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When invoicing customers, businesses must apply the correct tax scheme based on their location and the applicable laws. The two main types of taxes commonly seen on invoices are Value-Added Tax (VAT) and Sales Tax.

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How does VAT work

VAT is a consumption tax applied at every stage of the supply chain where value is added, from production to the point of sale. The final consumer ultimately bears the tax. VAT is common in most countries worldwide, particularly in Europe and some parts of Asia and Africa. VAT rates vary by country and are often categorized into standard, reduced, and zero rates for different goods and services.

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In the EU

First and foremost, ensure that you’re registered with your country’s tax authority and hold a valid VAT registration number, also known as an EU VAT Identification number. This number will be essential for conducting VAT-related activities. Next, determine whether your customers are businesses or consumers. Hyperline validates EU VAT numbers and uses the result when deciding whether reverse charge can apply. The chart below summarizes how Hyperline determines VAT for an EU-based invoicing entity. It assumes that automated tax collection is enabled.
When issuing invoices, it is mandatory to include VAT, even if it is zero-rated. VAT returns must also be submitted on a regular basis, typically monthly, quarterly, or annually, depending on the specific requirements of each country. Be diligent in fulfilling these obligations to remain compliant. Once you are registered for VAT in another EU country, it’s important to note that you should not charge VAT for both your own country and the customer’s country. VAT should only be applied once, in accordance with the rules and regulations of the customer’s location. Lastly, keep in mind that obtaining VAT registration in a new country can be a time-consuming process, typically taking around 6 weeks. This timeline can vary depending on the country where you are seeking registration. Patience and adherence to the necessary procedures will be key during this period.

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EU cross-border B2C threshold

When you use Hyperline’s automated tax engine, Hyperline automatically tracks the EU-wide €10,000 threshold used for eligible cross-border business-to-consumer (B2C) sales. Below this threshold, VAT is calculated using the rate of the invoicing entity’s country. Once the threshold is exceeded, subsequent eligible invoices use the VAT rate of the customer’s country. Hyperline tracks the threshold:
  • Separately for each invoicing entity
  • Per calendar year
  • Using amounts excluding tax from issued invoices in euros
  • Only when the customer’s current typology is B2C (person)
  • Using invoices that do not include a tax ID
Domestic sales do not change their applicable VAT rate when the threshold is exceeded. Cross-border B2B sales that qualify for reverse charge follow the reverse charge rules instead.

Example 💡

Your French invoicing entity sells to consumers in Spain. While its tracked annual amount is at or below €10,000, eligible invoices use the French VAT rate. After issued invoices bring the tracked amount above €10,000, subsequent eligible invoices use the Spanish VAT rate.
The €10,000 threshold applies only to certain cross-border B2C supplies. See the European Commission’s cross-border VAT guidance and confirm your obligations with your tax adviser.

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Outside the EU

If you’re a business registered within an EU-based country, you don’t charge VAT for customers that are based outside of the EU. Please take a look at this page to learn more about the different VAT rates globally.

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How does Sales Tax work

Sales tax is a tax imposed on the sale of goods and services, collected only at the point of sale from the end consumer. It is primarily used in the United States and some parts of Canada, and rates are usually set by states or local governments and vary significantly across jurisdictions.

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Configure taxes in Hyperline

In Hyperline, tax settings are managed per invoicing entity, allowing you flexibility in defining specific tax behavior depending on the legal entity responsible for issuing customer invoices. Hyperline automatically resolves the right tax scheme and applies the standard tax rate, the default rate of taxation applied to most goods and services. This is the general rate set by the government, which applies unless a specific good or service qualifies for a reduced rate, zero rate, or exemption. Two options are available regarding VAT collection:
  1. Automated tax collection: Hyperline will automatically collect taxes based on your origin country and customer information (country, VAT number, tax ID, etc.). The correct VAT amount and rate will be applied on the issued invoices.
  2. Manual tax handling: Hyperline allows manual tax handling where you are responsible for filing taxes by country.
To use manual tax handling, go to Settings > Taxes for the relevant invoicing entity and turn off Enable automated tax collection, which is enabled by default.

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Tax calculation on invoices

The taxes (rates and amounts) will appear on all invoices under the billed subtotal.
When creating, editing, or duplicating invoices, you can manually set custom rates for each individual line.
Tax is calculated on each invoice line item, then aggregated into the invoice totals. This means line-level rounding can affect the final tax total, especially when invoices contain several products, discounts, or mixed tax rates.
If you need to review or adjust line-level taxes before the customer is charged, enable draft invoices or configure a grace period for usage-based invoices.

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Grace period for metered invoices

For metered and usage-based subscriptions, the grace_period is the number of days an invoice stays open after the billing period ends. During this period, the invoice is not finalized or charged, so you can review usage, adjust line items, or correct taxes before payment collection starts. When the grace period ends, the invoice is finalized, assigned an invoice number, and moves to payment according to the customer’s payment method and invoice settings.

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Customer tax settings

You can customize the tax rate per customer if necessary, but be careful, a manual tax rate set on a customer will not allow Hyperline to display any legal information associated with that rate in the invoice. You can add a custom invoice note for the customer to fix this.

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Customize tax rate per customer

1

Click on 'Edit' in the information section of the customer page

2

Navigate to the 'Advanced' section and locate the 'Custom tax rate' field

3

Enter the desired rate and save

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Taxability per customer

Each customer can be marked as Taxable or Tax exempt from the customer edit form. Use Taxable for the standard case where Hyperline should calculate taxes from your tax settings, customer location, tax ID, and product configuration. Use Tax exempt when a customer should not be charged tax, for example when you have collected and validated a tax exemption certificate outside Hyperline.
Customer taxability is separate from a custom tax rate. Use taxability to decide whether tax applies at all, and custom tax rates to override the rate used for a taxable customer.

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EU VAT and tax ID validation

Hyperline automatically manages VAT in the EU. For B2B customers in another EU country, the reverse charge rate can apply when the customer has a tax ID on their profile. You can add the tax ID yourself from the customer page, or ask the customer to provide it from a portal, checkout, or quote signature flow.

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Tax ID validation

When a customer tax ID is added or updated, Hyperline checks its format and, for EU VAT numbers, validates it through the EU VAT Information Exchange System (VIES). EU VAT numbers are then revalidated with VIES regularly, at least once a month, so the status can change if the VAT number is updated in the official registry. The validation status appears next to the customer’s Tax ID on the customer page.
Use the Customers list to filter customers by tax ID status. This helps you find records with invalid, mismatch, unverified, or unsupported tax IDs so you can correct the tax ID, ask the customer to update their billing details, or decide the right follow-up action.
For EU VAT numbers, Hyperline stores the VIES consultation number on the customer and on invoices that rely on that validation. This gives your finance team a reference for later checks.
Tax ID validation helps you identify risky billing details, but it does not replace review by your finance, tax, or accounting team. VAT databases are not always up to date, and an otherwise valid VAT number may still require additional checks for your billing context.

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Tax enforcement options

Tax enforcement is configured per invoicing entity. This lets each legal entity decide how strictly Hyperline should require and validate tax IDs before applying tax rules. To configure tax enforcement, navigate to Settings > Taxes for the relevant invoicing entity.

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Require customer tax ID

Enable Require customer tax ID when all company customers billed by an invoicing entity must have a tax ID. When enabled, the tax ID field is treated as mandatory for company customers. Use it when your billing process requires a tax ID before invoices, quotes, or hosted-page billing details can be completed. This setting checks that a tax ID is present; it does not require the tax ID to be externally validated. To enable it, navigate to Settings > Taxes for your desired invoicing entity and toggle on Require customer tax ID.

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Enforce a valid tax ID for reverse charge

By default, Hyperline applies the reverse charge rate as soon as a tax ID is provided on the customer’s profile, without waiting for external validation. Enable Require valid tax ID for reverse charge when reverse charge should apply only after the customer’s tax ID has the valid status. If the tax ID is missing, invalid, mismatch, unverified, or unsupported, Hyperline applies the standard tax rate for the customer’s country instead. This setting is useful when your tax policy requires VIES validation before applying a 0% reverse charge rate.
This setting is disabled by default. If VIES validation is temporarily unavailable, a tax ID may remain unverified; with this setting enabled, Hyperline will not apply reverse charge until validation succeeds.

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Tax mappings

Tax mappings associate the tax rates used by Hyperline with the corresponding codes in your accounting software. They are configured separately for each invoicing entity. The Tax mappings list brings together:
  • Country-specific rates, including standard and reverse charge rates
  • Reusable custom rates, identified by the Custom label
  • The accounting code associated with each rate
You can search the list by mapping name, country, rate, or code. Use the action menu on a row to manage an existing mapping.

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Create a tax mapping

1

Open the invoicing entity's tax settings

Go to Settings > Taxes for the relevant invoicing entity.
2

Click 'Create tax mapping'

3

Configure the mapping

Enter the mapping details and the code used by your accounting software, then save the mapping.
When you send an invoice to connected accounting software, Hyperline associates the applicable tax mapping with its invoice lines. Custom tax mappings can also be assigned to products in your catalog for each invoicing entity. Use them when a product requires a reusable rate that differs from the country-specific rates resolved by the tax engine.