When you raise a sales invoice for a customer that’s based in the EU, you have to apply the reverse charge mechanism – find out more about the reverse charge here
This means accounting for the VAT element of your sales invoice in the right way. For Xero users, this means choosing the coding when you raise the invoice – either as ‘Zero Rated EC Services’ or ‘Zero Rated EC Goods Income’, depending on whether the invoice if for a product or service.
Once you’ve raised the invoice, Xero then automatically adds this to your VAT return.
It’s worth creating a separate branding theme in Xero for EU sales which includes the paragraph ‘EU VAT Directive: Application of the reverse charge mechanism according to articles 44 and 196 of Council Directive 2006/112/EC of 28 November 2006’ and adding the customer’s VAT number, which means no VAT will be charged to the customer.
NOTE: the place of supply for goods and services must be outside the UK. This can be confusing for when a service is being supplied, so ask us if you’re stuck.
If you need help with your EU VAT invoices, give us a call on 01454 300 999, or drop an email to firstname.lastname@example.org