EU VAT & Invoice Compliance Guides

Why EU Invoice Compliance Matters

The European Union has some of the strictest invoice and VAT compliance requirements in the world. Unlike the United States where invoice formatting is largely unregulated, EU member states require specific data points, legal text, and structural formatting for every B2B and B2C transaction.

The Core Problem: Payment processors are built for US markets where receipts and transaction summaries are sufficient. Their CSV exports contain the raw data, but they don't format it according to EU legal requirements. This leaves EU businesses in a difficult position: they have proof of payment, but not proof that meets tax authority standards.

What Makes an Invoice "EU Compliant"?

A compliant EU invoice must include:

• Sequential Numbering: Unique, gap-free, chronological invoice numbers (not random transaction IDs)
• Supplier Details: Your company name, address, VAT number (if registered), and registration number
• Customer Details: Customer name, address, and VAT number (for B2B transactions)
• Invoice Date and Due Date: Clear payment terms and timing
• Itemized Products/Services: Description, quantity, unit price, and total
• VAT Breakdown: VAT rate, VAT amount, net amount, and gross amount
• Payment Method: How the transaction was settled
• Currency: Clear currency denomination
• Legal Notation: Appropriate VAT scheme text (e.g., "VAT Reverse Charge" or "OSS VAT included")

Payment processor CSVs contain most of this data, but in unstructured formats with inconsistent field names. CSV2Invoice solves this by guiding you through a one-time field mapping process, then automatically applying that mapping to every future CSV upload.

The Four Compliance Pillars

EU VAT compliance for cross-border sales revolves around four distinct mechanisms, each designed for specific business scenarios. Understanding which applies to your transactions is crucial for proper invoice generation.

Most businesses selling across borders will use multiple schemes simultaneously. For example, a SaaS company might use OSS for consumer sales, Reverse Charge for business sales, and Sequential Numbering for all invoices. CSV2Invoice handles this complexity automatically by detecting which scheme applies based on your field mapping.

OSS (One Stop Shop) Compliance

The One Stop Shop (OSS) scheme simplifies VAT reporting for businesses selling digital services to consumers across the EU. Instead of registering for VAT in every EU country where you have customers, OSS allows you to register once in your home country and report all EU sales through a single quarterly VAT return.

Who Needs OSS?

• SaaS companies selling subscriptions to EU consumers
• Digital product creators (courses, ebooks, software downloads)
• Online service providers (consulting, freelancing platforms)
• Any B2C digital service provider with customers across multiple EU countries

OSS Invoice Requirements

OSS invoices must clearly indicate:

• The customer's country of consumption
• The applicable VAT rate for that country (ranging from 17% to 27%)
• The VAT amount calculated at the customer's country rate
• A notation indicating the sale was made under the OSS scheme

The €10,000 Threshold: If your total B2C sales to a single EU country remain under €10,000 per year, you can use your home country VAT rate instead. Once you exceed this threshold in any country, you must use that country's VAT rate. OSS registration simplifies this complexity significantly.

IOSS (Import One Stop Shop) Compliance

The Import One Stop Shop (IOSS) scheme was introduced in July 2021 to simplify VAT collection on low-value goods (under €150) imported into the EU from non-EU countries. IOSS allows sellers to collect VAT at the point of sale, eliminating customs VAT collection and speeding up delivery.

Who Needs IOSS?

• E-commerce sellers shipping physical goods from outside the EU
• Marketplaces facilitating sales of imported goods under €150
• Fulfillment services handling cross-border shipments to EU customers
• Any seller wanting to avoid customs delays for low-value consignments

IOSS Invoice Requirements

IOSS invoices must include:

• Your IOSS VAT identification number (format: IM + country code + identifier)
• Customer's destination country within the EU
• Total value under the €150 threshold
• VAT collected at the customer's country rate
• Clear notation that VAT was collected under IOSS

Critical Note: IOSS only applies to goods valued at €150 or less. Goods above this threshold must go through standard customs procedures with VAT collected at import. Accurate value declaration on IOSS invoices is essential for customs clearance.

Reverse Charge Mechanism

The Reverse Charge mechanism is a cornerstone of B2B VAT compliance within the EU. When you sell to a business customer in another EU country, and that customer has a valid VAT number, you charge 0% VAT and shift the VAT accounting responsibility to the customer. This prevents double taxation and simplifies cross-border B2B transactions.

When to Use Reverse Charge

Reverse Charge applies when all of the following conditions are met:

• Your customer is a business (not a consumer)
• Your customer has a valid VAT number in their EU country
• The transaction is cross-border (you and the customer are in different EU countries)
• You have verified the customer's VAT number through VIES (VAT Information Exchange System)

Reverse Charge Invoice Requirements

Reverse Charge invoices must clearly show:

• Your VAT number and the customer's VAT number
• 0% VAT rate applied to the transaction
• The exact legal text: "VAT reverse charge applies" or "Reverse charge - Article 196 of Council Directive 2006/112/EC"
• Net amount (which is also the gross amount since VAT is 0%)

Critical Compliance Point: You must retain proof that you verified the customer's VAT number. VIES validation records should be kept alongside invoices. If a VAT number is invalid, you must charge standard VAT rates instead of applying Reverse Charge.

Sequential Invoice Numbering

Sequential invoice numbering is the most fundamental—and most commonly violated—compliance requirement in EU invoicing. Every EU member state requires invoices to have unique, gap-free, chronological invoice numbers. This applies to all transactions, regardless of VAT scheme.

What Makes Numbering "Sequential"?

Sequential numbering means:

• Unique: No two invoices can have the same number
• Gap-Free: Numbers must be consecutive with no skipped numbers
• Chronological: Newer invoices have higher numbers than older ones
• Predictable: The numbering system follows a clear, logical pattern

Why Payment Processor IDs Don't Qualify

Payment platforms like Stripe, PayPal, and Square assign transaction IDs that seem unique, but they fail EU sequential numbering requirements in critical ways:

• Random or Hash-Based: IDs like "ch_3NHxRa2eZvKYlo2C1234" are not chronological
• Gaps in Sequence: Refunds, failed transactions, and testing create gaps in the number series
• Multiple Numbering Systems: Charges, subscriptions, and invoices have separate ID formats
• Not Human-Readable: Tax auditors expect simple, readable invoice numbers

Acceptable Numbering Formats

EU tax authorities accept various sequential formats:

• Simple Sequential: 0001, 0002, 0003... (most common)
• Year-Based: 2025-0001, 2025-0002, 2025-0003...
• Month-Based: 2025-01-001, 2025-01-002, 2025-02-001...
• Prefix-Based: INV-0001, INV-0002, INV-0003...

All formats must maintain the core requirement: consecutive, gap-free numbering within each series. If you start a new series (e.g., new year, new legal entity), this must be clearly documented in your accounting records.

Penalties for Non-Sequential Numbering

Using non-compliant invoice numbers can result in:

• Rejected VAT Deductions: Your customers may lose their VAT deduction rights
• Administrative Penalties: Fines starting at €50 per violation in most countries
• Audit Complications: Tax authorities may flag your entire invoice ledger
• Increased Audit Frequency: Non-compliance triggers closer scrutiny
• Loss of Good Standing: May affect VAT registration and refund processing

Platform-Specific Compliance Guides

Every payment processor, e-commerce platform, and SaaS billing tool exports CSV data in a slightly different format. Field names, date formats, currency notations, and data structure vary significantly across platforms. This makes generic invoice generators ineffective for EU compliance.

CSV2Invoice solves this through intelligent field mapping that adapts to your specific platform's CSV structure. Once you map your fields during the initial setup, the system remembers your configuration for all future uploads.

Supported Platform Categories

Don't see your platform? If your platform can export transaction data to CSV format, CSV2Invoice can transform it into compliant invoices. The field mapping system is flexible enough to handle any CSV structure.

Compliance Risks and Penalties

EU tax authorities take invoice compliance seriously. Non-compliant invoices aren't just an administrative nuisance—they can result in significant financial penalties, rejected VAT deductions, and increased audit scrutiny.

Common Compliance Violations

Country-Specific Penalties

Penalties vary significantly by EU member state:

• Germany (GoBD): Up to €50,000 for systematic non-compliance with digital bookkeeping standards
• France: 5% of invoice amount for missing invoices, up to €15,000 per offense
• Italy: 90-180% of VAT amount for missing or incorrect e-invoices
• Spain: €150-€6,000 per violation depending on severity
• Netherlands: €5,200 maximum fine for bookkeeping violations

Beyond direct penalties, non-compliance can trigger more frequent audits, delayed VAT refunds, and damaged business relationships when your customers can't claim VAT deductions on your invoices.

Frequently Asked Questions