country (B2B or B2C) | Charge your local VAT |
| Services to a business in another EU country | Reverse charge — no VAT on your invoice; customer accounts for it |
| Goods shipped to a VAT-registered business in another EU country | Zero-rated/exempt intra-Community supply, with proof of transport; customer accounts for VAT |
| Services or goods to consumers in another EU country | Your VAT until you exceed €10,000/year of cross-border B2C sales across the EU, then the customer’s country’s VAT (usually via OSS) |
| Exports of goods outside the EU | Generally zero-rated, with export evidence |
| Services to customers outside the EU | Often outside the scope of EU VAT (B2B), but rules vary by service type |
There are many special rules — for example, services connected with land, passenger transport, event admission and restaurant services follow different place-of-supply rules.
The reverse charge explained
Under the reverse charge, the customer rather than the supplier accounts for VAT. The most common case: you provide services to a VAT-registered business in another EU country. The general rule for B2B services is that they’re taxed where the customer is established, and the customer self-assesses the VAT in their own return.
What to do on the invoice
- Verify the customer’s VAT number using the EU’s VIES service and keep a record of the check.
- Charge 0% / no VAT on the invoice.
- Show both VAT numbers — yours and the customer’s.
- Add the words “Reverse charge” (many businesses also cite the legal basis, such as “Article 196 of Council Directive 2006/112/EC”).
- Report the sale in your VAT return and, in the EU, in your recapitulative statement (EC Sales List).
Reverse-charge invoice example
| Field | Example |
|---|---|
| Supplier | Studio Nord ApS, Copenhagen, Denmark · VAT DK12345678 |
| Customer | Lumen Software GmbH, Berlin, Germany · VAT DE123456789 |
| Service | UX design services, October 2026 |
| Net amount | €4,000.00 |
| VAT | €0.00 |
| Total | €4,000.00 |
| Note | Reverse charge — VAT to be accounted for by the recipient (Art. 196, Directive 2006/112/EC) |
(VAT numbers are placeholders.)
Some countries also apply a domestic reverse charge in specific sectors (such as construction services, scrap metal or certain electronics) to combat fraud. If you work in one of these sectors, check the local rules.
Selling to consumers in other EU countries: OSS
If you sell goods at a distance or provide services such as digital services to consumers (B2C) in other EU countries, VAT is due in the customer’s country once your total cross-border B2C sales exceed €10,000 a year across the EU. Instead of registering in every country, you can use the One-Stop Shop (OSS): you charge each customer their country’s VAT rate and file a single quarterly OSS return in your home country.
Businesses established outside the EU selling digital services to EU consumers generally must charge VAT from the first sale, and can use the non-Union OSS scheme.
Practical tips
- Issue invoices promptly. EU rules generally require invoices for intra-EU supplies by the 15th day of the month after the supply, and many countries set short deadlines for domestic invoices too.
- Round VAT carefully. Calculate VAT per line or on the total consistently, and round to the nearest cent.
- Foreign-currency invoices: in the EU and UK the VAT amount must be expressed in the local currency. See invoicing in a foreign currency.
- Corrections: never edit a VAT invoice after issuing it. Issue a credit note.
- E-invoicing is coming. Several EU countries already require structured e-invoices for B2B sales, and EU-wide rules are being phased in. See what is an e-invoice.
- Keep records of invoices, VIES checks and transport evidence for as long as your country requires.
Using BillKit for VAT invoices
In the invoice generator, set your tax name (VAT, MwSt, TVA, IVA…) and rate, add your VAT number and the client’s, and use the notes field for statements like “Reverse charge”. For zero-VAT invoices, set the rate to 0% and add the reason.
Again: this is a simplified overview of EU and UK VAT rules for general information only — not legal or tax advice. Rates, thresholds and requirements change; confirm with an accountant or your tax authority.