Invoicing glossary
Short explanations of the terms you meet on invoices and in EU VAT.
Rules differ by country. The rows explain the term and cite EU law; a national rule always names its country.
The VAT Directive is Council Directive 2006/112/EC on the common system of value added tax. Where a row mentions a national rule, it names the country; rules outside the EU, such as in the UK, are not covered here.
Documents
Invoice
The document that records a supply of goods or services and the amount the customer owes. For EU VAT purposes, Article 226 of the VAT Directive lists what it must show, among other things the date, a sequential number, the supplier’s VAT number, both parties’ names and addresses, the taxable amount, the VAT rate and the VAT amount.
Document typesProforma (pro forma) invoice
A document that asks the customer to pay, or sets out the terms, before the goods or services are supplied. The EU VAT Directive does not use the term; what it requires is an invoice for a payment on account received from a business customer (Article 220(1), points 4 and 5).
Advance and proforma invoicesCredit note
A document that reduces the amount of an invoice already issued, for example after a return or an agreed discount. EU VAT law treats any document that amends and refers specifically and unambiguously to the initial invoice as an invoice (Article 219 of the VAT Directive).
Credit notesDebit note
A document that raises the amount of an invoice already issued, for example for extra work agreed later. Like a credit note, it counts as an invoice under EU VAT law when it amends and refers specifically and unambiguously to the initial invoice (Article 219 of the VAT Directive).
Credit note vs. debit note
VAT
VAT number
The number under which a business is identified for VAT in an EU country (Article 214 of the VAT Directive). It starts with the country’s code (Article 215), so a VAT number from Slovakia, IČ DPH, starts with SK; Greece may use EL, and Northern Ireland uses XI.
VIES
The European Commission’s online check of a VAT number issued in an EU country or Northern Ireland; it is a check, not a registration. Article 31 of Council Regulation (EU) No 904/2010 requires every EU country to let businesses trading across EU borders confirm electronically that a VAT number is valid; UK (GB) numbers are not covered.
Reverse charge
The customer, not the supplier, accounts for the VAT. In EU law the basic case is a service supplied to a business by a supplier not established in the customer’s country (Article 196 of the VAT Directive), other cases follow in Articles 194 to 199b, and the invoice must say “Reverse charge” (Article 226, point 11a).
Payments
Remittance advice
A note from the customer telling the supplier which invoices a payment covers, sent with the payment or just after it. It is a business document, not a tax document: the EU VAT Directive does not mention it.
E-invoicing
E-invoice
In EU VAT law, an invoice issued and received in any electronic format (Article 217 of the VAT Directive); Directive 2014/55/EU on electronic invoicing in public procurement means something narrower, a structured format that software can process automatically (Article 2, point 1). EU countries may require e-invoices for domestic supplies (Article 218 of the VAT Directive), and some, such as Germany, France and Romania, have their own rules and systems.
Peppol
A network for exchanging electronic business documents such as invoices, owned by the OpenPeppol association, which governs its central parts. It is not EU law, and Peppol support in Lucanto is in preparation.
Peppol explained
We don’t have that term. Try another form of the word or tell us what you’re looking for.
These explanations are general and are not tax advice.