What Is a VAT Invoice? Contents, Timing, and Retention

A VAT invoice is the document a seller issues to record a taxable sale, and it is the buyer’s only valid proof for reclaiming the tax paid on that purchase. The requirements for a VAT invoice are set by national law and, across the EU, by the VAT Directive, and they converge on the same core: identify both parties, identify the supply, and show the tax clearly enough that an auditor can follow it.¹ Miss a required field and the tax authority can deny the buyer’s input tax deduction, leaving the VAT as an absorbed cost.

What a Full VAT Invoice Must Contain

A full VAT invoice is the standard document for business-to-business transactions and higher-value sales. The required elements are:

A unique sequential number drawn from a continuous series so each invoice can be individually identified.²
The date of issue, which establishes the tax point.
The date of supply, if different from the invoice date.
The supplier’s full legal name, address, and VAT registration number.
The customer’s full legal name, address, and, for B2B transactions, VAT registration number.
A description of each line item detailed enough to identify what was supplied.
The unit price before tax.²
The VAT rate applied to each line, whether standard or reduced.
The VAT amount, shown per line or as a total for each applicable rate.
The total amount due, including VAT.
Any discounts or rebates, shown separately if not already reflected in the unit price.

Every field carries weight. A missing VAT registration number, for example, gives the tax authority grounds to reject the buyer’s entire input tax claim on the purchase. When you receive an invoice, check each field before filing it. When you issue one, configure your accounting system to populate every field automatically rather than relying on manual entry.

Simplified Invoices for Lower-Value Sales

Most jurisdictions allow a stripped-down invoice for smaller and retail transactions. EU member states can permit simplified invoices for sales up to €400, and many set lower national thresholds.¹ The UK, for instance, allows simplified invoices for sales of £250 or less including VAT.

Simplified invoices drop most of the buyer-side detail. The customer’s name, address, and VAT number can usually be omitted. What still has to appear is the supplier’s name and VAT number, the date, a description of the goods or services, the total including VAT, and the VAT rate applied. One caveat: if you are selling to another VAT-registered business that will reclaim the tax, issue a full invoice regardless of the amount. A simplified version will not support their deduction claim.

Reverse Charge Invoices

In some cross-border transactions the obligation to account for VAT moves from the seller to the buyer, and the invoice changes accordingly. Under the reverse charge, the seller issues an invoice with no VAT charged and shows only the net amount. In place of a rate and tax figure, the invoice must include a note explaining why VAT was not applied. In EU cases this typically means citing the relevant article of the VAT Directive, such as Article 138 for intra-EU sales of goods or Article 196 for cross-border services.³

If you are the buyer, the invoice must show your VAT identification number, and for intra-EU sales that number must be valid in the VIES database. You then account for the VAT yourself on your return, charging yourself the tax and, if the purchase is for taxable business use, reclaiming it on the same return.

Self-Billed Invoices

Normally the seller prepares the invoice, but VAT law in many jurisdictions allows the buyer to issue it instead. Self-billing is common in agricultural supply chains, waste disposal, and subcontracting, where the buyer is better placed to measure or calculate what is owed.³

A self-billing arrangement needs a written agreement in place before it starts. The agreement must state that the buyer will prepare the invoices, that the supplier will accept them, and that the supplier will not issue their own invoices for the covered supplies. Every self-billed document has to be clearly marked as such and must contain all the information a full VAT invoice would, including the supplier’s name, address, and VAT registration number.⁴ If the supplier cancels their registration or changes their VAT number, the existing agreement lapses and you need a new one before issuing any further self-billed invoices.

Foreign Currency on the Invoice

When a sale is priced in a foreign currency, the VAT still has to be expressed in the domestic currency of the jurisdiction where the tax is due. In the UK, you can show line-item prices in the foreign currency, but the total net value and the VAT amount must appear in sterling.⁵

The exchange rate matters too. Most tax authorities accept either the market selling rate on the date of supply or an official rate they publish themselves. HMRC allows businesses to use its published period rate, which stays constant for a calendar month and simplifies bookkeeping for companies with frequent foreign-currency transactions.⁵ Forward rates and methods derived from them are generally not permitted. If you want to use an alternative conversion method, get written approval from the tax authority first.

Electronic Invoices

Electronic invoices carry the same legal weight as paper ones, but three conditions must hold throughout the document’s life: the origin has to be verifiable, the content has to be tamper-proof, and the invoice has to stay legible until the end of the required storage period.⁶

How you meet those conditions is largely your choice. Internal business controls that create a reliable audit trail between the invoice and the underlying supply are sufficient. The EU VAT Directive also recognizes two specific technologies as acceptable: advanced electronic signatures based on a qualified certificate, and electronic data interchange (EDI) where the agreement between the parties includes procedures guaranteeing authenticity and data integrity.⁶

One procedural point catches businesses off guard: the recipient must agree to receive invoices electronically before you send them that way. A PDF emailed without prior consent may not qualify as a valid invoice in every jurisdiction.⁷

When the Invoice Has to Be Issued

Timing is a requirement in its own right. The EU VAT Directive lets member states set their own deadlines for domestic supplies, but for cross-border sales between EU member states the invoice must be issued by the 15th day of the month following the month in which the goods arrived or the service was performed.⁸ National deadlines for domestic transactions vary but follow a similar pattern. Automating invoice generation at the point of supply or payment is safer than relying on someone to remember later.

How Long to Keep VAT Invoices

Every VAT-registered business must store copies of every invoice it issues and every invoice it receives.³ Retention periods vary by country. The UK requires a minimum of six years, while other jurisdictions run from five to ten years, calculated from the end of the tax period the invoice relates to.⁹ Records kept for other tax purposes may need to be held longer.

Storage location and format are flexible. Under EU rules, businesses are generally free to store invoices in a different member state from where they are based, and in whatever format they choose, as long as the documents stay complete, legible, and accessible for the full retention period.¹ Electronic storage is acceptable provided the copies are exact, unaltered representations of the originals. The non-negotiable requirement is retrieval speed. When an auditor asks for records, you need to produce them promptly.

Errors That Get an Invoice Rejected

The most common reason businesses lose input tax deductions is defective paperwork. The mistakes auditors see repeatedly are all avoidable.

Near the top of the list: treating a pro-forma invoice as a VAT invoice. A pro-forma is a preliminary quote, not a record of a supply. It is not a VAT invoice and cannot support an input tax claim. If a supplier sends you a pro-forma, you still need the actual VAT invoice before you deduct anything.

Other frequent errors:

Missing or incorrect VAT registration numbers. The tax authority uses the supplier’s number to verify the transaction; if it is wrong or absent, the invoice fails validation.
Vague descriptions. “Professional services” or “goods” tells the auditor nothing. The description must be specific enough to identify what was supplied.
Mismatched dates. If the tax point on the invoice falls in a different period from the one in which you claimed the deduction, the timing mismatch will draw scrutiny.
No VAT breakdown. An invoice showing only a lump sum, without separating the net amount, the rate, and the tax, is incomplete. Even if the VAT was paid, you cannot claim it without the breakdown.
Freight forwarder invoices used instead of customs documents. On imports, the agent’s invoice is not a VAT invoice. You need the official import VAT certificate issued by the customs authority.

When you spot an error on an invoice you have received, send it back to the supplier and ask for a corrected version before you record it. Claiming a deduction on a defective invoice is a gamble, and the cost of losing is the full VAT amount plus any penalties on top.

1
European Commission. VAT Invoicing
2
HM Revenue & Customs. VATREC5010 – VAT Invoice: Details Which Must Be Shown on a Full VAT Invoice
3
EUR-Lex. Council Directive 2006/112/EC on the Common System of Value Added Tax
4
GOV.UK. Self-Billing (VAT Notice 700/62)
5
GOV.UK. Transactions in Foreign Currencies and VAT
6
EUR-Lex. Council Directive 2010/45/EU Amending Directive 2006/112/EC on VAT Invoicing Rules
7
GOV.UK. Electronic Invoicing (VAT Notice 700/63)
8
Revenue Irish Tax and Customs. When Is VAT Due?
9
GOV.UK. Record Keeping for VAT (Notice 700/21)