Brexit has changed how EU member states interact with the UK. Please consult with your tax adviser on how Brexit has impacted your tax situation.
NoteAvalara AvaTax is a tax compliance solution that automates the complexities of calculating sales tax, VAT, and GST. Please ask your Customer Account Manager about Avalara AvaTax and how it can help with your VAT calculations.
VAT-registered businesses must issue VAT invoices that are compliant with the guidelines published by the relevant tax authorities. While the exact regulations do vary by country, VAT registered businesses are expected to:
- Issue and keep valid invoices, paper, or electronic.
- Ensure that VAT is applied correctly to all sales invoices where VAT is applicable.
- Maintain copies of all sales invoices issued, even if they were canceled or were produced in error.
- Retain all purchase invoices for items bought by your business.
NoteBusinesses cannot reclaim VAT if they do not have a valid VAT invoice, pro-forma invoice, statement, or delivery note for all of the relevant transactions.
VAT compliant invoices
Within the EU, the EU VAT Directive specifies the requirements of VAT invoices. Members states will also often specify additional requirements for VAT invoices.
Additional actions or information that are frequently requested include:
- Sequentially numbered invoices, specific to sales within that country.
- Invoice retention requirements for invoice hard copies. European countries frequently mandate the retention of VAT invoices for anywhere between five to ten years.
- B2B invoices are often required to contain more information than B2C invoices.
While member states may request more information, no EU member state may deny the right to deduct VAT by requiring extra information in invoices. Below are the basic elements that must appear on invoices, depending on the particular scenario, a simplified or full VAT invoice may be required.
NoteWhile it is compulsory for a business to include all mandated information on their VAT invoices, a business may also choose to include additional information in their invoices with no risk of penalty or denial of the right to deduct VAT.
Full VAT invoices
The following information is generally required for full VAT invoices:
- Date of issue
- A unique, sequential number to identify the invoice
- Customer’s VAT identification number if they are liable for tax
- Supplier’s full name and address
- Customer’s full name and address
- Description of the quantity and type of goods supplied
Description of the type and extent of services rendered
- Date of transaction or payment, if different from the invoice date
- VAT rate applied
- VAT amount payable
- Details of the various VAT amounts payable by VAT rate or exemption
- The unit price of the goods or services, exclusive of any tax, discounts, and rebates.
Simplified VAT invoices
The following information is generally required for simplified VAT invoices:
- Date of issue
- Supplier’s VAT identification number
- Description of the type of goods or services supplied
- The VAT amount payable, or all of the relevant information required to calculate it
Amending a VAT invoice
VAT invoices can be amended if an error is identified. Depending on the type of error found, and the relevant tax authority guidelines, the type and manner of amendment required may vary.
If the price on the original invoice needs to be increased, a supplementary invoice is required that shows the:
- relevant increase in price, exclusive of VAT.
- relevant rate(s) of VAT.
- amount of VAT appropriate to each rate.
- cross-references to all other invoices that relate to the amendment.
If the price on the original invoice needs to be decreased, a credit note needs to be issued to the customer and kept on record.
Incorrect VAT rate
VAT rate decrease
If the VAT rate needs to be decreased, you will still be liable for the VAT shown on the invoice. To resolve this, the business must issue a credit note and a revised, corrected invoice.
VAT rate increase
If the VAT rate needs to be increased, a credit note for the full value of the invoice should be issued and a revised invoice issued that has the correct VAT rate and amount.