Globalization is increasingly leading to the fact that services beyond the German borders are also provided abroad. This inevitably raises the question of tax and tax law peculiarities, especially in connection with the value added tax shown on the invoice for the services provided by a client based abroad.

So what about VAT on invoices abroad?

What does the law say

In the correct VAT treatment in an invoice for services provided abroad, two factors play a key role in the amount of VAT. The decisive factor for the value added tax shown in the invoice is the country in which the service provided is recorded for sales tax purposes and the way in which you have to show the value added tax in the invoice. Until the end of 2009, the legal situation with regard to VAT for clients domiciled abroad was very complex and characterized by exceptional regulations. Since January 1, 2010, the basic rule has been that services are taxable where the recipient of the service, i.e. your client, is based. There the use of the sales tax calculator is important.

  • This means that as a service provider based in Germany who carries out an order for a company based abroad, you are subject to sales tax abroad. This basic rule that the invoice is based on the VAT applicable abroad also applies if you did not perform the service predominantly on site abroad, but performed it in your office in Germany, for example. Accordingly, the German VAT would not have to be shown on the invoice issued by you. Instead you would have to the VAT listed on the invoice is based on the regulations of the respective country. This in turn would require that you register abroad, which would be a time-consuming and, above all, cumbersome affair.

However, due to the new and simplified rules that have been in force since 2010, registration abroad is not necessary, with a distinction being made between the European Union and third countries.

VAT for invoices abroad: what is the reverse charge procedure?

For the treatment of VAT in other European countries, the so-called reverse charge procedure applies on the basis of the European VAT system directive, provided it is subject to the basic rule. This means that there is no need to register as a German service provider abroad, which also applies to the disclosure of foreign VAT on the invoice.

Billing abroad: what applies within the European Union?

The invoice of a supplier or service provider who delivers his goods or provides services to a customer within the European Union depends on the legal form of the recipient. The criteria for differentiation depend on whether you are providing a delivery or a service