How to Write Your First VAT Invoice: Complete Guide (2026)
Writing your first VAT invoice can feel overwhelming, especially with strict legal requirements in different countries. This comprehensive guide walks you through everything you need to know to create a compliant VAT invoice, including calculation examples and country-specific requirements.
What is a VAT Invoice?
A VAT (Value Added Tax) invoice is a legally required document that shows the amount of VAT charged on goods or services. Unlike a standard invoice, a VAT invoice must include specific information to comply with tax regulations. Businesses registered for VAT must issue VAT invoices to their customers, and these invoices allow buyers to reclaim the VAT they've paid.
Essential Elements of a VAT Invoice
A valid VAT invoice must include all of these elements to be legally compliant:
Unique Invoice Number
Sequential numbering system with no gaps (e.g., INV-2026-001, INV-2026-002).
Your VAT Registration Number
Must be clearly displayed (e.g., "VAT: GB123456789" or "BTW: NL123456789B01").
Invoice Date
The date the invoice is issued (also called the "tax point" or "supply date").
Seller's Name and Address
Your full business name and registered business address.
Customer's Name and Address
The buyer's full name or company name and address.
Description of Goods/Services
Clear description of what was provided, including quantity if applicable.
Net Amount (Subtotal)
The total price excluding VAT for each item or service.
VAT Rate Applied
The percentage rate of VAT charged (e.g., 20%, 21%, 19% depending on country).
VAT Amount
The total VAT charged, calculated separately from the net amount.
Total Amount Including VAT
The final amount the customer must pay (net amount + VAT).
How to Calculate VAT on an Invoice
Calculating VAT correctly is crucial for compliance. Here's the step-by-step process:
Example: UK Invoice at 20% VAT
£300.00 = £1,500.00 × (20 ÷ 100)
Country-Specific VAT Requirements
United Kingdom (20% Standard Rate)
- VAT registration number format: GB followed by 9 digits (e.g., GB123456789)
- Must include the words "VAT Invoice" on the document
- Reduced rates: 5% for some goods and services, 0% for zero-rated items
- Reverse charge applies to some construction services
European Union (Varies by Country)
- Germany: 19% standard rate (Umsatzsteuer/USt), VAT number format: DE123456789
- France: 20% standard rate (TVA), VAT number format: FR12345678901
- Netherlands: 21% standard rate (BTW), VAT number format: NL123456789B01
- Spain: 21% standard rate (IVA), VAT number format: ES12345678A
- Intra-EU B2B transactions: Reverse charge mechanism applies (0% VAT with customer's VAT number)
United States (Sales Tax, Not VAT)
The US doesn't have VAT but uses state sales tax instead. Requirements vary by state, but generally:
- Sales tax rates vary from 0% to over 10% depending on state and locality
- You need a sales tax permit to collect sales tax
- Show sales tax separately on invoices
- Digital services may be subject to sales tax in many states
Special Cases and Exemptions
Reverse Charge (B2B EU Transactions)
When selling to VAT-registered businesses in other EU countries, you apply the reverse charge mechanism:
- Charge 0% VAT on your invoice
- Include customer's VAT number on the invoice
- Add the note: "Reverse charge applies - Customer to account for VAT"
- The customer pays VAT in their own country
Zero-Rated Goods and Services
Some items are zero-rated (0% VAT) but still need a VAT invoice:
- Exports outside the EU/UK
- Books and newspapers (in many countries)
- Children's clothing (in some countries)
- Essential food items (varies by country)
Common VAT Invoice Mistakes to Avoid
Missing or Incorrect VAT Number
Double-check your VAT number is displayed correctly with the country code.
Incorrect VAT Rate
Using the wrong rate for your country or service type can cause compliance issues.
Not Showing VAT Breakdown
Net amount, VAT amount, and total must be shown separately.
Rounding Errors
Always round VAT to 2 decimal places and ensure totals add up correctly.
Not Including "VAT Invoice" Text
Some countries require the words "VAT Invoice" to appear on the document.
VAT Invoice Record Keeping
Tax authorities require you to keep copies of all VAT invoices:
- UK: Keep records for at least 6 years
- EU: Most countries require 7-10 years (check your specific country)
- Digital copies: Most countries accept electronic records
- Sequential numbering: Maintain unbroken invoice number sequences
Simplified vs Full VAT Invoices
For small transactions, simplified VAT invoices may be acceptable:
Simplified VAT Invoice
- ✓ For transactions under £250 (UK) / €400 (EU)
- ✓ Can omit customer's address
- ✓ Can omit customer's VAT number
- ✓ Suitable for retail and small B2C sales
Full VAT Invoice
- ✓ Required for transactions over £250 / €400
- ✓ Required for B2B transactions
- ✓ Must include all mandatory elements
- ✓ Allows customer to reclaim VAT
Create VAT-Compliant Invoices Instantly
Creating compliant VAT invoices manually can be time-consuming and error-prone. PrestoBills automatically handles VAT calculations, ensures all required fields are included, and generates professional invoices that meet legal requirements in your country.
Features for VAT Invoice Creation:
- Automatic VAT calculation for multiple countries and rates
- Store your VAT registration number and apply it to all invoices
- Sequential invoice numbering with no gaps
- Support for reverse charge and zero-rated transactions
- Professional templates that meet legal requirements
Key Takeaways
- You must be VAT registered to issue VAT invoices
- Include all 10 mandatory elements on every VAT invoice
- Calculate VAT correctly: VAT Amount = Net Amount × (VAT Rate ÷ 100)
- Use the correct VAT rate for your country and service type
- Apply reverse charge for B2B EU transactions
- Keep invoice records for at least 6-10 years depending on your country
- Use sequential invoice numbering with no gaps
- Consider using invoicing software to ensure compliance and save time
Ready to Create Professional VAT Invoices?
Stop worrying about VAT compliance. PrestoBills handles all the calculations and requirements automatically, so you can focus on your business.