Guide
Do I Need to Charge VAT?
It is one of the most common questions in small business, and the answer is usually simpler than it feels. Whether you charge VAT (or GST, or sales tax) comes down to one thing: whether you are registered.
The short answer
If you are registered for VAT or GST, you charge it on your invoices at the correct rate and pass it to the tax authority. If you are not registered, you do not charge it at all. There is no in-between.
When do you have to register?
Most countries set a turnover threshold. Once your sales over a rolling period pass that figure, registration becomes compulsory. Below it, registration is usually optional. The exact threshold and rate vary by country, so check your local tax authority for the current number rather than relying on a figure you read online.
Some businesses register voluntarily before they have to, usually so they can reclaim VAT on their own purchases. Whether that helps depends on who your customers are and what you buy.
What to put on the invoice
If you are registered, show your registration number, the tax rate, the tax amount, and the total including tax. If you are not registered, leave tax off entirely and do not add a VAT line. Charging tax you are not registered for is a real problem, so when in doubt, confirm your status first.
Selling across borders
Cross-border sales add a wrinkle. Exported goods and services are often zero-rated or outside the scope of your local VAT or GST, which can mean you do not add tax on an overseas invoice even when you are registered.
The rules depend on where you and the customer are and what you sell, so treat this as something to confirm for your own situation rather than assume. When tax does not apply to an export, say so on the invoice rather than leaving the line blank with no explanation.
