An invoice is more than just a request for payment; it is a legal tax document. If your invoices are missing required information, you could be in trouble. Your clients might refuse to pay (because they can't claim the expense), and tax authorities could fine you during an audit.
Tax compliance is complex because the rules change depending on where you are and where your client is. This guide covers the essential requirements for the US, UK, EU, and other major jurisdictions.
Disclaimer: This article is for informational purposes only. Tax laws are subject to change. Always consult with a certified accountant or tax professional for your specific business needs.
Regardless of your location, every tax-compliant invoice must generally include:
The United States does not have a national sales tax. Instead, it has thousands of state and local tax jurisdictions.
You generally only need to collect sales tax in states where you have a "Nexus" (a physical presence or significant economic activity). However, since the Wayfair ruling, selling online can create a nexus even without a physical office.
[CONTENT IMAGE 1: Map of the US showing different sales tax rates in different states (heat map style)]
AI Prompt: Map of the US showing different sales tax rates in different states (heat map style)
Value Added Tax (VAT) is strictly regulated. If you are VAT-registered, you must issue a valid VAT invoice.
When selling B2B across borders within the EU (or sometimes domestic construction services), the buyer accounts for the VAT, not the seller. Your invoice must state: "Reverse Charge applies."
[CONTENT IMAGE 2: Diagram explaining the 'Reverse Charge Mechanism' with arrows moving between Buyer and Seller]
AI Prompt: Diagram explaining the 'Reverse Charge Mechanism' with arrows moving between Buyer and Seller
Goods and Services Tax (GST) works similarly to VAT.
What if you are in the US and invoice a client in France? Or you are in the UK and invoice a client in the US?
General Rule for Services (B2B): The "Place of Supply" is usually where the customer is located. Since the customer is outside your tax jurisdiction, the transaction is often Out of Scope or Zero-Rated for your local tax.
Example: A UK designer invoices a US company. The invoice should show 0% VAT and note "Export of Services."
Tax authorities require you to keep copies of all invoices issued and received.
You sent an invoice with the wrong tax rate. What do you do?
NEVER delete the invoice. This creates a gap in your sequential numbering, which looks like fraud to an auditor.
The Solution: Issue a Credit Note to cancel the original invoice (negative amount), and then issue a new, correct invoice.
Manually looking up tax rates for every zip code is impossible. Use software.
Invoicely and other platforms integrate with tax databases to automatically apply the correct rate based on your client's address. This ensures you never undercharge or overcharge tax.
Some clients (non-profits, government agencies, resellers) are exempt from sales tax.
Exclusive: $100 + $10 Tax = $110 Total. (Common in B2B).
Inclusive: $110 Total (Tax is already inside). You must calculate backwards to find the tax amount for the invoice breakdown.
It depends on the state/country. In some places, shipping is taxable if the item being shipped is taxable. In others, shipping is exempt if listed separately.
In most Western countries, no. In some Asian and European countries, a signature or digital seal is required for validity.
Yes, but for VAT/GST purposes, you usually must also show the tax amount converted into your local currency using the exchange rate on the invoice date.
You are still liable to pay it to the government. This means the tax comes out of your own pocket (eating into your profit) unless you can go back and collect it from the client.
In the EU/UK, for small amounts (e.g., under £250), you can issue a simplified invoice that requires fewer details (e.g., just the gross amount and tax rate, not the customer's address).
Only if you meet the registration threshold for your country (e.g., £90,000 in UK, $30,000 in Canada). In the US, sales tax rarely applies to pure services, but check your state laws.
Taxpayer Identification Number. In the US, it's your EIN or SSN. In Europe, it's your VAT number.
Yes, electronic invoicing (e-invoicing) is the standard. Some countries (like Italy and India) now mandate specific e-invoice formats submitted via government portals.
If the law says tax is due, they must pay it. If they refuse, you cannot simply waive it. You must either collect it or pay it yourself.
Apply the discount to the Net Amount before calculating the tax. You pay tax on the discounted price, not the original price.
A UK government initiative requiring businesses to keep digital records and submit VAT returns using compatible software (like Invoicely).
Invoicely automatically handles tax calculations, currency conversions, and compliant invoice templates for the US, UK, Canada, and beyond.
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