Cross-Border Invoicing Guide for Freelancers
How to invoice international clients correctly, handle VAT, deal with withholding tax, and ensure compliance.
VAT / GST on Cross-Border Services
The VAT treatment of cross-border services depends on two factors: whether you are selling to a business (B2B) or a consumer (B2C), and where the "place of supply" is deemed to be.
B2B Services (Business to Business)
Under the EU reverse charge mechanism (and similar rules in many countries), when you provide services to a business client in another country:
- You do not charge VAT on your invoice
- The client self-assesses and pays the VAT in their own country ("reverse charge")
- You must include both your VAT number and the client's VAT number on the invoice
- You must include the note: "Reverse charge: VAT to be accounted for by the recipient pursuant to Article 196 of Council Directive 2006/112/EC"
- The transaction must be reported in your EC Sales List (within the EU)
B2C Services (Business to Consumer)
When selling to individual consumers in another EU country, the rules are more complex:
- For digital services (software, consulting, design), you must charge VAT at the rate of the customer's country
- Below the EUR 10,000 threshold (total EU cross-border B2C sales), you can charge your home country's VAT rate
- Above the threshold, you must either register for VAT in each customer's country or use the One-Stop Shop (OSS) system
Non-EU Countries
Services exported outside the EU are generally zero-rated (VAT at 0%). You still report them on your VAT return but do not charge VAT. Keep proof of the client's location (contract, correspondence, payment origin).
Withholding Tax on International Payments
Some countries require the payer to withhold tax from payments made to foreign service providers. This is common for royalties, interest, and certain services.
| Client Country | WHT on Services | Treaty Rate | Notes |
|---|---|---|---|
| United States | 30% (non-resident) | 0-15% | W-8BEN form reduces rate; independent services usually exempt |
| India | 10-20% | 10-15% | Technical services (FTS) subject to WHT; file Form 10F for treaty relief |
| Brazil | 15-25% | 10-15% | High WHT on services; limited treaty network |
| Australia | 0% (services) | N/A | No WHT on service payments to non-residents |
| Germany | 0% (services) | N/A | WHT only on specific income types (dividends, royalties) |
| Singapore | 15-22% | Varies | WHT on technical services, management fees, royalties |
When withholding tax is deducted, you can usually claim a Foreign Tax Credit in your home country to avoid double taxation. Keep withholding tax certificates as proof.
Required Invoice Elements by Country
Every country has specific requirements for what must appear on an invoice. Missing elements can delay payment and create compliance issues.
Universal Elements
- Your full name and address
- Client's full name and address
- Unique sequential invoice number
- Invoice date and payment due date
- Description of services provided
- Amount (net, VAT if applicable, gross)
- Currency
- Payment details (bank account, IBAN, SWIFT/BIC)
Country-Specific Requirements
- EU countries: VAT identification number (yours and client's for B2B), reverse charge notation if applicable, VAT rate and amount
- Germany: Steuernummer or USt-IdNr, Rechnungsnummer (invoice number), date of service delivery, Kleinunternehmer notation if applicable (Section 19 UStG)
- France: SIRET number, mention "TVA non applicable, article 293B du CGI" for micro-entrepreneurs exempt from VAT, late payment penalty clause
- UK: VAT registration number (if registered), company registration number (if Ltd), VAT rate breakdown
- Netherlands: KVK number, BTW number, bank account in IBAN format
- US: No federal invoice requirements, but include EIN/SSN for W-9 purposes, payment terms, state tax information if applicable
Currency Considerations
When invoicing international clients, you need to decide which currency to use:
- Invoice in your currency: You bear no exchange rate risk, but the client does. May result in disputes if the rate fluctuates between invoicing and payment.
- Invoice in client's currency: More client-friendly, but you bear the exchange rate risk. Consider building in a small buffer (2-3%) for rate fluctuation.
- Invoice in a third currency (USD/EUR): Common in international trade. Both parties share the exchange rate risk.
For tax reporting, you typically need to convert foreign currency amounts to your local currency at either the exchange rate on the invoice date, the payment date, or an annual average rate (varies by country). Check your country's rules.
Double Taxation Treaty Relief
If your client's country withholds tax from your payment, you can seek relief through:
- Reduced rate at source: File the appropriate treaty benefit form before or at the time of payment (e.g., W-8BEN for US, Form 10F for India). The client withholds at the lower treaty rate.
- Foreign Tax Credit: Report the withholding tax on your home country return and claim a credit. This offsets your home country tax, preventing double taxation.
- Refund claim: If tax was withheld at a higher rate than the treaty allows, you can file a refund claim with the withholding country's tax authority. This can take 6-24 months.
Practical Tips
- Use accounting software that handles multi-currency invoicing and VAT correctly (Xero, QuickBooks, FreeAgent, sevDesk, etc.)
- Verify your client's VAT number before applying reverse charge using the EU VIES system
- Set clear payment terms (Net 30 is standard; consider Net 14 for new clients)
- Include bank details for international transfer (IBAN + BIC/SWIFT) and consider offering Wise or PayPal as alternatives
- Keep copies of all invoices for at least 7-10 years (requirement varies by country)
- Consider using our VAT Calculator to verify VAT amounts