Understanding VAT for freelancers in the EU

Value Added Tax is the tax that catches out more freelancers than any other. The mechanics are simple in theory — you collect it from customers, pass it to the state, and deduct what you paid on your own inputs — but the cross-border rules turn it into a small maze. Here's the shape of that maze.

What VAT actually is

VAT is a consumption tax collected in stages along the supply chain. Every business in the chain charges VAT on its sales (output VAT) and reclaims VAT on its purchases (input VAT). What you owe the tax office each period is the difference. The end consumer, who can't reclaim, ultimately bears the tax.

Rates vary by country — 27% in Hungary, 25% in Denmark, 21% in Spain, 19% in Germany, 20% in France — and most countries also have reduced rates (5–10%) for specific categories like books or hospitality.

When you must register

Every EU country has a domestic VAT registration threshold. Below it, you can operate without charging VAT (though you also can't reclaim it). The thresholds vary wildly:

• Germany — €25,000 (small business scheme, "Kleinunternehmerregelung")
• France — €37,500 (services) / €85,000 (goods)
• Netherlands — €20,000
• Spain — no threshold; register from day one
• Ireland — €42,500 (services) / €85,000 (goods)
• Hungary — HUF 12,000,000 (~€30,000)

Once you cross the threshold, registration is mandatory. Voluntary registration is possible below the threshold and often makes sense if your customers are businesses (who don't care about your VAT) and you have significant deductible input VAT (equipment, subscriptions, office).

Selling to another EU business — reverse charge

This is the rule that trips up new freelancers most often.

When you sell services B2B to a VAT-registered business in another EU member state, you don't charge VAT. Instead:

1. You verify their VAT number in VIES (the EU VAT number database).
2. You issue an invoice with 0% VAT.
3. You add the note: "Reverse charge — Article 196 of Directive 2006/112/EC."
4. Your customer accounts for the VAT themselves in their own country ("self-assessment").
5. You report the sale on your EC Sales List (or the country equivalent) each period.

You did not "avoid" tax. The customer accounts for it locally. This is the entire point of reverse charge — it prevents double taxation across borders.

Critical: if the client's VAT number doesn't check out in VIES, you must charge VAT at your domestic rate. Screenshot the VIES check when you invoice — it's your defence in an audit.

Selling to EU consumers — OSS

Selling digital services or products to private individuals (non-business) in other EU countries is different. Since 2015, and expanded in 2021, the place of supply for B2C digital services is the customer's country. That means:

• German freelancer sells a €50 course to a French consumer → French VAT (20%) applies.
• Same freelancer sells the same course to a Spanish consumer → Spanish VAT (21%) applies.

You have two options:

1. Register for VAT in every country you sell to. Nobody does this.
2. Use the One-Stop Shop (OSS). You register once in your home country and file a single quarterly OSS return covering all your cross-border B2C EU sales. Your home tax office distributes the collected VAT to the other countries.

There's a small-business exception: if your total cross-border B2C sales to other EU countries are under €10,000/year, you can charge your home country's VAT rate on all of it. Above that, OSS kicks in.

Selling outside the EU

Selling services to a business or consumer outside the EU is generally out of scope of EU VAT. You issue a zero-rate invoice with a note explaining it's outside the EU VAT territory. Some services (electronic services to consumers) have specific rules — check the OSS Non-Union scheme if that's your main market.

Physical goods vs services

Everything above is for services. Goods have their own rules — Intrastat for intra-EU movement, customs declarations for exports, IOSS for low-value imports. Almost none of that affects a typical freelancer selling design, code, writing, or consulting.

The compliance rhythm

Once VAT-registered, expect:

• Monthly or quarterly VAT return — depends on turnover and country
• Annual VAT return in most countries
• EC Sales List each period for reverse-charge sales
• OSS return quarterly if using it
• Records kept for 10 years in most jurisdictions

The mental model that keeps you sane

1. Who is the customer — business (B) or consumer (C)?
2. Where are they — same country (domestic), another EU country (intra-EU), or outside the EU (export)?
3. Have I verified their VAT number if I'm claiming reverse charge?

Three questions, one invoice at a time. Do that consistently and VAT stops being scary. Do it inconsistently, and you'll be on the phone with your accountant explaining why you didn't collect VAT on twelve invoices you should have.