You are based in Dubai, Tallinn, or Lisbon, and you continue to invoice clients in France or across Europe. This scenario has become commonplace for thousands of French entrepreneurs living abroad. But it raises tax and legal questions that can be very costly if ignored.

This guide covers the VAT rules applicable to your situation, the mandatory information on your invoices, and practical tools for invoicing properly from abroad. To understand how to structure your business in this context, see our entrepreneur abroad guide.

The Fundamental Question: Where Are You Liable for VAT?

The basic rule is often misunderstood: VAT depends on the place of supply or delivery, not the country where the provider is established. The rules differ significantly depending on whether you invoice businesses (B2B) or individuals (B2C).

B2B VAT: The Reverse Charge Principle

When you invoice a VAT-registered business in another EU country, the reverse charge mechanism applies. In practice:

  • You do not charge VAT. Your invoice is net of tax, with the mention “Reverse charge - VAT due by the recipient (Article 283-2 CGI or Article 196 Council Directive 2006/112/EC).”
  • The client declares and pays VAT in their own country, at the local rate.
  • You have nothing to remit: you are outside the scope for this transaction.

This mechanism works between EU countries, and similarly with clients established outside the EU (in that case, the service is generally outside the scope of French VAT by nature, but the client’s local rules may apply on their end).

B2C VAT: The OSS Regime

If you sell to individuals (B2C) in the EU from your European company, the rules have been more complex since the July 2021 reform.

The single threshold of 10,000 euros applies to all your cross-border B2C sales in the EU. Below this threshold (annual cumulative), you can invoice with the VAT of your country of establishment. Above it, you must apply the VAT of the client’s country.

To avoid registering in every European country, the EU created the One Stop Shop (OSS). You register in a single country (where your company is based), declare all your EU B2C sales via a single form, and the tax authority redistributes the VAT to the relevant member states.

For non-EU B2C sales (from a non-European company), the IOSS (Import One Stop Shop) regime applies to goods under 150 euros imported into the EU. For digital services invoiced from abroad to European consumers, the rules vary country by country, and this is a topic that often requires specific tax advice.

Invoicing French Clients from Abroad: The Permanent Establishment Risk

This is THE topic that concentrates the most errors among expatriate entrepreneurs. Having clients in France does not automatically make you liable for corporate tax in France, but certain behaviors can create what is called a “permanent establishment.”

What Is a Permanent Establishment?

A permanent establishment (PE) is a fixed place of business through which a foreign company carries out all or part of its activity in France. It can be:

  • A fixed location: office, workshop, construction site (if lasting more than 12 months for construction sites)
  • A dependent agent: a person in France who concludes contracts on behalf of your foreign company, holds stock, negotiates terms…
  • Management activity: if you continue to manage the company from France (even if you are officially abroad)

If the tax authority classifies your activity as a permanent establishment in France, your foreign company will be taxed in France on the profits attributable to it. The reassessment can be massive, with penalties and late-payment interest.

How to Avoid a Permanent Establishment?

  • Cease all regular and organized presence in France (no office, no regular meetings with clients from France)
  • Do not maintain stock or means of production in France
  • Prevent any French employee or subcontractor from concluding contracts on your behalf
  • Document your actual presence abroad (lease agreements, daily living invoices, banking presence)

A consultant who lives in Dubai 9 months a year, who has no office in France, and whose contracts are signed from the UAE does not, in principle, have a permanent establishment in France, even if 80% of their clients are French. But the line is fine and the factual context matters enormously.

Mandatory Information on Your International Invoices

An international invoice must comply with specific rules, or it risks being invalid for your client and exposing you to penalties. Here is what must appear.

Always Mandatory

  • Invoice number (sequential, unique)
  • Date of issue
  • Full identity of the provider (name/company name, address, local registration number)
  • Full identity of the client (same)
  • Precise description of the service or product
  • Unit price excluding tax, quantity, total excluding tax
  • Payment terms (due date, method, late payment penalties)

Information Specific to International Transactions

Intra-community VAT number: If you are a company established in the EU, your VAT number (format FR + 11 digits for a French company, EE + 9 digits for an Estonian company, etc.) must appear on the invoice. Your client’s number too, if the transaction is intra-EU B2B.

Reverse charge mention: On a B2B intra-EU invoice exempt from VAT, the legal mention is essential: “Reverse charge” followed by the reference to Article 196 of the European VAT Directive 2006/112/EC.

Out-of-scope mention: If the service is outside the scope of VAT (for example, a B2B intellectual service invoiced from outside the EU to a client outside the EU), this must be explicitly stated.

Currency and exchange rate: If the invoice is in a foreign currency, it is recommended to indicate the reference exchange rate used and/or the equivalent amount in euros.

Practical Cases

Case 1: Freelancer in Estonia, Clients in France

Mika is a developer who created an OU (Estonian LLC) and lives in Tallinn. He invoices 15,000 EUR/month to 4 French clients, all VAT-registered businesses.

Correct invoicing: Invoices excluding tax from the OU, with Estonian intra-community VAT number, mention “Reverse charge - Article 196 Directive 2006/112/EC.” His French clients declare VAT in France through their own returns. Mika does not deal with VAT.

Risk to watch: If Mika spends more than 183 days in France per year or uses a French office to work, the tax authority could classify his activity as a permanent establishment in France.

Tax optimization: Profits reinvested in the OU are not taxed in Estonia (CIT = 0% on undistributed profits). Mika only pays Estonian CIT when he pays himself dividends.

Case 2: Consultant in Dubai, Clients in Europe

Sara is a strategy consultant living in Dubai who created an LLC in the DMCC free zone. She invoices clients in France, Belgium, and Switzerland.

Correct invoicing: Invoices from the Dubai LLC, without VAT (Dubai is not in the EU, no VAT applicable on her services). The mention on the invoice simply states that the service is outside the scope of VAT. Her European clients can deduct the VAT they would normally have paid through the reverse charge mechanism if they are VAT-registered.

Point of attention: Switzerland is not in the EU, and Swiss VAT rules (standard Swiss VAT at 8.1%) may apply on the Swiss client’s end depending on the nature of the service and their turnover. Sara should check with her Swiss client whether Swiss VAT registration is necessary.

Taxation: Dubai CIT = 9% on profits above 375,000 AED. Below that threshold, SMEs are exempt. Sara does not pay income tax in Dubai. Her French tax situation must be completely severed (French non-tax residency established).

Xolo (formerly LeapIN)

Specialized for entrepreneurs using an Estonian e-Residency company. Xolo manages accounting, Estonian tax filings, and generates invoices compliant with European rules. Price: from 79 EUR/month.

Ideal for: freelancers and consultants with an Estonian OU.

Finom

Finom is a business neobank with an integrated invoicing module. Very well suited for European companies (France, Germany, Italy, Spain, Netherlands). It generates compliant invoices, handles VAT, and connects to accounting tools. Price: from 0 EUR (basic plan) with paid options.

Ideal for: European structures seeking simplicity and compliance.

Wise Business

Wise Business is not an invoicing software, but its international payment infrastructure is essential. It allows you to receive payments in multiple currencies with very low fees and convert at the real exchange rate. Very useful when your clients pay in GBP, USD, or CHF.

Ideal for: all international entrepreneurs, as a complement to an invoicing tool.

QuickBooks Online

The global reference for accounting and invoicing. QuickBooks handles VAT rules for many countries, financial reports, bank reconciliation, and accounting exports. Price: from 15 EUR/month (Simple Start plan).

Ideal for: structures with high invoicing volume and a need for comprehensive financial reporting.

Common Mistakes and How to Avoid Them

Forgetting the intra-community VAT number. Without this number on the invoice, your client cannot justify the reverse charge to their tax authority. The invoice will be disputed or rejected.

Applying French VAT from a non-French company. If you invoice from an Estonian company, you cannot collect French VAT (unless you are registered in France, which is possible but complex). An invoice with “VAT FR 20%” from an Estonian OU is incorrect.

Neglecting proof retention. For each international invoice, retain: proof of dispatch, acknowledgment of receipt, proof of payment. In the event of an audit, you will need to prove that the service was actually performed and that the invoicing corresponds to an economic reality.

Underestimating the permanent establishment risk. As described above, working “for” French clients from your Parisian office during your visits to France, receiving professional mail in France, or delegating contract signing to a French associate are red flags for the tax authorities.

Not adapting mentions according to the client’s country. Mandatory mentions vary. An invoice sent to Switzerland must comply with Swiss requirements, and in the post-Brexit UK, UK VAT rules apply. Get clear on the specific obligations of each market where you are active.

Currencies, Exchange Rates, and Hedging Against Currency Risk

Invoicing from abroad often means working in multiple currencies. A French client pays in euros, a British client in pounds sterling, an American client in dollars. This diversity creates opportunities but also risks.

What Currency to Use on the Invoice?

There is no legal obligation to issue an invoice in a specific currency for most international transactions. You can invoice in euros, dollars, or any currency agreed upon with your client. What matters: the explicit mention of the currency on the invoice, and if necessary, the exchange rate used for accounting conversion.

Practical recommendation: Invoice in your client’s currency to simplify the business relationship, but manage your treasury in your main currency. Tools like Wise Business or Revolut Business allow you to receive payments in multiple currencies via local IBANs (UK, US, EU) without excessive conversion fees.

Currency Risks for Long-Term Contracts

If you have multi-month contracts denominated in a foreign currency, you are exposed to exchange rate fluctuations. A contract worth 100,000 USD signed when 1 EUR = 1.05 USD is worth 95,238 EUR. If the euro strengthens to 1.15 USD before payment, you will only receive 86,956 EUR, a loss of 8,300 EUR without anything changing in your service delivery.

Solutions: For significant contracts in foreign currency, consider simple hedging options (forward contracts) offered by platforms like Wise Business, Airwallex, or business banks. Some entrepreneurs prefer simply indexing their rates to the euro and systematically invoicing in EUR, transferring the currency risk to their client.

Accounting Impact of Currency Exchange

In your accounting, invoices in foreign currencies must be converted to your reference currency (generally the euro if your company is in the eurozone) at the exchange rate on the date of the transaction. Exchange differences between the invoicing date and the payment date constitute exchange gains or losses, which are recorded separately and can have a tax impact.

This technical point is worth discussing with your local accountant, especially if your volume of foreign currency transactions is significant (beyond 20-30% of your revenue).

Key Takeaways for Invoicing Correctly from Abroad

International invoicing is not rocket science, but it requires a rigor that domestic invoicing does not demand. The three critical points to remember:

VAT follows the nature of the transaction (B2B or B2C) and the client’s location, not the provider’s. In intra-EU B2B, the reverse charge exempts you from collecting VAT. In B2C, the OSS is your best friend to simplify multi-country obligations.

Permanent establishment is the most underestimated risk. It is not because you have French clients that you are taxed in France, but certain behaviors can create this permanent establishment. Evaluate your situation with a tax advisor before settling in.

Your invoices must be impeccable and documented. VAT number, reverse charge mentions, currency, payment terms: each element matters so your client can use your invoice in their own accounting and so you can prove the reality of the service in case of an audit.

To learn more about the optimal legal structure for your country of establishment, explore our entrepreneur abroad guide.