Your LLC is up and running, your first EU business client wants an invoice, and suddenly there is the question that makes forum threads explode: with VAT or without? And what on earth is reverse charge? The good news: for the typical service LLC, the answer is simpler than it sounds. Here is the full mechanism, including the one trap that really costs money.
The principle in one picture
For cross-border B2B services, the EU flips the tax liability: you as the supplier do not pay the VAT, your client does, in their own country. For B2B services, the place of supply is where the client is established; your agency client books your net invoice and reports the VAT of its own country itself, as if it had invoiced itself, with a simultaneous input tax deduction, so for the client it usually nets out to zero. The system is set out in the European VAT Directive, and it applies to suppliers from non-EU countries, so to your US LLC as well, without the LLC needing any EU registration for it. No EU establishment, no VAT number required for you, no VAT on your B2B invoice: that is the normal case.
The invoice that gets it right
Four elements make your EU B2B invoice clean. First, invoice net, with no tax shown. Second, the reverse charge note, for example: "Reverse charge: VAT to be accounted for by the recipient, Article 196 of the EU VAT Directive." Third, your client's VAT number on the invoice, because it is your evidence that they are a business. Fourth, check that VAT number before the first invoice in the EU's official VIES system, and keep the result; a made-up or expired number turns your B2B case into a B2C case, and that plays in a different league. The rest is normal invoice hygiene: sequential number, description of the service, date, your LLC's sender details.
The B2C trap: this is where it gets serious
Now the part the "LLC = never VAT" videos leave out, and which we already touched on in the e-commerce article: if you sell digital services to consumers in the EU, your LLC owes the VAT of the customer's country from the very first euro. Online courses, e-books, software subscriptions, templates for consumers: for all of these the EU taxes at the consumer's place of residence, and for non-EU suppliers there is the non-Union OSS scheme, a single registration in one member state through which you report the VAT of all EU countries every quarter. It is manageable, but it is a real obligation with real rates between 17 and 27 percent, and it attaches to your customers, not to your legal form. Ignore it and you are not collecting savings, you are collecting arrears. In practice many people defuse the issue through platforms and reseller models (marketplaces, merchant-of-record services) that take over the tax; if you sell direct, take OSS seriously or price the advice in.
And the other setups?
US clients: no EU VAT; instead the sales tax logic, usually uncritical for pure services. UK business clients: the same basic idea as reverse charge under national law, and in the B2B case usually with no registration duty for you. Physical goods into the EU: a chapter of its own with import and IOSS; the FBA article covers the marketplace case. The rule of thumb over everything: B2B service = reverse charge and relaxed, B2C digital = OSS and disciplined, goods = separate homework.
Your next step
If your business is B2B: order your LLC and start cleanly with the invoice wording above; as a client you get the invoice templates in the package. If your model includes B2C digital sales or is on the fence, book a consultation with Sebastian, held in English, before the first course is sold: one hour, honest feedback, 15-minute guarantee.
About the author
ZeroTax LLC is a service of Mount Bonnell Advisors in Austin, Texas.
Founder of Mount Bonnell Advisors, Austin, Texas. Has dictated the reverse charge note so often he can say it backwards, and defused the OSS trap often enough to take it seriously.
Book a consultation with Sebastian (held in English only)