How to work out and show VAT on an invoice

1. Check that you must charge it

Most countries require VAT or GST registration once your sales pass a threshold. Below it, you usually do not charge the tax and must not show it on invoices.

2. Choose the right rate for each item

Use the standard rate unless the item clearly falls into a reduced or zero rate, such as food, books, children's clothes or medicine. When unsure, check your tax authority's rate list or ask an adviser.

3. Work out the tax line by line

Multiply each net line by its rate and round to the nearest cent. Then total the net amounts, the tax for each rate and the gross amount. Some countries let you round on the invoice total instead; follow one method consistently.

4. Show the required details

A full VAT invoice usually shows your VAT number, the customer's details, the invoice date and number, a description of each item, the net amount, the rate, the tax amount and the total.

5. Cross-border sales

Sales to businesses in another country often use the reverse charge: you charge 0% and add a note, and the customer accounts for the tax. Sales of digital services to consumers abroad may need the customer's country rate.

Checklist

Before you send an invoice:

• Show net, tax and gross amounts separately.
• Show the rate next to each tax amount.
• Use the rate in force on the date of supply.
• Keep a copy for as long as your tax authority requires, often 6 to 10 years.
• Ask an accountant about anything unusual: exports, mixed supplies, margin schemes.