Invoicing in dollars, pounds or francs: VAT, exchange rates and your books

An American client wants to pay in dollars, a British one thinks in pounds. That is fine: your invoice does not have to be in euros. One amount does have to be, and your administration stays in euros either way. Which rate to use, what must be on the invoice, and what to do when slightly more or less comes in than you invoiced.

Can you invoice in another currency?

Yes. Nothing obliges you to invoice in euros. If you agreed an amount in dollars with your client, you put dollars on the invoice. That holds for any currency and for clients inside and outside the EU.

The rest of the invoice does not change: your details with CoC and VAT number, a sequential invoice number, the date and a description. All the usual invoice requirements still apply, plus one extra.

The VAT amount is always in euros

The amounts on your invoice may be expressed in any currency, but the VAT payable has to be expressed in euros. That comes from article 230 of the EU VAT Directive and article 35a of the Dutch VAT Act (Wet op de omzetbelasting).

So in practice your lines, subtotal and total are in your client's currency, with a line underneath showing the VAT in euros:

The rate itself is not legally required, but put it on the invoice anyway. Your client sees where the euro amount comes from, and nobody has to reconstruct it during an audit.

If you charge no VAT because it is reverse charged, exempt, or your client sits outside the EU, there is no VAT amount to show. Add the total in euros with the rate anyway; it saves you a puzzle later.

Which exchange rate?

You convert at the rate applying when the VAT becomes chargeable. For a regular service invoice that is the invoice date, so in practice the rate of the day you write the invoice.

You may choose the source yourself: the European Central Bank reference rate of that day, or the last published selling rate. The condition is consistency. Pick one source and use it for every invoice; switching per invoice to whichever rate happens to suit you is exactly what stands out in an audit. If your invoice date falls on a weekend or a public holiday, the ECB publishes no rate and the last working day's rate applies.

Your books stay in euros

A Dutch administration is an administration in euros. Your revenue, your profit, your VAT return and your income tax return are all in euros, even when your invoices leave in dollars.

So for every foreign-currency invoice you keep two amounts: the amount as it appears on the invoice, and the converted euro amount you book. The euro amount is the revenue that ends up in box 1a of your VAT return and in your profit. Keep the rate you used alongside it, or the euro amount can no longer be verified.

What if more or less comes in?

Between your invoice date and the day your client pays, the rate moves. So a $ 6,050 invoice almost never brings in exactly the euro amount you booked.

• You invoice $ 6,050 on 3 March at a rate of 0.8600 and book € 5,203 of revenue plus VAT.
• Your client pays on 2 April and the bank credits € 5,250.
• The € 47 difference is an exchange result.

That difference is not extra revenue and it changes nothing about your VAT: the VAT became chargeable on the invoice date at that day's rate, and that return stands. An exchange result belongs in your profit and loss as an exchange gain or loss, so it does count towards your income tax. If less comes in, it is an exchange loss and it lowers your profit.

Do not confuse this with a client who underpays. Your $ 6,050 invoice is only settled once $ 6,050 has arrived, so compare in the invoice currency rather than in euros.

Credit notes use the same rate

Reversing a dollar invoice means a credit invoice in the same currency, at the rate of the original invoice. The correction in euros then cancels out exactly against what you booked and declared earlier. Use the rate of the credit date instead and a leftover sliver of revenue and VAT stays behind in your books.

VAT for clients abroad

The currency says nothing about the VAT. Whether you charge VAT depends on who your client is and where they are, not on the currency they pay in. A Dutch client who wants to settle in dollars still gets 21% VAT on the invoice.

Supplying a business in another EU country usually means reverse charging the VAT; for a client outside the EU your service often falls outside Dutch VAT altogether. See invoicing abroad, and invoicing in English for date and number notation.

How Finq handles it

In Finq you pick the currency per invoice: euro, dollar, pound or Swiss franc. The invoice lines are then in that currency.

• The rate is a suggestion, not a rule. Finq fetches the ECB reference rate for your invoice date and fills it in. Want a different rate? Overwrite it.
• The rate is printed on the invoice. Below the totals, Finq adds the VAT amount and the total in euros, with the rate used. Exactly what the law asks for.
• Your administration stays in euros. The revenue that reaches your VAT return, your reports and your tax reserve is always the converted euro amount.
• Finq works out the exchange result. Once a foreign-currency invoice is fully paid, the difference appears as an exchange result in Reports, separate from your revenue.
• Paid means paid in the invoice currency. Finq compares what came in in dollars against the invoice amount in dollars, so an exchange difference never marks an invoice paid or open by mistake.

One thing is euro only: the online payment link through Mollie. A dollar invoice goes out as a PDF or through an invoice link instead. The same will apply to e-invoices via Peppol, which are in euros as well.

See how invoicing works in Finq.

This is general information, not personal tax advice. The rules on invoice currency are in article 230 of the EU VAT Directive and article 35a of the Dutch VAT Act; check your own situation on belastingdienst.nl or with your bookkeeper.