How to Add VAT to an Invoice: A Simple Guide
Getting VAT on an invoice right is not complicated, but a missing field or wrong calculation can cause payment delays and compliance issues. This guide covers the mechanics clearly.
The required VAT fields on an invoice
- Your VAT registration number (VAT ID or Umsatzsteuer-Identifikationsnummer).
- The customer's VAT number, for B2B transactions within the EU or reverse charge cases.
- The VAT rate applied (e.g. 19%, 20%, 0%).
- The net amount (amount before VAT).
- The VAT amount (net amount times the VAT rate).
- The gross total (net amount plus VAT amount).
How to calculate the VAT amount
Net amount multiplied by the VAT rate as a decimal gives the VAT amount. Net plus VAT equals the gross total.
- Net: 1,000.00
- VAT rate: 19%
- VAT amount: 1,000.00 x 0.19 = 190.00
- Gross total: 1,190.00
Standard rate, reduced rate and zero rate
- Standard rate: varies by country (19% in Germany, 20% in the UK and Austria, 21% in Spain).
- Reduced rate: applied to specific goods and services such as food, books and medicine in many countries.
- Zero rate: technically VAT-rated at 0%. The customer pays nothing, but the transaction must still be reported.
- Exempt: certain services (healthcare, education in many countries) are not subject to VAT and require no VAT line.
Reverse charge invoices
In cross-border B2B transactions within the EU, the VAT obligation shifts to the customer (reverse charge). Your invoice should show the net amount, state the reverse charge applies, include both VAT numbers, and show no VAT charge with a note that VAT is accounted for by the customer.
A common mistake to avoid
Do not include VAT if you are not VAT-registered. Adding a VAT amount to an invoice without a VAT registration number is fraudulent in most jurisdictions. If you are unsure of your VAT status, check with your accountant first.
Invoice Studio calculates the VAT amount and gross total automatically once you select the rate. For a comparison of invoices with other documents, see the guide to invoice vs receipt vs quote.
Common questions
- Do I need a VAT number to charge VAT?
- Yes. You must be VAT-registered with your tax authority to charge VAT on invoices. If you are not registered, do not include a VAT line. The threshold for mandatory VAT registration varies by country.
- How do I show VAT on an invoice?
- Show the net amount, the VAT rate as a percentage, the VAT amount as a figure, and the gross total. Include your VAT registration number and, for B2B EU transactions, the customer's VAT number.
- What is reverse charge on an invoice?
- In cross-border EU B2B transactions, the buyer accounts for VAT rather than the seller. Your invoice shows the net amount, notes that reverse charge applies, includes both VAT numbers, and does not itself charge VAT.