Selling to businesses in Europe comes with complexity that B2C sellers never face. VAT reverse charge, VIES validation, formal invoice requirements, and cross-border tax rules create a maze that catches many businesses off guard.
Get it wrong, and you might charge VAT when you shouldn't (making your prices uncompetitive) or fail to charge when you should (creating tax liability). Get it right, and you can sell confidently across the EU with proper documentation and compliance.
This guide demystifies B2B billing in Europe, focusing on practical implementation rather than accounting theory.
Understanding B2B VAT in Europe
VAT (Value Added Tax) in Europe is designed to be paid by the final consumer. In B2B transactions, where the buyer isn't the final consumer, special rules apply to prevent tax from cascading through the supply chain.
When you sell to a business in another EU country, the normal VAT rules flip. Instead of you charging VAT and remitting it to your tax authority, your customer accounts for the VAT through their own tax return. This is called "reverse charge."
For example: A Dutch company (you) sells €1,000 of services to a German company. Without reverse charge, you'd charge 21% Dutch VAT (€210), collect €1,210, and remit €210 to Dutch tax authorities. The German company would then claim back the €210 as input VAT.
With reverse charge, you invoice €1,000 with 0% VAT and note "VAT reverse charge." The German company reports both the output and input VAT on their German tax return, netting to zero. The transaction is VAT-neutral without money actually changing hands for tax.
Reverse charge applies when all these conditions are met:
• You and your customer are both VAT-registered businesses
• Your customer is in a different EU country than you
• You can verify your customer's VAT number through VIES
If any condition fails, normal VAT rules apply. Selling to a German consumer? Charge German VAT (or your domestic VAT, depending on EU distance selling rules). Customer can't provide a valid VAT number? Charge your domestic VAT.
When selling to businesses in your own country, reverse charge doesn't apply. You charge your domestic VAT rate, issue a proper invoice, and your customer claims the VAT as input credit on their return.
The invoice requirements are similar to B2C, but you need additional B2B elements: both parties' VAT numbers, itemized services, and clear tax breakdowns.
VAT Number Validation with VIES
VIES (VAT Information Exchange System) is the EU's official database for verifying VAT numbers. Before applying reverse charge, you must verify your customer's VAT number is valid and active.
When you submit a VAT number to VIES, it checks with the relevant EU member state's tax authority and returns:
• Whether the number exists and is currently active
• The registered business name and address
• Confirmation of the country of registration
This verification is legally required. If you apply reverse charge to an invalid VAT number, you become liable for the VAT you should have charged.
Manual validation means visiting the EU's VIES website, entering the VAT number, and recording the result. This works for occasional B2B sales but becomes tedious with volume.
Automated validation integrates VIES checks into your billing workflow. When you add a customer's VAT number, the system automatically validates it and stores the verification result. PayRequest's customer management includes automatic VIES validation.
Keep records of validation results. If a tax authority questions a reverse charge invoice, you need to prove the VAT number was valid at the time of the transaction, not just that it's valid now.
When VIES returns an invalid result, you have options:
• The number might have a typo. Double-check formatting (country prefix, no spaces, correct length).
• VIES databases occasionally lag. Try again in a day if the customer insists their number is valid.
• The business might not be VAT-registered. If truly invalid, you must charge your domestic VAT.
Don't accept "my VAT number is pending" as a reason to apply reverse charge. No valid number means normal VAT rules apply.
B2B Invoice Requirements
B2B invoices have more stringent requirements than B2C invoices. Missing elements can void the customer's right to reclaim VAT, creating complications for everyone.
Every B2B invoice in the EU must include:
• Sequential invoice number
• Invoice date
• Your business name, address, and VAT number
• Customer's business name, address, and VAT number
• Clear description of goods or services
• Quantity and unit price
• Total amount excluding VAT
• VAT rate(s) and amounts
• Total amount including VAT (or reverse charge notation)
For reverse charge invoices, include the phrase "VAT reverse charge" or your country's equivalent, and show 0% VAT with the net amount equaling the total.
If your invoice includes items at different VAT rates (common with mixed goods and services), each rate needs separate subtotals. The invoice should clearly show how much was charged at each rate.
When you need to adjust a B2B invoice—refunds, discounts, corrections—issue a formal credit note referencing the original invoice. Credit notes have the same requirements as invoices and must clearly show the adjustment amount and reason.
Billing Individual vs. Business Customers
Your billing system needs to distinguish between B2B and B2C customers because the rules differ significantly.
The simplest indicator is whether the customer provides a VAT number. Businesses can provide VAT numbers; individuals cannot. Make VAT number an optional field that triggers B2B treatment when populated.
Some businesses buying for personal use might not provide their VAT number—that's their choice, and you treat them as B2C. Similarly, some consumers might try to claim they're a business to avoid VAT—without a valid VAT number, they're B2C.
PayRequest lets you tag customers as Business or Individual, applying appropriate VAT treatment automatically.
For B2C customers:
• Collect basic contact information
• Apply appropriate VAT (domestic or destination country rate)
• Invoice can be simpler (receipt-style)
For B2B customers:
• Collect and validate VAT number
• Determine if reverse charge applies
• Generate full B2B invoice with all required elements
• Store customer business details in your CRM
What if a B2C customer becomes a business, or a business customer makes a personal purchase? Your system should handle type changes gracefully—updating future invoices without altering historical records.
Automating B2B Billing Workflows
Manual B2B billing is error-prone and time-consuming. Automation ensures compliance while reducing administrative overhead.
Once your system knows a customer's country and VAT status, it should automatically determine the correct VAT treatment:
• Same country + VAT number = domestic VAT
• Different EU country + valid VAT number = reverse charge (0%)
• Different EU country + no VAT number = domestic or destination VAT (depending on thresholds)
• Non-EU country = typically 0% VAT (export)
This logic runs for every invoice, eliminating manual determination of VAT treatment.
Many B2B relationships involve recurring charges—monthly retainers, subscriptions, or regular service agreements. Automating these invoices ensures they go out on time with correct details.
Set up recurring invoice schedules that automatically generate and send invoices on specified dates. Customer details, VAT treatment, and amounts are pre-configured, requiring no manual intervention.
B2B customers often work on payment terms (Net 30, Net 60), meaning invoices aren't paid immediately. Automated reminders ensure follow-up happens at appropriate intervals without you tracking due dates manually.
PayRequest's invoicing and dunning features handle this automatically—sending reminders before and after due dates according to your configured schedule.
Common B2B Billing Mistakes
Even experienced businesses make B2B billing errors. Knowing the common pitfalls helps you avoid them.
The most expensive mistake: applying reverse charge without VIES verification. If the number is invalid, you're liable for the VAT. Always verify, always keep records of verification.
Invoice numbers must be sequential and unique. Gaps in sequence or duplicate numbers trigger tax authority scrutiny. Use your billing system's automatic numbering rather than manual assignment.
An invoice missing your VAT number, the customer's VAT number, or proper reverse charge notation might be rejected by the customer's accountant. They can't reclaim VAT on non-compliant invoices.
Some services are VAT-exempt regardless of B2B status (financial services, insurance, healthcare, education). Know which of your services fall into exempt categories and don't charge VAT where it doesn't apply.
EU VAT rules change. Thresholds, rates, and distance selling rules evolve. Stay current with regulations or use billing software that updates automatically.
Getting Started with PayRequest B2B Billing
PayRequest handles the complexity of B2B billing automatically. When you add a customer's VAT number, automatic validation checks VIES and stores the result.
Invoices automatically apply correct VAT treatment based on customer location and VAT status. All required B2B elements are included, formatted for EU compliance.
Combined with subscription billing for recurring B2B revenue and dunning for payment follow-up, PayRequest provides complete B2B billing infrastructure.
Start billing business customers confidently—create your free account at payrequest.app/register.