# A taxing issue: Ten tax invoicing pitfalls that international businesses must avoid
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-24
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Top Ten Tax Invoicing Pitfalls for International Businesses
Meta Description: Learn from Alex Baulf, Senior Director at Avalara, as he outlines the common tax invoicing challenges for global businesses, from languages to digital
URL: https://financedigest.com/a-taxing-issue-ten-tax-invoicing-pitfalls-that-international-businesses-must-avoidhtml

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![Alex Baulf, Senior Director, Global Indirect Tax at Avalara](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/1da63-1736815939397-compressed.jpg)

_Bu_ **_Alex Baulf,_** _Senior Director, Global Indirect Tax at_ [Avalara](https://www.avalara.com/eu/en/index.html) _, highlights the ten most common tax invoicing issues facing international businesses today._

The tax invoice is arguably the most crucial element in any VAT or GST system. Not only does it underpin a business’s ability to reclaim the VAT on its purchases, but it also forms the basis for tax calculation, reporting, posting to the ERP and auditing by tax authorities.

However, for companies operating internationally, the plethora of unique local invoicing requirements relating to contents, storage, language, and currency can make it challenging to [ensure compliance](https://www.financedigest.com/the-lego-blocks-of-saas-how-microservices-can-help-ensure-compliance-with-changing-financial-regulations.html "The Lego blocks of SaaS: how microservices can help ensure compliance with changing financial regulations"). The more knowledge businesses have of these pitfalls, the better placed to avoid them.

With that in mind, below are the top ten [tax invoicing pitfalls businesses](https://www.financedigest.com/are-there-tax-breaks-for-business-health-insurance.html "Are there tax breaks for business health insurance?") should be aware of when operating internationally.

1. **Language**

In the [European Union](https://www.financedigest.com/lisk-announces-lsk-token-listed-on-bitflyer-the-european-unions-newest-crypto-exchange.html "Lisk announces LSK token listed on bitFlyer, the European Union’s newest crypto exchange") (EU), the invoicing legislation does not prescribe the mandatory use of any specific local language. Where a business issues an invoice in a language other than the national one, the relevant EU country cannot [restrict VAT recovery](https://www.financedigest.com/europe-sees-travel-recovery-as-covid-restrictions-ease.html "Europe sees travel recovery as COVID restrictions ease") solely. However, [tax authorities](https://www.financedigest.com/eu-tax-authorities-anti-fraud-measures-and-a-grab-for-cash.html "EU tax authorities – anti-fraud measures and a grab for cash") can request a translation in case of audits.

2. **Sequential numbering**

Most countries with a [VAT or GST regime require tax](https://www.financedigest.com/goodbye-to-all-vat-eu-indirect-tax-after-brexit.html "GOODBYE TO ALL VAT? EU INDIRECT TAX AFTER BREXIT") invoices to have a unique sequential number. This can be [challenging for firms operating across separate business](https://www.financedigest.com/the-maserati-100-one-hundred-business-disruptors-challenging-the-establishment.html " ‘The Maserati 100’ One Hundred Business Disruptors Challenging The Establishment") units or divisions or using a single shared service centre or ERP that centrally issues invoices from one series, covering several groups of companies.

3. [Digital signatures](https://www.financedigest.com/cryptomathic-publishes-digital-signatures-for-dummies.html "Cryptomathic Publishes Digital Signatures for Dummies")

While there is often a [choice of digital signature standards or providers](https://www.financedigest.com/route-genie-partners-withnorsk-global-to-provide-retailers-with-increased-international-carriage-choice.html "Route Genie Partners WithNorsk Global To Provide Retailers With Increased International Carriage Choice") to use, some countries will mandate this or issue the digital signature themselves under a pre-clearance e-invoicing model.

4. **PDF is generally not an electronic invoice for VAT purposes**

PDF invoices do not generally qualify as e-invoices. However, when a [business issues or receives](https://www.financedigest.com/controlling-your-business-cash-flow-with-effective-accounts-receivables-turnover-ratios.html "Controlling Your Business Cash Flow With Effective Accounts Receivables Turnover Ratios") invoices in PDF formats, they may be subject to specific storage and archiving rules.

5. **Supplier and customer VAT numbers**

It is mandatory for a supplier to clearly show its VAT registration number (or GST/TIN number in some jurisdictions). An invoice missing this number will generally not be classified as a valid tax invoice for VAT/GST purposes. In turn, the customer can’t generally recover the [VAT as ”input tax”](https://www.financedigest.com/boardroom-attention-to-tax-compliance-up-76-thanks-in-part-to-making-tax-digital-for-vat.html "Boardroom Attention to Tax Compliance Up 76%, Thanks in Part to Making Tax Digital for VAT").

6. **Storage and archiving**

[Businesses must retain invoices for the minimum retention period set](https://www.financedigest.com/finalised-pan-european-data-protection-laws-set-the-new-standard-for-a-privacy-friendly-business-environment.html "Finalised Pan-European data protection laws set the new standard for a ‘privacy-friendly’ business environment") by national tax authorities. But, archiving requirements for e-invoices can be much more onerous; for example, in Italy, these cannot be altered and [need to be grouped into archived packets](https://www.financedigest.com/travel-insurance-small-print-what-you-need-to-know-loopholes-in-policies-that-could-cost-you-a-packet.html "Travel insurance small print – what you need to know Loopholes in policies that could cost you a packet"), with a digital signature and timestamp applied.

7. [Currency and exchange rates](https://www.financedigest.com/currency-exchange-how-to-find-the-best-rates.html "Currency Exchange: How to Find the Best Rates")

Where a VAT or GST is charged, the general requirement is to show this as the [local reporting](https://www.financedigest.com/local-government-business-support-getting-worse-report-shows-as-70-of-uk-firms-say-its-not-good-enough.html "Local government business support getting worse, report shows, as 70% of UK firms say it’s not good enough") currency on the tax invoice.

But a common pitfall is that [accounts payable teams](https://www.financedigest.com/what-can-accountants-learn-from-great-britains-olympic-team.html "What can accountants learn from Great Britain’s Olympic team?") in the country or within a regional shared service centre may not be aware of this requirement. The tendency is to enter the [tax amount into the ERP system using the company’s](https://www.financedigest.com/exxon-sues-eu-in-move-to-block-new-windfall-tax-on-oil-companies.html "Exxon sues EU in move to block new windfall tax on oil companies") chosen exchange rate rather than the suppliers. The amounts should match to demonstrate the symmetry between the VAT reported on the sale (the [output tax](https://www.financedigest.com/uk-oil-gas-firms-to-leave-years-worth-of-output-in-ground-with-tax-hikes-report.html "UK oil, gas firms to leave year’s worth of output in ground with tax hikes-report")) and the VAT recovered on the purchase (the input tax). This may lead to issues during audits or when [tax authorities attempt to match the amounts in countries with digital](https://www.financedigest.com/self-employed-taxpayers-and-making-tax-digital.html "Self-employed taxpayers and Making Tax Digital") reporting or e-invoicing systems.

8. **Description of the goods or services**

Some tax authorities do not simply accept an SKU or material number. As a result, [South Africa](https://www.financedigest.com/inmobi-and-coca-cola-win-mma-smarties-south-africa-award-for-beat-can-campaign.html "InMobi and Coca-Cola Win MMA SMARTIES South Africa Award for Beat Can Campaign"), for example, has recently updated its invoicing requirements for foreign digital service providers, stating that the description on the invoice of the electronic services supplied must now be “full and proper.

[Businesses should be aware of local](https://www.financedigest.com/the-local-benefits-which-can-help-your-business.html "The local benefits which can help your business") requirements. Hungary, for instance, mandates companies to show the relevant HS code for each item on the invoice if a non-standard VAT rate is charged.

9. **Commercial and legal requirements**

While most invoicing requirements country guides focus on specific tax-related needs, [businesses entering new markets should ensure that they are aware of the broader commercial and legal](https://www.financedigest.com/how-to-budget-for-legal-fees-in-your-business.html "How to Budget for Legal Fees in Your Business") invoicing requirements.

Likewise, France recently introduced a law that requires the billing address of the buyer and seller to be shown on the invoice if these are different from the main [business](https://www.financedigest.com/addressing-the-human-aspects-of-business-transformation.html "Addressing the human aspects of business transformation") address. Other local legal requirements include the company’s incorporation number from the trade register, registered offices, legal forms, names of directors, and [share capital](https://www.financedigest.com/shares-in-monte-dei-paschi-plunge-14-after-capital-raise.html "Shares in Monte dei Paschi plunge 14% after capital raise") amount.

10. **Self-billing**

Not only must self-billed invoices [meet all the usual](https://www.financedigest.com/despite-return-to-work-virtual-meetings-will-continue-to-disrupt-business-as-usual-in-finance.html "Despite Return to Work, Virtual Meetings Will Continue to Disrupt Business as Usual in Finance") invoicing requirements in that country, but there are generally additional requirements to make them valid for VAT purposes.

For instance, in the EU and the UK, there must be a valid self-billing agreement in place. While self-billing can be an efficient [way of doing business](https://www.financedigest.com/5-ways-to-grow-your-business-despite-a-bad-credit-score.html "5 Ways to Grow Your Business despite a Bad Credit Score"), there is also a risk if requirements are not fully understood or met.

**Staying up-to-date with complian**

**ceMaintaining compliance with constantly evolving local tax invoicing [rules across multiple countries can be time-consuming and stressful for internationally-operated businesses](https://www.financedigest.com/uk-businesses-call-for-looser-immigration-rules-to-boost-growth.html "UK businesses call for looser immigration rules to boost growth"). Knowing and understanding the most common pitfalls, like those listed above, is critical if companies wish to avoid them. An even better approach is working with an international tax specialist who can help [ensure tax compliance regardless of the business strategy](https://www.financedigest.com/2023-supply-chain-trends-for-businesses-to-ensure-a-more-efficient-supply-chain-strategy.html "2023 supply chain trends for businesses to ensure a more efficient supply chain strategy").**


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