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European invoice – what is it, how to issue it and what should it contain?

25.09.2023
European invoice – what is it, how to issue it and what should it contain?

Nowadays, where globalization and open borders are the strength of economies, understanding the rules and practices related to invoicing within the European Union is crucial for entrepreneurs. As one of the most important documents in commercial transactions between EU member states, the European invoice plays a significant role in the day-to-day operations of companies. In this article we will try to explain what a European invoice is, what elements it should contain, how to issue it correctly and what details are worth paying attention to in order to avoid potential problems – we invite you to read on!

What is a European invoice?

European invoice is asettlement document that is used in commercial transactions between companies operating in different countries of the European Union. Thanks to the harmonization of regulations within the EU, the issuance and acceptance of such invoices is much easier compared to trade with countries outside the EU.

Why is the European invoice so important?

In an era of globalization and increasing trade between EU countries, the European invoice is a key document that facilitates and streamlines settlement processes. It is not only proof of the transaction, but also the basis for calculating VAT, which is one of the most important elements of internal and external trade in the European Union.

What should a European invoice contain?

There are certain mandatory elements that must be included on every EU invoice. These are:

  • the data of the contractor and the principal, and the addresses of both entities,
  • the tax identification numbers of both entities – European TIN numbers with different prefixes depending on the country of the European Union,
  • the “reverse charge” annotation – if the invoice documents EU sales,
  • invoice number,
  • date of issuance of the invoice,
  • the dimensions and weight of the goods or the scope of the service provided,
  • the name of the service or goods, which are the subject of the transaction,
  • currency in which payment is made,
  • net price,
  • value of goods or services (excluding VAT)
  • iBAN and SWIFT codes – if payment is made by wire transfer.

EU invoice with and without VAT

An EU invoice can be issued with VAT (EU invoice with VAT) or without VAT (EU invoice without VAT). The choice between the two options depends on various factors, such as the type of goods, services or the tax status of both parties to the transaction.

EU VAT invoice – what VAT?

As for the VAT rates in EU invoices, they vary depending on the country in which the parties to the transaction operate. This is one of the elements to pay attention to when issuing an EU VAT invoice.

European invoice template

The European invoice template is harmonized within the EU, but there may be some differences related to local regulations. Therefore, before issuing an invoice, it is advisable to familiarize yourself with the applicable standards in your country.

How to issue a European invoice?

Issuing a European invoice is a process that can be accomplished using a variety of tools, from traditional computer programs to dedicated invoicing software to online platforms. Here are some steps you can follow to do this:

  • make sure you know all the necessary information about the counterparty and the transaction,
  • choose an appropriate European invoice template that complies with the regulations of the country in which your company operates,
  • fill in all mandatory fields, keeping in mind such elements as the transaction identification number or VAT rates,
  • carefully check the invoice before sending it,
  • send the invoice in a mutually acceptable format (most often PDF).

Foreign invoices without VAT

There are certain situations in which it is possible to issue a foreign invoice without VAT. These include transactions related to the export of goods outside the EU, the provision of services to foreign entities that are not registered for VAT, or specific cases like the sale of excise goods.

EU invoice and VAT – what is worth knowing?

When it comes to VAT rules in the context of EU invoices, they are quite complicated and depend on a number of factors, such as the type of goods or services, the relationship between the parties and the country’s regulations. Therefore, before issuing an EU invoice, it is worth consulting a tax advisor or other expert in the field.

In the context of European invoices, it is also worth paying attention to issues related to VAT deduction, tax refunds or documentation necessary for any settlements with the tax authorities.

Invoice to a foreign company – specifics and exceptions

When invoicing a foreign company, it is extremely important to take into account any regional specifics, such as different VAT rates, customs procedures, or other local fees and taxes. It is also worth paying attention to possible international agreements that may affect the rules for calculating VAT or other elements of the transaction.

All this makes the European invoice not only a legal, but also a business document, the correct issuance of which can significantly affect the course and efficiency of business transactions within the European Union.

How to issue a VAT invoice for a foreign contractor?

Issuing an invoice in euros to a foreign counter partyis not significantly different from the invoicing process for domestic customers, but it requires taking into account several additional aspects.

First, it is necessary to determine where the services will be performed. This is of great importance in terms of correctly determining how VAT should be charged and accounted for. As a general rule of thumb, theplace of supply of services is where the person using the service is established or has a fixed place of business.

Gather information about the contractor

Make sure you have all the necessary information about the foreign contractor. This includes the company’s full name, address, tax identification number (NIP for Poland, VAT ID for other EU countries), and the currency in which the invoice is to be issued.

Select the appropriate VAT rate

The VAT rate may vary depending on the country in which the contractor’s company is registered and the type of services provided or goods sold. In some cases, the invoice can also be issued as an “EU invoice without VAT.” – for example, if the counterparty is a registered VAT payer in another EU country.

Include the currency of the transaction

If the transaction is carried out in a currency other than your home currency, make sure the invoice states the amounts in the appropriate currency. A frequently used currency for international transactions in the EU is the euro.

Description of goods or services

Carefully describe the goods or services that are the subject of the transaction. In some cases, a detailed description is required for customs clearance or other regulatory purposes.

Add additional information, if necessary

Some countries may require additional information on the invoice, such as, for example, clauses on regulations applied, information on licenses or certificates.

Check and approve

Before sending the invoice, check it carefully. Make sure that all information is legal and comprehensive. Once accepted by both parties, the invoice is ready to be sent.

Sending the invoice

The European VAT invoiceshould be sent in a form that is compatible with the requirements of both parties. It can be a paper invoice sent by mail, a scan sent by email, or an electronic invoice issued by dedicated invoicing systems.

Archiving

Once the invoice has been issued and sent, make sure you have a copy of it in accordance with applicable record retention regulations. This may be required for tax audit or other audit procedures.

Remember that it is always agood idea to consult a tax advisor or accountant, especially if this is your first transaction with a foreign counterparty or if you have any doubts about the applicable procedures and regulations. Our TAXON invoice accounting application will certainly help you with the correct settlement – a solution for modern entrepreneurs who value their time.