What Is a VAT Invoice? Requirements, Rules, and How to Charge VAT

Value-added tax (VAT) is a consumption tax applied at each stage of the supply chain in more than 170 countries worldwide, including all 27 European Union member states. A VAT invoice is the specific document that records a VAT-liable transaction — detailing the goods or services sold, the VAT rate applied, and the total tax charged. Businesses registered for VAT are legally required to issue VAT invoices for qualifying sales.

Unlike sales tax in the United States (which is applied only at the final point of sale), VAT is collected at every stage of production and distribution. Each business in the chain charges VAT on its sales and reclaims the VAT it paid on its purchases, so the tax is ultimately borne by the end consumer.

What Must a VAT Invoice Include?

According to EU VAT Directive 2006/112/EC, a compliant VAT invoice must contain the following information:

• Invoice number — a unique, sequential identifier
• Invoice date — when the invoice was issued
• Seller's details — business name, address, and VAT registration number
• Buyer's details — business name, address, and VAT number (for B2B transactions)
• Description of goods or services — a clear statement of what was supplied
• Quantity and unit price — for each line item
• VAT rate — the percentage applied to each item (rates vary by country and product category)
• Net amount — the pre-tax total for each line item
• VAT amount — the tax charged on each line item
• Gross total — the total amount including VAT
• Date of supply — when goods were delivered or services were performed (if different from the invoice date)
• Currency — specified if different from the seller's domestic currency

EU rules require that VAT invoices be issued within 15 days of the end of the month in which the goods or services were supplied.

Types of VAT Invoices

Full VAT Invoice

Contains all the fields listed above. Required for most B2B transactions and any transaction above the simplified invoice threshold (typically between 100 and 400 euros, depending on the member state).

Simplified VAT Invoice

A shorter version that omits buyer details and certain line-item breakdowns. Permitted for low-value transactions (under the member state's threshold) and retail sales. Simplified invoices still require the seller's VAT number, the invoice date, a description of goods or services, and the total amount including VAT.

Modified VAT Invoice

Used in specific situations such as self-billing (where the buyer issues the invoice on behalf of the seller) or for margin-scheme transactions (second-hand goods, works of art).

How to Register for VAT

If your business sells goods or services to customers in the EU — even if your business is based outside the EU — you may be required to register for VAT. The registration process depends on your situation:

EU-Based Businesses

Each EU country sets a VAT registration threshold. In the UK (post-Brexit), the threshold is 90,000 GBP in taxable turnover. In Germany, small businesses with revenue under 22,000 EUR may be exempt. Once your turnover exceeds the threshold, you must register with your national tax authority.

Non-EU Businesses Selling to EU Customers

If you sell digital services, software, or physical goods to EU consumers, you must register for VAT in at least one EU member state. The VAT One-Stop Shop (OSS) simplifies this by allowing you to register in a single country and file VAT returns for all EU sales through that one portal, rather than registering separately in each country.

The European Commission's VAT information portal provides tools to verify VAT numbers and access country-specific registration guidance.

How to Charge VAT on Invoices

B2C Transactions (Business to Consumer)

Charge VAT at the rate applicable in the customer's country. Include the VAT amount on the invoice and remit it to the relevant tax authority.

B2B Transactions (Business to Business)

Within the EU, B2B transactions between VAT-registered businesses typically use the reverse-charge mechanism. The seller issues an invoice without VAT, and the buyer accounts for the VAT in their own country. The invoice must note "Reverse charge applies" and include both parties' VAT numbers.

Mixed-Rate Invoices

If an invoice includes items taxed at different VAT rates (for example, standard-rate consulting services and reduced-rate printed materials), each rate must be listed separately with its own net amount and VAT amount.

VAT Rates Across the EU

VAT rates vary significantly between EU member states. As of 2025:

Country	Standard Rate	Reduced Rate(s)
France	20%	5.5%, 10%
Germany	19%	7%
Ireland	23%	9%, 13.5%
Italy	22%	4%, 5%, 10%
Netherlands	21%	9%
Spain	21%	4%, 10%
Sweden	25%	6%, 12%

Reduced rates typically apply to essential goods like food, medical supplies, and books. Some items — such as healthcare and educational services — may be VAT-exempt entirely.

VAT vs. Sales Tax

	VAT	Sales Tax
Collected by	Every business in the supply chain	Retailer at final point of sale only
Applied to	Each stage of production and distribution	Final consumer purchase only
Tax credit mechanism	Businesses reclaim VAT paid on inputs	No input credit; tax cascades if applied at multiple stages
Prevalence	170+ countries	Primarily the United States

The key structural difference is that VAT is a multi-stage tax with an input credit mechanism, while sales tax is a single-stage tax collected at retail.

Submitting VAT Returns

VAT-registered businesses must file periodic returns — typically quarterly — reporting the VAT they collected on sales and the VAT they paid on purchases. The difference is either remitted to the tax authority (if collections exceed credits) or refunded (if credits exceed collections).

Most EU countries allow online filing through national tax portals. Through the OSS system, businesses selling across multiple EU countries can consolidate all EU VAT reporting into a single return.

Managing VAT Invoices with Software

Manually tracking VAT rates, generating compliant invoices, and filing returns across multiple jurisdictions is complex and error-prone. Invoicing software automates rate calculations, ensures invoices include all required fields, and generates records that simplify VAT return preparation.

For businesses that sell internationally, using a platform like Agiled to manage invoicing alongside project and client data keeps financial operations centralized and audit-ready.

Related Articles:

• What Is a Tax Invoice?
• What Is a Sales Invoice?
• Invoice vs. Bill: What's the Difference?
• How to Fill Out an Invoice