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Invoicing International Clients & VAT – Part II

invoicing international clients

This article is of informative character only

In the Part I of the article we delved into 2 scenarios of trade within the EU both from the point of view of a VAT payer.

In the Part II, let's have a look at the following situations:

  1. a non-payer entity intending to buy goods or services from a foreign VAT payer,
  2. a VAT payer exporting goods to a non-EU country.
invoicing international clients

1. Hypothesis: your are a non-payer entity intending to buy goods or services from a foreign VAT payer

As an entity purchasing goods or services for commercial ends, you are liable to report and pay the VAT in your country. You must apply for a VAT identification number with your local authorities before acquiring such goods or services from a provider residing abroad. If you only register for the acquisition identification you cannot use the amount of the tax paid in your VAT input which would result in deduction of the VAT output had you been a VAT payer.

An exception would be, if your foreign supplier were already VAT registered in your home country. The invoice would state the price including the VAT instead of the ‚reverse-charge‘ clause. You can use the VAT lookup service to check this upfront.

2. Hypothesis: your are a VAT payer exporting goods to a non-EU country:

Such goods are, from your point of view – and unless you act as the importer as well – often exempt from the VAT as the tax will be collected by the third country’s customs office before the release of the goods into the free circulation.

If the goods are indeed exempt on your side, you should include a note of this fact on the invoice ‚The supply of goods is exempt from VAT (+ add a reference to the pertinent Act)‘. The transaction must be declared in the correct line of your VAT return.

Furthermore, make sure you retain relevant documentation proving the export out of the EU did take place. This can include postal slips, customs declaration, customs confirmation from the country of destination, invoices, etc.

Note for the non-payers: such a transaction would add up to your VAT registration threshold.

In some circumstance, a foreign seller might be required to register as a VAT payer in the third country too – making him responsible for collecting & paying the tax. The topic of export deserves an article of its own. Until next time!

For in-depth information, visit the websites of the respective authorities or consult a specialist.


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