Reverse charge VAT on cross-border IT services

When you sell IT or software services to a business in another country, the question is rarely "how much VAT do I add?" but "do I add any at all, and who accounts for it?" For most cross-border business-to-business services the answer involves the reverse charge, a mechanism that moves the VAT accounting from you, the supplier, onto your client.

Get it right and you issue a clean no-VAT invoice and your client handles the rest. Get it wrong and you either charge VAT you should not have, fail to charge VAT you should have, or omit the reference note that makes the invoice valid. This guide walks through the general principles so you know which questions to ask. The detailed rules differ by jurisdiction and change over time, so treat this as orientation, not a determination, and confirm specifics with an adviser.

Place of supply: where the customer belongs

VAT on services hinges on the place of supply, the country that has the right to tax the service. For most business-to-business services the general rule is that the place of supply is where the customer belongs, not where you are based. So when you sell development or consulting to a business in another country, the supply is generally treated as taking place in the customer's country rather than yours.

That single rule is why you often do not add your own country's VAT to a cross-border B2B invoice. There are important exceptions, and the picture is different for consumers and for certain electronically supplied services, where special rules can place the tax where the customer is located even for B2C sales. Establishing whether your client is a business, and where they belong, is therefore the first thing to settle before you decide how to invoice.

How the reverse charge works

When the place of supply is your client's country and the reverse charge applies, you do not charge VAT. Instead your client accounts for the VAT in their own return, both charging it and, where they can, reclaiming it, so the two entries typically net to nothing for them. This avoids you having to register for VAT in every country you sell into.

Your obligation is to issue the invoice correctly. That generally means showing no VAT amount, and adding a clear reverse-charge reference stating that VAT is to be accounted for by the recipient. The exact wording and the legal reference depend on the jurisdiction, but the principle is consistent: the invoice has to make plain that the customer, not you, is responsible for the VAT. Omitting that note is a common error that can make an otherwise correct invoice non-compliant.

Validating the customer and getting invoicing right

The reverse charge generally depends on your customer genuinely being a VAT-registered business. That is why validating the customer's VAT number matters: it is your evidence that this is a B2B supply and that shifting the VAT accounting is appropriate. Keep a record of the validation at the time of supply, because checking after the fact is weaker evidence if a tax authority ever asks.

Common pitfalls are treating a consumer or an unregistered business as if the reverse charge applied, misjudging where the customer belongs, or applying the right treatment but leaving off the reference note. Electronically supplied services and B2C sales can follow different rules again, sometimes requiring you to charge VAT at the customer's local rate. Because the rules vary by country and change, build a simple checklist into your onboarding, confirm the VAT number, confirm where the customer belongs, confirm whether it is B2B, and confirm the correct invoice wording, and check the edge cases with an adviser.

How Altery fits

Altery is not a VAT determination tool, and it cannot tell you whether a given supply qualifies for the reverse charge; that judgement rests with you and your adviser. Where it helps is operational. Multi-currency business accounts holding USD, EUR and GBP let you receive payment from overseas clients in their own currency and convert on your own timeline, so the money side of a cross-border invoice stays clean.

Because each client's receipts sit against a clear, real-time record, you can reconcile what you invoiced against what arrived per client, which is useful when invoices carry no VAT and you need to show that the net you received matches the net you billed. Multi-entity management and ring-fencing money in pots help if you bill from more than one entity or want to separate flows by client. Altery is not a bank, and this is general information rather than tax advice, but tidy per-client records make your VAT reporting and any review far easier to stand behind.

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