Very good question.

Applying VAT correctly is often a challenge for entrepreneurs.

First and foremost: I want to note that our platform will help you to easily apply VAT to your invoices, without complicated formulas and calculations. It is very convenient and fast.

But how to determine if you need to collect VAT from your customers?

I will show you using the example of the rented company in the Netherlands.

Step 1: Is your customer an entrepreneur or an individual?
– entrepreneur: go to Step 2
– individual: you are obliged to charge VAT 21%

Step 2: Is your customer located in the Netherlands, in an other European country, or outside of Europe?
– in the Netherlands: you are obliged to charge VAT 21%
– in an other European country (EU): go to Step 3
– outside of Europe (EU): you do not need to charge VAT

Step 3: Does your customer, an entrepreneur from another European country, have a valid VAT number:
Yes: you do not need to charge VAT
No: you are obliged to charge VAT 21%

I hope this explanation will help you learn how to apply VAT.

Let me summarize again:

Invoice from Netherlands Company to:
NL Business with VAT number: 21%
EU Business with VAT number: 0%
EU Business without VAT number: 21%
EU/NL Individual customer: 21%
Individual/Business Outside EU: no VAT

Of course, in some cases there are exceptions to the above rule. Please check the other answers on this topic or contact our Support Team.