Billing clients abroad: currency, tax and getting paid

Your first client in another country raises a lot of small questions. Which currency do you bill in? Do you still add VAT, GST or sales tax? How will the money reach you? And why did a little less arrive than the invoice said?

This guide answers them in plain words, for businesses anywhere. The idea is the same in most countries, and the details differ, so treat it as a starting point, not tax advice. For your own case, ask your accountant (in India, your CA).

Which currency to bill in

Usually your client's. A company in the US expects dollars, one in the UK expects pounds, one in Dubai may expect dirhams. An invoice in their own currency is easier to approve, and it puts the exchange work on your side, where you can see it.

Billing in your own currency is fine too, if the client agrees. They then carry the exchange risk, and some will pay late while they work out the conversion. Whichever you pick, write the currency code on the invoice (USD, GBP, EUR), not just a symbol. Several countries use “$”.

Exports usually carry no tax

In most countries, goods or services sold to a client abroad are zero-rated: you charge 0% of your local VAT, GST or sales tax, and you can usually still claim back the tax on your own business costs. Some countries call certain sales to clients abroad “outside the scope” instead. The result on the invoice is similar: no local tax.

There are conditions. For services, the rules look at where the client is and where the service is used. Services tied to a place, like work on a building or an event in your country, often stay taxable at home. Goods usually need proof they left the country. The invoice should say why no tax is charged, in one short line.

Selling to EU businesses: the reverse charge

The reverse charge moves the job of paying VAT from the seller to the buyer. When a VAT-registered business in one EU country sells to a VAT-registered business in another EU country, the seller usually charges no VAT. The buyer works out the VAT in their own country's return. Nothing is lost: the tax is just paid by the side that is in that country.

For this to work, the invoice shows both VAT numbers and a line saying the reverse charge applies. Check your client's VAT number first. In the EU you can do it on the official VIES website. Selling to an EU consumer is different: the reverse charge does not apply and the rules depend on what you sell. The same reverse charge idea is used for many business services bought from abroad, in the UK and elsewhere, but check the local rule.

Getting paid across borders

The common ways, each with its own costs:

• Bank transfer (SWIFT). Works almost everywhere. Your bank, the client's bank and sometimes a bank in the middle can each take a fee.
• Money transfer services, like Wise. Often cheaper for smaller amounts, with the fee shown up front.
• Card and wallet payments, like Stripe or PayPal. Easy for the client to pay by card, but the fee is usually a share of the amount.

On top of fees, whoever converts the money uses their own exchange rate, which is often a little worse than the rate you see online. That gap is called the spread. So what arrives in your bank is usually a little less than the invoice value. That is normal, not a short payment. For bank transfers, you can ask the client to pick the option where they pay the sending fees (often called “OUR”), if their bank offers it.

Make paying easy: put your own pay link on the invoice, from Stripe, PayPal, Wise or similar, with a QR code, and add your full bank details for transfers. If the amount that arrives is short for another reason, see why your client paid less.

Keep the value in your own currency

Your accounts and tax returns are in your own currency. So each foreign invoice should also record its value in your currency and the exchange rate used, usually the rate on the invoice date. When the money arrives at a different value, the difference is a small exchange gain or loss, or a bank fee. Agree with your accountant how to record it, and use the same method every time.

When the credit appears on your statement, match it by the invoice number in the bank line, not the amount, because the amounts will not agree. See how to match bank payments to invoices.

In India: the LUT

Exports from India are zero-rated under GST. A service counts as an export when you are in India, the client is outside India, the place of supply is outside India, you are paid in foreign currency (or in rupees where the RBI allows it), and you are not just two branches of one business. Miss one condition and it may be a normal taxable sale.

You can export without paying IGST under an LUT (Letter of Undertaking), or pay IGST and claim it back as a refund. Most small service exporters use the LUT, so no tax money waits for a refund. The LUT is filed online on the GST portal, usually once each financial year and before you issue export invoices under it. You get an ARN (acknowledgement reference number) when you file. The invoice should say “Supply meant for export under LUT without payment of IGST”, and many businesses add the ARN.

• Place of supply is “Other countries”, code 96 in GST returns.
• Show the value in rupees and the rate used. Which official rate to use can depend on goods or services, so agree it with your CA.
• Keep proof of the foreign payment: your bank's FIRC or FIRA, and an e-BRC if you need one. Check which papers your case needs.
• Report exports in GSTR-1, Table 6A, with or without payment of tax. UPI works only for rupees, so clients abroad pay by bank transfer or a payment service.

The short version

• Bill in your client's currency, and write the currency code.
• Exports are usually zero-rated: no local tax, with a line saying why. Conditions apply, especially for services.
• EU business to EU business across borders: no VAT from you, both VAT numbers and a reverse charge note on the invoice.
• Expect a little less to arrive after fees and the exchange rate. That is normal.
• Record the value in your own currency and the rate on the invoice date.
• In India: file an LUT each financial year, put the LUT line on the invoice and report in GSTR-1 Table 6A.