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Selling services – when to charge VAT?

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Selling services – when to charge VAT?

In our most recent blog posts, we have dealt with topics related to selling goods, such as non-EU shipping regulations, the VAT of non-EU purchases, the OSS and the IOSS. However, you should know that services are taxed differently from goods. What determines whether the services you provide are subject to VAT or not?

You need to charge VAT if…

To determine whether VAT is applicable, you need to consider two factors: who the customer is and where they are located. Within the European Union, you must charge VAT on B2C (business-to-consumer) sales of services. By default, VAT needs to be applied at the rate of the seller’s country. However, telecommunications, broadcasting and electronic services are always taxed in the customer’s country. If you provide these services, you will need to apply VAT at the rate of the country where the customer is located.

You do not need to charge VAT if…

Within the European Union, you do not need to charge VAT on B2B (business-to-business) sales if the customer has a valid EU VAT number. In these cases, the customer pays VAT at the rate applicable in their country using the reverse charge procedure, which we will explain in a future blog post.

Deducting VAT from related expenses

You are allowed to deduct the VAT from the expenses related to your sales: if you bought a computer to provide your services, you can reduce the VAT your company needs to pay by the VAT content of that purchase. Given that an expense can be related to multiple sales (e.g., you can use your new computer to provide services to several customers), this option applies to all sales, regardless of the customer’s location.

Need accounting? Contact us!

Whether your services are subject to VAT depends on who your customers are and where they are located. Since the applicable VAT rate also depends on the kind of services you sell, international service sales are a complex matter.

You can always count on Helpers Finance to help you make sure your invoices are always correct: our team has provided accountancy to international businesses operating from Hungary for nearly a decade. You can learn about our accounting services here. Ask for a consultation by calling our office on +36 1 215 0712, by e-mailing or by filling in our contact form. If you would like to be notified about our future blog posts, like us on Facebook.

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