One of the big advantages of working with international clients is that, in many cases, you can invoice without VAT. But the rules are precise, and getting them wrong leads to problems with Hacienda, the Spanish tax authority. This guide explains when you can invoice foreign clients without VAT and how to do it correctly.
The general rule: where the service is deemed to be supplied
VAT on services depends on where they are deemed to be supplied, under the place-of-supply rules. For business-to-business (B2B) services, the general rule is that the service is deemed to be supplied where the client is located. This means that, if your client is a business outside Spain, in many cases the invoice does not carry Spanish VAT.
Business clients outside the European Union
If you invoice a service to a business established outside the EU (for example, in the United States or the United Kingdom), the transaction is not subject to Spanish VAT. You issue the invoice without VAT, stating that the transaction is not subject to VAT under the place-of-supply rules for services. It is the cleanest and most common case for anyone invoicing American clients in dollars.
Business clients within the EU: the reverse charge mechanism
If your client is a business in another EU country with a valid intra-Community VAT number (registered in VIES), you apply the reverse charge: you invoice without VAT and it is the client who accounts for the VAT in their own country. You must verify their number in VIES and report the transaction on Modelo 349.
💡 At Aiden Startup we help you set up the best structure for your project, with advice in Spanish included in every plan.
Watch out: private individuals (B2C)
This is where everything changes. If your client is an end consumer (a private individual), the rules are different and you often do have to charge VAT, especially for digital services within the EU. You cannot assume that a foreign client means no VAT: it depends on whether they are a business or an individual and where they are located. Confusing B2B with B2C is one of the most expensive mistakes.
| Client | VAT on the invoice? |
|---|---|
| Business outside the EU | Not subject (no VAT) |
| Business in the EU (with VIES) | No VAT (reverse charge) |
| Individual in the EU (digital service) | Yes, VAT of the client’s country |
| Individual outside the EU | Generally not subject |
Why proper documentation matters
Invoicing without VAT means you have to justify why. Keep evidence that your client is a business (their VAT number, their registration), check VIES where applicable and report the transactions correctly on Modelo 303 and Modelo 349. A poorly justified invoice without VAT is an invitation to a check by Hacienda.
🚀 At Aiden Startup we incorporate your company in the UK or Delaware in 72 hours, with a registered address, bank account and Spanish-speaking adviser included. See plans →
Frequently asked questions
Yes. Services to businesses established outside the EU are not subject to Spanish VAT. You issue the invoice without VAT, stating that it is not subject to VAT under the place-of-supply rules.
You apply the reverse charge: you invoice without VAT and the client accounts for the VAT in their own country. You must verify their VAT number in VIES and report the transaction on Modelo 349.
It depends. For digital services to individuals in the EU, you normally do have to charge the VAT of the client’s country. For individuals outside the EU, it is usually not subject to VAT. It is not automatic: it depends on the case.
Hacienda, the Spanish tax authority, can claim the VAT you did not charge, plus interest and penalties. That is why it is essential to justify every invoice without VAT and report the transactions on Modelo 303 and Modelo 349.
Photo by Kelly Sikkema on Unsplash
