What reverse charge VAT means
The reverse charge moves the VAT on cross-border business services to the buyer: under Article 196 of the EU VAT Directive, the VAT on a service sold to a business is payable by the business that receives it when the supplier is not established in that business's country.
The client pays that VAT at its own country's rate and, if it can deduct VAT in full, claims it back as input tax under Article 168 of the Directive, so the charge nets to nothing, while you collect no foreign VAT and may still deduct the VAT you paid on related costs (Your Europe).
| Your fee, design work for a Berlin agency | €5,000 (about $5,690) |
|---|---|
| Portuguese VAT on your invoiceReverse charge: the service is taxed in Germany | €0 |
| German VAT the client declares, 19% | €950 (about $1,080) |
| Input VAT the client deducts in the same return | −€950 (about $1,080) |
| Net VAT paid by either side | €0 |
Germany's standard rate from Your Europe, checked October 12, 2026. A client that cannot deduct VAT in full keeps part of the €950 (about $1,080) as a cost.
The reverse charge settles who pays VAT on an invoice and changes nothing about income tax: digital nomad taxes on your profit follow your tax residence, while VAT follows the client.
The same name covers domestic reverse charges, which EU countries may apply between 2 local businesses for supplies such as construction work and scrap (Article 199).
Where your services are taxed: the place of supply rules
VAT is due in the country where a service is supplied, and the VAT Directive fixes that place by who the client is. A service to a business is supplied where the business is established (Article 44), and a service to a private person is supplied where you, the supplier, are established (Article 45).
Freelancers meet 3 exceptions. Telecoms, broadcasting and electronically supplied services to private persons are taxed where the buyer is established, has a permanent address or usually resides (Article 58), and so are cultural, educational, entertainment and similar activities streamed to private persons, such as a live webinar (Article 54). Consultancy, legal, accounting, engineering, advertising, data processing and similar services to private persons outside the EU are supplied where that person is, which puts them outside EU VAT (Article 59).
Who charges VAT on an EU freelancer's service, by client
| Your client | Where the service is taxed | What your invoice shows |
|---|---|---|
| Business in your own country | Your country | Your country's VAT |
| Business in another EU country | The client's country (Article 44) | No VAT, both VAT numbers, "Reverse charge" |
| Business outside the EU | Outside the EU (Article 44) | No EU VAT; the client's country may apply its own reverse charge |
| Private person in the EU, most services | Your country (Article 45) | Your country's VAT |
| Private person in another EU country, streamed classes and webinars | The buyer's country (Article 54), from the first sale | The buyer's country's VAT, declared through the One Stop Shop |
| Private person in another EU country, electronic services | The buyer's country (Article 58), once EU cross-border consumer sales pass €10,000 (about $11,400) | The buyer's country's VAT, declared through the One Stop Shop |
| Private person outside the EU, professional, electronic or streamed services | Outside the EU (Articles 54, 58 and 59) | No EU VAT |
| Private person outside the EU, most other services | Your country (Article 45) | Your country's VAT |
Which freelance services count as electronically supplied
Annex II of the Directive lists website supply and hosting, software, images, text, databases, music, films, games and distance teaching, among others. Article 7 of Implementing Regulation 282/2011 defines electronic services as those delivered over the internet whose supply is essentially automated, with minimal human intervention, and excludes teaching delivered by a teacher over the internet, so a recorded course, a pack of templates or a stock photo download falls under the electronic rule, while a live lesson over a video link does not.
A service is not electronic just because it travels by email: under Article 58, email contact between supplier and customer does not by itself make it one, so a logo, a translation or a code review sent as an attachment stays an ordinary service.
When the reverse charge applies to your invoice
The reverse charge needs 3 things: your client is a business, it is established in an EU country where you are not, and the service falls under the general business rule rather than one of the exceptions in the European Commission's place of taxation rules. Those cover services connected with immovable property, taxed where the property is (Article 47), passenger transport, by the distance covered (Article 48), admission to events attended in person, where they take place (Article 53), restaurant and catering, where carried out (Article 55), and short-term hire of means of transport, where it is handed over (Article 56).
Proving the first condition is your job. The usual proof is the client's VAT number checked in the European Commission's VIES search, which returns valid or invalid from the national VAT databases; keep a record of each check in case of a tax audit.
An invalid result does not always mean a fake number: a number can be valid at home but not yet registered for cross-border trade, which the client fixes with its own tax office before you apply the reverse charge.
Business client or private buyer
Right
A Madrid agency sends its VAT number, you check it in VIES, save the result with the invoice and bill €3,000 (about $3,410) with no VAT and the words "Reverse charge".
Wrong
A client with a company name but no VAT number gets the same invoice. Without proof that it was a business, the sale can be treated as one to a private person, taxed in your own country, and the VAT then comes out of your fee.
What a reverse charge invoice must show
Article 226 of the VAT Directive already requires your own VAT number on every invoice (point 3). When the client pays the VAT it adds 2 more items: the client's VAT number (point 4) and the mention "Reverse charge" (point 11a).
The invoice is due no later than the 15th day of the month after the service is supplied (Article 222), so work finished on March 20 is invoiced by April 15.
Each reverse-charged sale also goes on a recapitulative statement, often called the EC Sales List, listing every EU business client and the amount billed. The Directive sets the statement per calendar month and lets each country allow quarterly statements instead (Articles 262 and 263). From July 1, 2030, the VAT in the Digital Age package brings digital reporting for cross-border business sales (European Commission).
Before you send a reverse charge invoice
- Get the client's VAT number and check it in VIES; save the result with the invoice.
- Confirm the client is established in another EU country, not in yours.
- Put your own VAT number and the client's VAT number on the invoice.
- Add the words "Reverse charge" and leave your own country's VAT off.
- Issue the invoice by the 15th day of the month after the work is done.
- List the client and the amount on the recapitulative statement for that period.
Small business VAT exemption and EU business clients
Every EU country can exempt small businesses from charging VAT, under a national threshold that Article 284 of the Directive caps at €85,000 (about $96,700) of annual turnover, and countries can set it lower.
An exempt business shows no VAT on its invoices and cannot deduct VAT on its costs. After registering once at home for an EX identification number, it can use the exemption in other EU countries while its EU-wide turnover stays under €100,000 (about $114,000) and its sales in each of those countries stay under that country's own threshold, in the previous calendar year too (Your Europe).
The exemption does not switch off the reverse charge. The client still accounts for the VAT, and Article 214 requires a business that supplies reverse-charged services in another EU country to be identified for VAT. Article 292b lets each country release exempt small businesses from identification, but not for those supplies, so you need a VAT number whatever your turnover. Article 292d does let each country release them from the invoicing, record-keeping and reporting duties in Articles 217 to 271, the recapitulative statement among them, so check your own country's rule.
That number comes from the country where your business is established, so moving abroad to another EU country means telling the old tax office that your activity there has ceased and registering for VAT in the new one, alongside income tax and social contributions (Articles 213 and 214).
Selling to private buyers: digital services, the €10,000 threshold and the OSS
Most services you sell to private persons carry your own country's VAT, wherever in the EU the buyer lives (Your Europe). Electronically supplied services are the main exception: they are taxed in the buyer's country, at that country's rate.
A freelancer established in only 1 EU country gets a threshold first. While cross-border sales of these services and any distance sales of goods to EU consumers together do not exceed €10,000 (about $11,400) a year, excluding VAT, in both the current and the previous calendar year, they can stay taxed at home (Article 59c).
Live online classes, workshops and webinars sold to private buyers get no such threshold: the Commission's place of taxation rules tax events that are streamed or otherwise made virtually available where the customer resides (Article 54), so they carry the buyer's VAT from the first sale.
Above the threshold every sale of electronic services carries the buyer's rate, and a seller under it can choose the buyer's rate from the first sale, a choice that binds it for at least 2 calendar years (Article 59c). The spread is wide: a buyer in Luxembourg pays 17% and one in Hungary 27%, the lowest and highest standard rates in the EU (Your Europe).
Source: Your Europe (European Commission), VAT rules and rates
Show the numbers
| Standard VAT rate | |
|---|---|
| Hungary | 27% |
| Finland | 25.5% |
| Croatia | 25% |
| Denmark | 25% |
| Estonia | 24% |
| Portugal | 23% |
| Ireland | 23% |
| Italy | 22% |
| Spain | 21% |
| France | 20% |
| Germany | 19% |
| Luxembourg | 17% |
The One Stop Shop saves registering in every buyer's country. It started on July 1, 2021, and you register in 1 country, your Member State of identification: EU-based sellers use the union scheme, and sellers with no place of business in the EU use the non-union scheme.
You file 1 return per calendar quarter for the EU countries you sold into, due by the end of the month after the quarter (Articles 364 and 369f), and pay the VAT no later than that deadline (Articles 367 and 369i). Sales in your own country stay on your normal VAT return, because the union scheme covers only countries where you are not established (Article 369b).
Take a freelancer resident in Portugal selling templates from her own site, already above the threshold: each quarter's OSS return adds up the VAT country by country at the buyers' rates.
| Buyers in Germany, €6,000 of sales at 19% | €1,140 (about $1,300) |
|---|---|
| Buyers in France, €4,000 of sales at 20% | €800 (about $910) |
| Buyers in Hungary, €1,000 of sales at 27% | €270 (about $307) |
| Buyers in Portugal, €2,000 of sales at 23%Domestic sales: on the normal Portuguese VAT return, not the OSS | €460 (about $523) |
| VAT on the OSS return for the quarter | €2,210 (about $2,510) |
Sales shown without VAT. Rates from Your Europe, checked October 12, 2026; the seller's yearly cross-border consumer sales are above €10,000 (about $11,400).
Freelancers outside the EU with EU clients
Business clients work the same way from outside the EU. The client's country taxes the service under Article 44, and the client pays the VAT under Article 196 because you are not established there, so your invoice carries no EU VAT.
For a freelancer based in the UK, HMRC treats services to a business customer abroad as outside the scope of UK VAT, and you keep evidence that the customer is in business abroad, for which an EU client's VAT number is the best proof (VAT Notice 741A).
Those outside-scope sales also stay out of the UK registration test, which counts taxable turnover over £90,000 (about $119,000) in any 12 months (GOV.UK), so a UK freelancer billing only foreign businesses does not have to register on those sales.
Assuming the EU's consumer threshold covers you is one of the digital nomad tax mistakes that catches freelancers outside the EU. The €10,000 (about $11,400) threshold applies only to sellers established in a single EU country (Article 59c), so a freelancer based outside the EU who sells templates, software or recorded courses to EU consumers owes the buyer's VAT from the first sale and can declare it through the non-union scheme of the One Stop Shop.
Consulting for a private client is different: under Article 45 it is supplied where the seller is established, so it carries no EU VAT from outside the EU, and HMRC treats professional services to private customers outside the UK as outside UK VAT (VAT Notice 741A, section 12).
David's note
I would not let VAT pick the country you base your business in. For a freelancer billing businesses, the reverse charge works the same from Lisbon, Tallinn or Sofia and nets to nothing in each, so the choice should rest on income tax and social contributions, where the real differences sit.
