B2B invoices to third countries: how to bill correctly

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Of all the VAT scenarios involving third countries, B2B transactions are usually the easiest to handle. The basic rule is clear: you issue a net invoice, and your customers take care of the tax treatment in their own country. Even so, there are a few points where you should pay attention - particularly when it comes to proving your customer's business status and to certain exceptions from the basic rule.

This article shows you how to issue B2B invoices to third-country customers correctly and what to keep in mind in practice.

Disclaimer: This article provides general guidance only. For questions about your specific situation, feel free to reach out to our Tax Coaches or to a partner tax advisor.

For a complete overview, see our pillar article: International clients outside the EU: Your guide

The basic rule: place of supply is where the recipient is

According to § 3a (2) of the German VAT Act (UStG), the basic rule for services to businesses is that the place of supply is wherever the receiving company is based. So if your business customer is located in a third country - the US, Switzerland, the UK, the UAE - your service is not subject to German VAT.

The result is refreshingly simple:

• Your invoice contains no German VAT.

• You don't need to remit anything in Germany for this transaction.

• The tax treatment abroad is your customer's responsibility.

Example: You're a web designer in Berlin, and you build a new website for an IT startup in Austin, Texas. The place of supply shifts to the US → your invoice is not subject to German VAT → you bill net, without VAT.

This basic rule applies to most typical services - consulting, web design, programming, marketing, B2B coaching, content creation, translations, graphic design, and many more.

Proof of business status: without a VAT ID

Within the EU, you use the VAT identification number (VAT ID) to prove that your customer is actually a business. In third countries, there is no such standardized number. The German tax office still expects you to be able to demonstrate convincingly that your customer is a business - otherwise the service could be classified as B2C, which would have completely different consequences.

Suitable proof can include:

• a certificate from the foreign tax authority (e.g. a "Certificate of Registration" or "Tax Residency Certificate")

• an extract from a commercial register or comparable document from the country of residence

• a letterhead, domain, email address, and contact details that clearly indicate business activity

• for larger projects: an order form or contract with company details

In practice, no one will ask for an official certificate for a €300 project. The tax office will pragmatically accept combinations of business address, website, email domain, and invoicing requirements.

What's important is that your documentation supports the classification as a business in a comprehensible way - and that you keep it on file.

If your customer turns out to be a private individual, different rules apply.

You can read more in our article B2C transactions in third countries and catalogue services.

International reverse charge

Within the EU, the reverse charge mechanism applies automatically: your business customers tax the service themselves in their own country. In third countries, a similar principle applies in many - but not all - jurisdictions. There is no unified system as in the EU; it depends on each country's national law.

What this means for you: Whether and how your customers have to handle the service in their third country is their concern - not yours. You issue a clean net invoice and leave the rest to local law.

Even so, it's good practice to add a clear note on your invoice explaining the situation. Common formulations include:

• "Not subject to taxation in Germany - place of supply in third country"

• "Place of supply in third country, tax liability shifts to the recipient (reverse charge)"

• "According to §3a Abs. 2 UStG taxable at the recipient location"

These are standard wordings and provide clarity for the recipient. They are not strictly required (unlike the reverse charge note for EU B2B invoices), but they save both sides from follow-up questions.

What goes on your invoice?

A B2B third-country invoice contains the usual mandatory information of a German invoice, with a few adjustments:

• Your full details (name, address, tax number or VAT ID).

• Your customer's full details (company name, address in the third country, and local company number if applicable).

• Invoice date and number.

• Service description - detailed enough to make the classification as a B2B service clearly recognizable.

• Net amount - no German VAT shown.

• Clear reference to the foreign place of supply (see above).

• Total amount.

You must not show German VAT in this scenario - not even if your customer asks for it.

An incorrect VAT statement would oblige you to remit the tax in Germany (§ 14c UStG) and would be useless to your customer anyway.

Entry in the VAT pre-submission

B2B sales to third countries usually go in the advance VAT return on line 36, KZ 45 ("Other non-taxable sales (place of supply not in Germany)").

Unlike EU B2B sales, you don't need to file a recapitulative statement (ZM) for third-country transactions - that's only required for EU transactions.

Exceptions to the basic rule

The basic rule "place of supply at the recipient's location" doesn't apply to all types of services.

In the following constellations, special rules apply that may shift the place of supply somewhere other than the third country - sometimes even back to Germany:

Services connected with real estate (§ 3a (3) no. 1 UStG): Services related to real estate (architecture, construction, surveying, expert opinions, and real estate brokerage) are always taxed where the property is located. So if you draft a site plan for a German property on behalf of a Swiss company, the transaction remains taxable in Germany.

Short-term rental of means of transport (§ 3a (3) no. 2 UStG): For rentals of up to 30 days (or 90 days for watercraft), the place of supply is where the vehicle is handed over.

Event services (§ 3a (3) no. 5 UStG): Admission to cultural, artistic, scientific, or similar events is taxed where the event actually takes place. If you give a talk at a conference in Tokyo, the transaction is taxable in Japan.

Restaurant and catering services: The place of supply is where they are actually rendered.

Passenger transport: This is taxed based on the distance traveled.

In these exceptional cases, you may have to register for VAT locally to remit the local tax.

You'll find details in our article VAT registration abroad: when do you need to register?.

Special case: permanent establishment in Germany

Sometimes a company based in a third country has a permanent establishment in Germany - and you provide your service specifically to that establishment. In this case, the place of supply does not shift to the third country but stays in Germany, because the service is rendered to a domestic establishment.

This is particularly relevant for international corporations with German subsidiaries.

What this means for you: If the invoice address is in Germany and the service benefits the German subsidiary, the third-country rule does not apply - it remains a regular German B2B transaction with German VAT.

Three typical examples

Example 1 - simple standard case: You're a developer in Hamburg and you program an app for a software company in Singapore. Place of supply shifts to Singapore → net invoice without German VAT, with a note about the foreign place of supply.

Example 2 - exception applies: You're an architect in Munich and you create a design for a single-family home that a Swiss engineering firm wants to build in Bavaria. Real estate-related service → place of supply at the property in Germany → invoice with 19% German VAT.

Example 3 - permanent establishment: You're a consultant advising a US company that operates a German GmbH as a subsidiary in Frankfurt. If the service is rendered directly to the German GmbH, the place of supply is in Germany → invoice with German VAT.

Your roadmap for B2B invoices to third countries

1. Confirm that your customer is actually a business - and document this with appropriate proof.

2. Check whether an exception to the basic rule applies (real estate, events, German permanent establishment).

3. Issue a net invoice with a clear reference to the foreign place of supply.

4. Record the transaction correctly and enter it on line 36, KZ 45 of your advance VAT return.

5. Keep the proof of business status on file - it could be important during a tax audit.

Conclusion

B2B sales with third-country customers are usually straightforward from a VAT perspective: apply the basic rule, issue a net invoice, add a clear note - done. The main pitfalls are the lack of EU-wide standardized business proof and a few exceptions where the place of supply doesn't shift to your customer's country after all.

If you can document the business status of your customer convincingly and keep an eye on the special rules, you're on the safe side. For more complex scenarios - real estate-related services, events, and larger projects spanning multiple countries - it's always worth a quick check with a tax professional.

For individual questions, our Tax Coaches and the Accountable network of partner tax advisors are happy to help.

Author - Valesca Wilms

As content marketing lead at Accountable Belgium, Valesca writes about freelancing, self-employment, and taxes based on her own experience as a freelancer.

Who is Valesca ?