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If your company wants to be paid by its customer, it must issue an invoice.
This invoice will give rise to a number of VAT issues:
- When must an invoice be issued?
- Does the invoice have to include VAT?
- What information must be included on an invoice?
- What VAT rate should be mentioned on an invoice?
- Should the invoice be sent to your customer in paper form or electronically?
All these practical questions relate to your obligation to issue an invoice to your customers. The general rules on invoicing are set out in Articles 217 to 237 of the VAT Directive, while the practical details (electronic filing, additional information, etc.) are unfortunately left to the discretion of each Member State.
The invoice is an essential VAT document. However, it is regularly neglected by businesses: missing information, brief description of the goods or services, etc. If it is not drawn up correctly, it means trouble guaranteed in the event of a tax audit: financial penalties and/or refusal of the deduction right.
When should an invoice be issued ?
As a general rule, the invoice must be issued at the time the goods or services are delivered. However, there are exceptions to this general rule, particularly where advance payments have been requested or in the case of intra-European movements of goods or services.
The date of issue of an invoice raises thus the question of what is known as the tax point and the tax liability in regards to VAT. An invoice can potentially have several dates: a date of issue, a date of payment and a date for the tax point. These three dates may not correspond to each other.
Does the invoice have to include VAT ?
As a supplier of goods or services, your company is normally obliged to issue an invoice with VAT to its customer. This is the general rule. However, there are many derogatory situations which transfer this obligation to pay tax to the customer himself. These situations are known as "reverse charge" or "reverse charge" situations.
What are the compulsory statements on an invoice ?
The VAT Directive sets out the minimum information that you must include on your invoice. In some cases, countries may add additional compulsory statements. Particular attention should be paid to the conversion rates when the currency used on the invoice is not that of the country in which the transaction takes place and to the specific information justifying the legal reason for not charging VAT.
Should the invoice be sent to your customer in paper form or electronically ?
Many companies still send their invoices in PDF format by email to their customers. This is not electronic invoicing within the meaning of the VAT Directive. Most countries (e.g.Portugal) have or are about to (e.g.France, Germany, Belgium) oblige all companies to switch to electronic invoicing.
Some countries (e.g. Spain) are taking advantage of this to couple this obligation with an additional obligation of "real time", a sort of "cash register" which obliges companies to declare their transactions to the tax authorities in near real time.
Beware of penalties !
The invoice is a document that is all too often neglected by businesses: too brief a description of the goods or service, absence of the customer's name, address or VAT number, incorrect VAT rate, etc.
However, issuing a correct invoice is of paramount importance and requires a good understanding of the VAT mechanics: where should your company's economic activity be taxed? Which country has the power to regulate the content of invoices? Should the invoice include local VAT or should it be subject to reverse charge?
All these questions are not trivial. There are many traps and pitfalls. An incorrect invoice can be detrimental not only in financial terms (fine and non-recovery of VAT on your expenses) but also commercially (dispute with your customers or suppliers).
Do you want to manage your purchase and sales invoices correctly? Call on our VAT experts!
Issuing a correct invoice is an integral part of our business support service. Our goal? To ensure that your company is paid by your customer as quickly as possible and that you do not have to worry about a tax audit abroad.
How does this work in practice?
It is very simple for you: you send us a copy of your purchase and sales invoices. From there, we take over:
- We determine the invoicing rules: which country is responsible? What information is required? What is the due date?
- We support you in the practical implementation of electronic invoicing and, if necessary, of "real time" in each European country
- We check that purchase invoices do not contain any errors that could jeopardise the recovery of VAT on these expenses.
By using our firm, you can be sure that your purchase or sales invoices are always correct.
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Any VAT question ?
We offer you the opportunity to discuss the subject during a free videoconference.