VAT on Invoices: A Plain-English Guide for EU Freelancers

VAT rules read like they were written to be confusing, but the situations most freelancers actually run into boil down to a handful of patterns. This isn't tax advice for your specific case - rules vary by country and your accountant should have the final say - but it's the map that makes the terminology make sense.

If you're not VAT registered

Many countries let small businesses and freelancers stay under a VAT registration threshold, below which you simply don't charge VAT at all. Your invoice shows the amount with no tax line, and often a short note explaining why - something like "VAT not applicable, small business exemption." Once your revenue crosses the local threshold, registration usually becomes mandatory.

If you're VAT registered and billing a client in your own country

This is the straightforward case: charge your country's standard VAT rate, show it as a separate line from the subtotal, and include your VAT number on the invoice. The client pays the VAT-inclusive total, and you remit the VAT portion to your tax authority.

If you're billing a business client in a different EU country

This is where "reverse charge" comes in. If both you and your client are VAT-registered businesses in different EU countries, you typically don't charge VAT at all - instead, the client accounts for it themselves under their own country's rules. Your invoice still needs both VAT numbers on it and a note like "VAT reverse charged - Article 194, EU VAT Directive," even though no tax amount appears in the total.

If you're billing someone outside the EU

Exports of services outside the EU are generally outside the scope of EU VAT entirely - no VAT charged, no reverse charge note needed, though your own country may still want the transaction recorded for other reporting purposes. Local rules on exactly how to document this vary, so it's worth a quick check rather than assuming.

What actually has to be on the invoice

• Your VAT number, if you have one
• The client's VAT number, if the reverse charge applies
• The VAT rate and amount, shown separately from the subtotal - or a clear note explaining why there isn't one
• The pre-tax subtotal and the final total, both visible

The pattern underneath all of it

Almost every VAT question on an invoice comes down to one thing: who is responsible for accounting for the tax, you or the client. Once you know that, the invoice format follows automatically. When in doubt for a specific transaction, a five-minute question to an accountant costs far less than getting it wrong on every invoice for a year.

InvoiceCraft lets you set a tax rate per invoice - including zero, for reverse charge or exempt cases - so the right total shows up without having to remember the rule every time.