EU VAT invoices on services to European clients

What are EU VAT services?

Let’s imagine that you are providing some type of service to clients in a different European country. Maybe you are designing a hip new logo for a company as a graphic designer or advising someone as a lawyer. Whatever the case is, the same question usually arises: should I charge my client VAT? If so, should I charge them with my country’s VAT rate or their country’s VAT rate?

Should I charge VAT on services invoiced to the EU?

General rule: Do not charge VAT on services to businesses in the EU

According to the general rule introduced in Article 196 of the VAT Directive, a supplier providing services to a VAT registered customer in another Member State without being established there will not charge any VAT on their invoice. The customer will reverse-charge the transaction. This is because under the general rule, the place of supply is where the customer is established.

For example, if you are a French graphic designer creating a new logo for a German company, you will normally not charge VAT on your invoice.

And what if I provide services to individuals in the EU?

Keep in mind that when these services are provided to a private individual, making it a B2C transaction, the VAT rate of the supplier’s country should be applied. In this scenario, the deemed place of supply is where the supplier is located.

Following the earlier example, if you are a French graphic designer creating wedding invitations for a Belgian couple, you will charge French VAT on your invoice.

Exceptions

As always with any rule, there are bound to be exceptions. In these cases, the place of supply does not follow the general rule mentioned above.  The exceptions occur when certain services are provided, and include:

• Services related to immovable property
  The place of supply in this case is where the property is located.
• Passenger transport services
  The place of supply will be located where the transport takes place. If in one journey the transport takes place in a variety of locations, the VAT rates will be allocated accordingly depending on the country and the distance covered in each place.
• Catering services
  The place of supply is located where the catering services are rendered.
• Short-term leasing of means of transport
  The place of supply is where the customer accesses the transport (boat, car, or other). VAT of that country will be due unless the client is a business and local rules allow for domestic reverse-charge on supplies by foreign non-established suppliers.
• Access to conferences, fairs, and exhibitions
  The place of supply is located where the event takes place.

What should I include on the invoice for EU services?

The European Commission has set some basic guidelines for the information to be included on invoices throughout the EU. In general, these invoices should include:

• Issue date and date of transaction or payment (if it is different than the invoice date)
• Unique sequential invoice number for identification purposes
• Customer’s VAT number (if the customer is liable for the tax on the transaction)
• Full name and address of both the supplier and the customer
• A description of the goods supplies or services rendered
• Applicable VAT rate and VAT amount to be paid

It is crucial to include on the invoice that for services that fall under the general B2B rule, the customer is liable for the tax under the reverse-charge mechanism. The supplier should therefore be sure to include the words “Reverse charge” on their invoices.