A value-added tax (VAT) invoice is a bill issued when VAT applies to a sale, which itemises the goods or services provided along with the VAT charged. Countries around the world, including those in the European Union (EU) and China, use VAT, with standard rates ranging from 4.5% to 27.0%. Businesses must issue VAT invoices when VAT applies to their goods or services, and they must do so correctly to maintain customer trust and avoid compliance problems. Whether you're handling international sales, managing different VAT rates, or just trying to stay compliant, there are a few basic principles to remember about VAT invoices.
What's in this article?
- What is a VAT invoice?
- When do you need a VAT invoice?
- What information should be included on a VAT invoice?
- How to format a VAT invoice for compliance
- Example VAT invoice
- How to issue VAT invoices for international transactions
- Upcoming e-invoicing and digital reporting requirements
- What are common mistakes to avoid on a VAT invoice?
- How Stripe Tax can help
What is a VAT invoice?
A VAT invoice is a bill that businesses issue when they're registered for VAT. It's a detailed record of what was sold and the VAT amount that was charged, and it serves as a necessary document for VAT reporting. Registered businesses must create VAT invoices to track their tax obligations. Customers must acquire VAT invoices if they want to claim back VAT on their purchases.
When do you need a VAT invoice?
VAT invoices are required when VAT is charged on a transaction between businesses or between a business and a customer who wants to claim back the VAT they paid on a purchase. Here are a few relevant scenarios:
One VAT-registered business sells taxable goods or services to another. The seller must issue a VAT invoice for their records, and the customer needs an invoice to reclaim VAT on their purchase.
A VAT-registered business from one EU country sells goods or services to a customer in another EU country. VAT invoices are required for most business-to-business (B2B) transactions of this nature and certain business-to-consumer (B2C) transactions, particularly for high-ticket items that require their own means of transport. For many other B2C sales, however, sellers aren't required to issue a full VAT invoice unless the customer specifically asks for one.
As of 2025, small businesses operating across EU borders have a new option: a cross-border VAT exemption scheme that lets eligible small enterprises apply an exemption in EU member states other than their own, not just their home country as under the previous rules. Businesses that qualify and register for this scheme may not need to charge VAT – or issue VAT invoices – on the sales it covers.
What information should be included on a VAT invoice?
If you're issuing a simpler VAT invoice (typically for sales under a certain threshold), you might need only the most important details, such as the seller's name and VAT number, the items or services sold, the invoice date, the VAT rate, and the VAT-inclusive price.
Beyond this simplified format, several other VAT invoice types exist, each suited to a different transaction scenario and carrying its own requirements:
Full invoices: The standard, most detailed format.
Self-billing invoices: Issued by the customer rather than the supplier, by prior agreement.
Reverse charge invoices: Used when the customer, not the supplier, accounts for the VAT.
Margin scheme invoices: Used for certain second-hand goods, art, or travel services where VAT is calculated only on the seller's profit margin rather than the full sale price.
Otherwise, a proper VAT invoice must include:
Supplier information: The supplier's business name, address, and VAT registration number.
Invoice number: A unique, sequential number that identifies the invoice.
Invoice date: The date the invoice is issued.
Tax point: Also called the time of supply, this is the date VAT becomes due on the transaction. It's usually the same as the invoice date, but include it separately whenever it differs – for example, if goods or services were supplied well before the invoice was issued.
Customer information: The customer's business name, address, and VAT registration number (if applicable).
Description of goods or services: Details of what was provided, including quantities and itemised costs.
Total (net) amount: The total cost of goods or services before VAT is applied.
VAT rate and amount: The VAT rate applied to each item or service (e.g., 20%, 5%) and the corresponding VAT amount for each.
Total amount payable (including VAT): The grand total with VAT included.
How to format a VAT invoice for compliance
Your VAT invoice should be arranged in a way that clearly displays the information your customer and tax authorities need. Here are tips on how to format this document:
Header information
Include your business logo, a title that marks the document as a VAT invoice, the invoice number, and the date of issue in your invoice header.
Your business information
List your business name, address, and VAT registration number directly below the header.
Customer details
Below that, include your customer’s business name, address, and VAT registration number, if applicable.
Itemised list of goods or services
Next, include an itemised list of the goods and services provided, including the quantity, unit price, and subtotal for each item.
VAT details
Beside each item, specify the VAT rate and the total line amount.
Totals section
At the bottom of your invoice, include a subtotal (the total before VAT) and the total amount due.
Additional notes (if applicable)
Below the total amount, you can include any additional information such as the due date and payment options. You can add a note explaining anything else, such as VAT reverse charges.
Example VAT Invoice
Note: the sample below uses USD, but your invoice should show amounts in the currency of the actual transaction, such as euros or pounds for EU or UK sales.
[Your business logo]
VAT invoice
Invoice no.: 12345
Date: DD/MM/YYYY
Your business information
Business name
Address
VAT registration number
Customer information
Customer business name
Customer address
Customer VAT registration number
Goods and services breakdown
|
Description
|
Quantity
|
Unit Price (Net)
|
Total (Net)
|
VAT Rate
|
VAT Amount
|
|---|---|---|---|---|---|
| Product A | 10 | US$10.00 | US$100.00 | 20% | US$20.00 |
| Service B | 5 hrs | US$50.00 | US$250.00 | 20% | US$50.00 |
Totals
Net Total: £350.00
VAT Total: £70.00
Grand Total (Including VAT): US$420.00
How to issue VAT invoices for international transactions
Issuing VAT invoices for international transactions requires making adjustments based on where the customer and seller are located. Here are some considerations for handling VAT invoices for international transactions:
Currency: Specify the currency used in the transaction.
Exchange rate: Include the exchange rate, particularly if you're filing in a different currency.
Shipping terms: Define shipping terms, and specify who bears costs and risks in cross-border goods sales.
Proof of export: Some jurisdictions don't charge VAT on exports (e.g., EU VAT rules don't apply to goods exported from the EU). Retain documentation of shipping for exported goods because tax authorities might ask for proof that the goods left the country.
Digital goods and services: Depending on local regulations, you might have to register and charge VAT in the customer's country for digital goods and services.
Reverse charge mechanism: If you're selling to a VAT-registered business in another country, you might need to apply the reverse charge mechanism. This means you don't charge VAT, since the customer accounts for it in their country.
Upcoming e-invoicing and digital reporting requirements
VAT invoicing rules are shifting towards mandatory digital formats in several jurisdictions:
EU: The VAT in the Digital Age (ViDA) package, adopted by the EU Council in March 2025, will require e-invoicing and near-real-time digital reporting for cross-border B2B transactions, with phased implementation through 2030.
UK: The UK government has committed to mandatory structured e-invoicing for B2B and B2G transactions starting 1 April 2029. In June 2026, His Majesty's Revenue and Customs (HMRC) confirmed Peppol as the core interoperability network (a decentralised four-corner model, with no real-time reporting to HMRC in this initial phase). For a closer look at what UK-registered businesses need to include on invoices today, see our guide.
Businesses issuing VAT invoices in these markets should plan for these changes now, since e-invoicing formats and transmission requirements differ from standard PDF or paper invoices.
What are common mistakes to avoid on a VAT invoice?
When you issue VAT invoices, double-check them and use reliable invoicing software such as Stripe Invoicing to minimise common errors. Here are some mistakes to watch for:
Skipping required details: VAT invoices need to include specific information. Leaving out any important details can invalidate the invoice.
Applying the wrong VAT rate: Applying the wrong VAT rate is a frequent error. Ensure you use the correct rate for the type of goods or services provided and the destination country, if it's an international transaction.
Using the wrong VAT number: You must include the VAT registration number for the supplier and, in certain cases, the customer. This is especially important for cross-border transactions within the EU. Double-check that these numbers are accurate and up to date.
Making calculation errors: Miscalculations on VAT amounts can happen, especially when you work with varying rates. Double-check your maths or use accounting software for accuracy.
Not separating VAT amounts: You should clearly state the VAT amount separately from the total amount. Failure to do so can make the invoice noncompliant and difficult for clients to process.
Using the incorrect currency: For cross-border transactions, VAT invoices often need to show amounts in the local currency or at an agreed exchange rate. Verify the currency requirements to avoid discrepancies.
Omitting payment terms: Though they're not always legally required, payment terms clarify expectations for both parties and help prevent disputes. Including terms for VAT payments is also helpful for the client's records.
Using the incorrect date format: Using the wrong date format can lead to misunderstandings, especially in international contexts. Use a clear, consistent format to ensure accurate bookkeeping.
Not including exemptions or zero-rated items: If there are items on the invoice that are zero-rated or exempt from VAT, you should identify them to ensure everything is clear.
Issuing an invoice when payment isn't due: For certain VAT schemes, such as the United Kingdom's Cash Accounting Scheme, VAT is due based on when payment is received, not when the invoice is issued. Prematurely issuing an invoice can create complications.
How Stripe Tax can help
Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard or using our powerful API.
Stripe Tax helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US, automate US filings in the Dashboard, and manage global filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, VAT, and GST on:
- Digital goods and services in all US states and over 100 countries
- Physical goods in all US states and 42 countries
Stripe Tax can help you:
Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration, or add tax collection with the click of a button in the Stripe Dashboard.
Register to pay tax: If you need to register for a sales tax in the US, let Stripe manage your tax registrations. You'll benefit from a simplified process that prefills application details – saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.
Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.
Simplify filing: Stripe Tax automates US filings in the Dashboard, powered by TaxJar. For global filings, Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business. US tax filings can be automated in the Stripe Dashboard, powered by TaxJar.
Learn more about Stripe Tax or get started today.
The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.