VAT on Invoices — Simple Guide for Tradespeople.

Do You Need to Charge VAT?

The first question every tradesperson asks is: "Do I need to add VAT to my invoices?" The answer depends on where you are and how much you earn.

Every EU country has a VAT registration threshold — a minimum annual turnover below which you don't need to register for or charge VAT:

Note: Thresholds change. Always verify with your local tax authority.

Under the Threshold: Small Business Exemption

If your turnover is below the threshold, you operate under the small business exemption (Kleinunternehmerregelung in Germany, franchise en base de TVA in France). You do NOT charge VAT on your invoices and you cannot reclaim VAT on your purchases. Your invoices simply state "No VAT charged — small business exemption" or the locally required phrase.

Over the Threshold: You Must Register

Once you exceed the threshold, you must register for VAT with your tax authority. From that point on, every invoice must include VAT. You also need to file regular VAT returns (monthly, quarterly, or annually depending on your turnover and country).

The Reverse Charge Rule — Critical for Construction

If you do subcontracting work for other construction companies, you must understand the reverse charge.

What It Is

Normally, the supplier charges VAT and pays it to the tax authority. Under the reverse charge, the customer is responsible for reporting and paying the VAT instead.

When It Applies

In most EU countries, the reverse charge applies to construction services between two VAT-registered businesses (B2B). For example:

• An electrician subcontracting for a general contractor
• A plumber doing work for a property developer
• A painter contracted by a construction company

How to Invoice with Reverse Charge

Your invoice needs:

• The usual business and client details (including both VAT numbers)
• A line stating the reverse charge applies (each country has a legally required phrase)
• No VAT added to the total
• The client's VAT number verified through VIES

Example legal wording (Germany): "Steuerschuldnerschaft des Leistungsempfängers gemäß §13b UStG"

Displaying VAT on Your Invoice

A proper VAT breakdown makes your invoice compliant and professional:

Description: Kitchen rewiring
Subtotal:                         €500.00
VAT (19%):                         €95.00
Total:                            €595.00

Multiple VAT Rates

If you supply items with different VAT rates (e.g., standard 19% for labor, reduced 7% for certain materials in Germany), group them by rate:

Electrical installation labor
  Subtotal (19% VAT):             €300.00
  VAT (19%):                       €57.00

Energy-saving materials
  Subtotal (7% VAT):              €200.00
  VAT (7%):                        €14.00

Total VAT:                         €71.00
Total:                            €571.00

Country-by-Country VAT Tips

Germany

• VAT rates: 19% standard, 7% reduced (certain renovation work)
• Reverse charge: §13b UStG for construction services between businesses
• Small business: Kleinunternehmerregelung up to €25,000

France

• VAT rates: 20% standard, 10% reduced (renovation in residential buildings over 2 years old), 5.5% (energy renovation)
• Reverse charge: Auto-liquidation for subcontracting in construction
• Small business: Franchise en base up to €85,000

Poland

• VAT rates: 23% standard, 8% reduced (certain construction), 5% (social housing)
• Reverse charge: Mandatory for specified construction services
• Must verify subcontractors in the "white list" of VAT taxpayers

Automating VAT on Invoices

Manually calculating VAT, remembering each country's rules, and formatting invoices correctly is tedious and error-prone. Get VAT wrong and you either overcharge your client or owe back taxes later.

SpeakBill handles VAT automatically. Tell the app what country you're in and what work you did — it applies the correct rate, formats your invoice to EU standards, and generates a professional PDF with the proper VAT breakdown.

Frequently Asked Questions

When do I need to charge VAT as a tradesperson?

You must charge VAT once your annual turnover exceeds your country's threshold. Below it, you can use the small business exemption. You may also register voluntarily to reclaim VAT on purchases.

What is the reverse charge mechanism for construction services?

The reverse charge shifts VAT reporting responsibility from the supplier to the customer for B2B construction services. You issue an invoice without VAT and the customer reports it in their VAT return.

How do I show VAT on an invoice correctly?

Show the net subtotal, VAT rate, VAT amount in euros, and gross total. For multiple rates, group items by rate and show subtotals per rate.

Can I invoice a client in another EU country without charging VAT?

Yes — if they're a VAT-registered business, use the reverse charge and verify their VAT number on VIES. For consumers (B2C), charge your own country's VAT rate.

Stop worrying about VAT. Try SpeakBill free — the app calculates VAT for you.