Tax compliant invoicing presents challenges for online merchants. Some countries don’t require B2C invoicing or do not impose set requirements and instead allow you to rely solely on your home country’s rules, while others require you to meet country-specific criteria. This means that if you have customers in multiple countries, you need to be able to comply with a wide variety of invoice rules.
Here we explain some basic invoice rules and introduce a few more unusual requirements found in some regions.
Basic invoice rules
These cover some of the more common invoicing requirements across regions:
- Invoice and supply date;
- Description of the supplied services or goods;
- Sequential invoice numbering per country;
- Net amount for the goods or services;
- Display of tax amount in local currency;
- VAT/GST registration number of the seller; and
- Official business name and address of the seller.
Let’s also explore some more unusual requirements...
Many jurisdictions collect local VAT from a local business customer instead of the supplier. Then, as a vendor, you should not calculate VAT as your business customer will self-account for this. Usually, your invoice must indicate that the VAT is due by the customer. And for example, within the EU, you must confirm your customer’s business status by including his/her validated VAT number in the invoice.
This validation must sometimes be done in real-time during the sales process. For recurring subscriptions, it’s important to validate each time you take a payment as it’s not unlikely a customer has withdrawn its VAT ID.
Foreign currency details
When invoicing in a currency foreign to the country where the VAT is due, this often is allowed provided base, and VAT amounts are converted into the reporting country’s currency. However, many countries such as Ukraine require invoices in the local language and local currency. Working with different currencies is complicated as applicable exchange rates are mandated and must be applied at the point of sale when issuing the invoice.
Countries where this is the case include Saudi Arabia and Serbia, where invoices must be in English as well as Arabic and Serbian, respectively.
Identifying tax agents on invoices
In countries where foreign sellers must have a tax agent, the invoice may need to include details of the tax agent showing them as liable for the tax.
Taiwan’s electronic uniform invoices
To Taiwan-based consumers, foreign suppliers of digital services must integrate a ‘legally generated lottery number’ issued by Taiwan’s electronic Government Uniform Invoice system (eGUI). The customer can then use the lottery number to enter the state lottery draw. Adopting this eGUI system can be challenging.
India’s service accounting codes
India assigns a unique SAC (service accounting code) to service categories, which must be shown on the (electronic) invoice.
How can you be sure of compliance?
Your shopping cart processes must incorporate the technology to identify where a customer is based and whether it’s a consumer or a business, apply the relevant invoicing requirements for every individual transaction, and connect with any necessary third-party data sources – all in real-time. It’s also essential that you are confident that the data being fed into the system is kept constantly updated so you’re not caught off-guard by changes.
To learn more about global e-commerce invoice rules and requirements, check out our Global Digital Services Tax Compliance Guide.
PLEASE REMEMBER THAT THE TAX MATTERS PROVIDES INFORMATION FOR EDUCATIONAL PURPOSES, NOT SPECIFIC TAX OR LEGAL ADVICE. ALWAYS CONSULT A QUALIFIED TAX OR LEGAL ADVISOR BEFORE TAKING ANY ACTION BASED ON THIS INFORMATION. THE VIEWS AND OPINIONS EXPRESSED IN TAX MATTERS ARE THOSE OF THE AUTHORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY, POSITION, OR OPINION OF VERTEX INC.