EU cross-border VAT. The rules that actually matter.
Selling across EU borders means dealing with different VAT rules for B2B services, B2C sales, and goods. Here is what you need to know to invoice correctly.
How VAT works across EU borders
VAT in the EU is not one-size-fits-all. The rules change depending on whether you sell services or goods, and whether your client is a business or a consumer. For B2B services, the reverse charge mechanism shifts VAT liability to the buyer. For B2C services, you generally charge VAT in your own country, with exceptions for digital services. Goods follow their own set of rules with intra-community supply and distance selling thresholds. The One-Stop-Shop (OSS) simplifies things for B2C sellers who cross those thresholds. Getting it right means fewer corrections, fewer surprises, and fewer angry emails from tax authorities.
Key rules for EU cross-border invoicing
- Verify your client's VAT ID through the VIES database before invoicing
- Apply the reverse charge mechanism for B2B services across EU borders
- Include both your VAT ID and your client's VAT ID on every cross-border invoice
- Use the correct tax rate based on transaction type, destination, and client status
- Report all cross-border transactions in your VAT return and EC Sales List
Questions
What is the reverse charge mechanism for B2B services?
When you sell services to a VAT-registered business in another EU country, you do not charge VAT. Instead, your client self-assesses VAT in their own country. You issue the invoice without VAT and include a reverse charge note. This avoids the need to register for VAT in every EU country you sell to.
How does VAT work for B2C services across EU borders?
For most B2C services, you charge VAT at your own country's rate. Digital services are an exception. Since 2015, digital services sold to consumers are taxed in the buyer's country. The OSS (One-Stop-Shop) lets you report and pay that VAT through a single registration in your home country instead of registering in each buyer's country.
What is intra-community supply for goods?
When you sell goods to a VAT-registered business in another EU country, the sale is zero-rated as an intra-community supply. Your client needs a valid VAT ID, and the goods must physically leave your country. You report the sale on your EC Sales List and your client accounts for the VAT in their country.
What are the distance selling thresholds?
When you sell goods to consumers in other EU countries, you charge your local VAT until you exceed the EU-wide threshold of EUR 10,000 in cross-border B2C sales. Once you pass that threshold, you must charge VAT at the buyer's country rate. The OSS system handles the reporting so you do not need to register in each country.
Does Billstride support EU cross-border VAT rules?
Yes. Billstride detects the transaction type based on your location and your client's details. It applies the correct VAT treatment automatically, whether that is reverse charge for B2B, standard VAT for domestic sales, or zero-rated intra-community supply. VAT IDs and required notes are added to the invoice for you.
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