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If your business is based in Great Britain, and you sell goods to EU businesses, you will not apply VAT to your invoices. You will, however, need to apply for an EORI number to sell abroad, and should familiarise yourself with customs declaration requirements. If you are a VAT registered business or were on a VAT scheme, you may have to make changes to how you sell and invoice to EU customers. Starting in 2025 and by 2030, the various requirements related to intra-EU digital reporting, single VAT registration, and new rules for platforms will gradually come into effect. Specifically, in almost all European states where there is no obligation, sending an electronic invoice is currently subject to the consent of the recipient, who can then also refuse to receive it and demand a paper or PDF invoice. According to the proposal, from 2025, member states will be free to remove this clause, thus eliminating the need for suppliers to obtain consent from their customers for e-invoicing.
- Unit of measure in an invoice allows the use of codes from UNECE Recommendation No. 20 , as well as codes from UNECE Recommendation No. 21 prefixed with an X.
- Non-EU merchants selling digital services must enable all countries, otherwise sales will be blocked in the non-enabled countries.
- Each country has their own process for registration, so check with them for more specific instructions.
- To avoid such discrimination, rules could allow platforms not to pay VAT when the underlying sellers operate under the threshold or in private capacity.
An invoice cannot contain services subject to both home and destination VAT. If you need to invoice a service item that has home VAT rules, you must Invoice Requirements Eu Vat create another invoice. For example, if as a UK business you sell goods to a customer in France, you charge VAT at the rate applicable in France.
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While e-invoicing is likely to be implemented at the level of intra-community transactions, it will still be optional for individual states in terms of fulfilling digital reporting obligations at the EU level. This is great for you, because it means you don’t need to register for taxes in every EU country where you have a business buyer. The EU VAT rules we’re about to explain only apply to digital goods and services. They do not apply to physical products, which have their own separate rules involving cross-border customs and taxes. Reporting frequency will be within two working days of a chargeable event – so not real-time. The VAT Directive therefore will be amended from the current 45-day limit for invoicing intra-community supplies.
Does an invoice need to include VAT?
There are a few exceptions (such as if you sell second-hand goods under a margin scheme or sell zero-rated products), but as a general rule, VAT-registered businesses should always include their VAT numbers on their invoices.
It seems from the proposal that invoices issued in pdf format wouldn’t comply with the new definition. If the widely used pdf format isn’t accepted, businesses currently issuing invoices in a pdf format and sharing them by e-mail or a weblink should switch to a new software that would allow them to issue, transmit, and receive invoices in an XML format. A majority of EU member states have already introduced, or are planning to introduce, their own digital reporting requirements, as these have widely proven successful in increasing VAT collection and combating VAT fraud. All 28 countries that make up the European Union are subject to a value-added tax, although the VAT rates vary from country to country within the EU. The EU is not the only jurisdiction to charge VAT, in fact, the United States is the only OECD country that doesn’t levy a value-added tax federally. If your client in the EU has a valid VAT number, you don’t have to charge them VAT on your invoices.
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The EU call-off stock simplification will cease to apply since the simplification no longer will be required because those movements of goods can be reported via the OSS. These platforms also will be required to collect and store information regarding services of short-term accommodation rental and passenger transport for which they aren’t held liable for VAT. The deeming provision doesn’t apply if the platform is only established in one member state and facilitates local sales in this member state. The proposed rules enhance the role of online marketplaces in collection of VAT when they facilitate the supply of goods. In addition, they make platforms liable for charging and remitting the VAT when they facilitate a supply of passenger transport or short-term accommodation. Member states that already have e-invoicing in place are allowed to require pre-clearance until 2028, but no new pre-clearance systems are allowed from 2024.
The allowed maximum number of decimals for the Sum of allowanced on document level (BT-107) is 2. Invoice line charge reason code (BT-145) and Invoice line charge reason (BT-144) shall https://quick-bookkeeping.net/invoice-template-for-excel/ indicate the same type of charge reason. Invoice line allowance reason code (BT-140) and Invoice line allowance reason (BT-139) shall indicate the same type of allowance reason.
Invoicing of VAT in the European Union
Businesses with valid VAT numbers in the EU are subject to a reverse-charge mechanism. EU companies are responsible for filing their own VAT, because they can then be reimbursed for the VAT charged on products and services used to run their business. The obligation to include the ATCUD code finally took effect on 1st January 2023. Unlike the QR code, the ATCUD code is required on both paper and electronic invoices and must be legible on all pages. The prescribed data for this reporting will need to be transmitted electronically, on a transaction-by-transaction basis, within two working days from the issuance date of the invoice.
- Each Additional supporting document (BG-24) shall contain a Supporting document reference (BT-122).
- The invoiced object identifier is the identifier for an object on which the invoice is based, given by the Seller.
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- Later the customer would reclaim that same amount as a tax break and get reimbursed.
- This will help prevent them potentially being caught-up in VAT frauds unaware.
- You must also store this data for at least 10 years to show that you are EU VAT compliant.
If a customer is based in the UK or any other EU member state, VAT is charged at UK’s rate. If a customer is based in the UK, VAT is charged at the UK’s rate. With reverse-charge now in place, the customers can just keep the VAT you charge them, and just file the paperwork for that tax. The responsibility for tax reverses from your business back to the customer, so that the tax money goes directly from customer to the government.
4. VAT Reporting
In the case of an EU business selling to another EU business, you must mention “zero-rated intra-Community supply.” To include these references in your invoice, add a custom field under Advanced options in the Invoice Editor. The EU’s VAT reverse charge procedure is an essential tool for simplifying the taxation of cross-border transactions within the EU, especially in the context of B2B sales. It supports the EU’s goal of taxing products and services in the Member States where they are consumed and helps reduce the administrative burden for businesses that operate across multiple Member States. It is important for businesses to understand when the reverse charge rules apply and to who it applies, as failure to comply with the VAT rules can result in significant penalties and fines. Therefore, checking whether your business partner has a valid VAT number can be crucial when applying the reverse charge.