How does VAT work

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, it’s crucial to determine whether your customers are businesses or consumers. Hyperline will verify VAT numbers for you so you can make sure to only manage legally registered businesses.

Here’s a flow chart representing how VAT should be applied (and how Hyperline works under the hood), courtesy of our friends at Chargebee.

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.

Outside the EU

If you’re a business registered within a 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.

VAT in Hyperline

In Hyperline, you have two options regarding VAT collection:

  1. Automated tax collection: Hyperline will automatically collect taxes based on your origin country and customer information (country, VAT number, 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 filling taxes by country.

To opt for this mode, you need to navigate to the ‘Settings’ section, then ’% Taxes’ and deselect the ‘Enable Automated Tax Collection’ toggle, which is enabled by default.

VAT on invoices

The VAT (rate and amount) will appear on all invoices under the billed subtotal.

VAT per customer

You can customize the VAT rate per customer if necessary.

To customize the VAT 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 VAT rate

Checking for invalid VAT numbers

While we are verifying the VAT number’s validity and displaying it in your interface, we’re trusting your customer as long as the format of the VAT number is valid.

VAT databases are not always up-to-date and Hyperline cannot always confirm a specific number belongs to a specific customer.

Make sure to check our interface regularly to see if some customers have invalid VAT numbers (in the Customer page → VAT number).

An invalid VAT number does not impact the ability to send invoices with Hyperline, but it can have negative consequences on your business if your invoices are not VAT compliant in your country (subject to fines).