When I started invoicing European companies, VAT was the part I understood least. If you're a freelance developer, designer, or consultant billing EU businesses, the reverse charge is probably the rule that applies to you, and it's simpler than it sounds.
The idea in one paragraph
For most business-to-business services across borders, VAT is charged where the customer is established. Instead of you registering for VAT in your client's country, the customer accounts for the VAT themselves. You invoice the net amount, and they "reverse charge" it on their VAT return.
When it usually applies
- You supply a service (development, design, consulting).
- Your customer is a business, with a valid VAT number.
- The customer is in a different country from you.
It usually does not apply to:
- Sales to consumers (B2C), where different rules apply
- Some services tied to land or events, which have special place-of-supply rules
- Goods, which have different rules again
Checking the VAT number
Before invoicing, check your client's VAT number using the Commission's VIES service. Save a screenshot or confirmation with the date. If the number is invalid, the customer may not be a VAT-registered business, and the reverse charge may not apply.
What your invoice should include
- Your details, plus your VAT number if you have one
- Customer's name, address, and VAT number
- Invoice number and date
- Description of services
- Net amount, with no VAT charged
- A note such as "Reverse charge" or "VAT reverse charged – Article 196, Council Directive 2006/112/EC"
If you're inside the EU
You'll usually also need to report these supplies on your own VAT return and, in many countries, an EC Sales List (recapitulative statement). Check your national rules.
If you're outside the EU
You generally don't charge EU VAT on B2B services, and the client handles it. Your own country's rules on export of services still apply. See Invoicing EU Clients as a Non-EU Freelancer.
Common mistakes
- Charging VAT anyway: the client then has to sort it out, which is annoying for them.
- Not checking the VAT number.
- Missing the reverse-charge note.
- Applying it to consumers: B2C digital services work differently (EU VAT rates).