VAT, GST, and Sales Tax Explained: A Simple Invoicing Guide for Global Creators

Navigating Taxes When Invoicing Overseas Clients

Selling digital services or software engineering across borders is easier than ever, but tax obligations often confuse freelancers. Understanding the core difference between Value Added Tax (VAT), Goods and Services Tax (GST), and US Sales Tax is essential to avoid compliance penalties.

Key Concepts Demystified

#### 1. The EU Reverse Charge Mechanism

When you are a VAT-registered business in one European Union member state selling B2B services to a VAT-registered business in another EU country, you typically do not charge VAT. Instead, you apply the Reverse Charge Mechanism.

• What to write on your invoice: Include both your VAT ID and the client’s verified VAT ID, and add the note: *"Reverse Charge: VAT to be accounted for by the recipient as per Article 196 of EU Directive 2006/112/EC."*

#### 2. Invoicing US Clients from Overseas

Generally, if you are a non-US freelancer providing services remotely from your home country to a US client, you do not charge US Sales Tax. Your US client will often ask you to complete an IRS Form W-8BEN to certify your foreign status and exempt you from US withholding tax.

#### 3. Multiple Business Entities & Multi-Tax Systems

If you operate both a consulting agency and an e-commerce brand, you may need different tax registration disclosures. On MakeMyInvoice.net, you can maintain separate business profiles with unique tax labels and rates.

Checklist Before Sending an International Invoice

• Verify the client's official legal address and tax identification number.
• State the billing currency clearly (e.g., USD, EUR, GBP, CAD).
• Specify who covers bank intermediary wire fees (e.g., "All wire transfer fees to be borne by the remitter").