"Should I charge VAT on this invoice?" is one of the most common questions small businesses and freelancers ask, and getting it wrong is easy to do. Charge VAT when you should not have, and your customer overpays. Forget to charge it when you should have, and you can be left covering the difference yourself.
The good news is that the answer almost always comes down to three questions: where is your customer, are they a business or a consumer, and do they have a valid VAT number? This guide walks through the common cases, and introduces a free tool that gives you the answer in seconds.
This article is general guidance, not tax advice. Rules vary by country and situation, so check with an accountant or your local tax authority for anything unusual.
The three things that decide it
Before you issue an invoice, you need to know:
- Your VAT status. Are you VAT-registered? If you are below the registration threshold and not registered, you generally do not add VAT at all.
- Where your customer is. Same country as you, another EU country, or outside the EU.
- Who your customer is. A VAT-registered business, or a private consumer (B2C).
With those three answers, most situations fall into one of the cases below.
Case 1: Selling to a customer in your own country
This is the simplest case. If you are VAT-registered and selling to a customer in the same country, you charge your local VAT rate, whether the customer is a business or a consumer. The VAT shows on the invoice and you report it in your normal return.
Case 2: Selling to a business in another EU country
This is where the reverse charge comes in. If you sell goods or services to a VAT-registered business in another EU country, you usually do not charge VAT. Instead, you apply 0% and add a note such as "Reverse charge - VAT to be accounted for by the recipient." The customer then accounts for the VAT in their own country.
There is one critical condition: your customer must have a valid EU VAT number. If they cannot give you a valid number, you generally have to treat the sale like a domestic one and charge VAT. Always validate the number before you rely on the reverse charge, you can do this instantly with our EU VAT checker, which queries the official VIES database.
Case 3: Selling to a consumer in another EU country (B2C)
Selling to private individuals across the EU is more involved. Depending on what you sell and how much, you may need to charge the VAT rate of the customer's country and report it through the One Stop Shop (OSS) scheme. For digital services in particular, the customer's-country rate often applies from the first sale. If you sell to EU consumers regularly, this is worth getting proper advice on.
Case 4: Selling outside the EU
Sales to customers outside the EU are usually treated as exports and are zero-rated, meaning you charge 0% VAT. As always, keep evidence of where the customer is and that the supply left the EU, and check the rules for services, which can differ from goods.
Why validating the VAT number matters
The reverse charge in Case 2 only holds up if the customer's VAT number is valid. Tax authorities can reject a 0% invoice if the number was invalid at the time of the sale, leaving you liable for the VAT. It takes seconds to check, so make it a habit: run every new EU business customer's number through the EU VAT checker before invoicing.
Let the VAT decision tool answer it for you
Instead of memorising the cases above, you can let our free VAT decision tool do the thinking. You tell it where your customer is, whether they are a business or a consumer, and whether they have a valid VAT number, and it tells you whether to charge VAT, apply the reverse charge, or zero-rate the sale, along with the note to put on the invoice.
It is built into Invoicier, so once you know the answer you can issue the correct invoice right away, whether that is a PDF invoice by email or a structured invoice over the Peppol network.
Summary
Whether to charge VAT comes down to your customer's location, whether they are a business or a consumer, and whether they have a valid VAT number. Domestic sales carry your local rate, EU B2B sales with a valid VAT number use the reverse charge at 0%, and exports outside the EU are generally zero-rated. When in doubt, validate the VAT number and let the VAT decision tool confirm the right treatment.
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