VAT & Invoices

September 2011

The key document that determines the tax liability in any VAT system is the invoice.

The European Commission has recently issued “draft explanatory notes” that discuss paper and electronic invoices. In particular, this draft deals with the authenticity of the origin, the integrity of the content and the legibility of invoices are insured from the moment of their issue until the end of the period of storage. This aims to ensure that the invoice accurately reflects actual supplies of goods and services.

There are many interesting comments in this draft, and one of the most important comments I think is that “For suppliers not established in the EU making taxable supplies of goods or services in the EU, […] the basic invoicing rule always applies, that being [the rules of] the Member State where the supply takes place.” Also, see the Annex on page 26 of the “draft explanatory notes”.

This comment means that for the supply of for example consulting services out of the U.S. to the UK, the U.S. consultant must issue an invoice that meets the UK invoice requirements. If not, the UK authorities could refuse the purchaser input tax credit on the reverse charge…!

Another worthwhile comment is the one on sequential numbering (page 36) – this comment confirms that series of sequential numbers that are identified with letters are allowed (for example with letters indicating the member state where the invoice is issued).

A number of countries including Italy, Portugal and Greece have sometimes disallowed this way of sequential numbering.

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