As a hosting provider or IT service provider, the issue of correct invoicing and tax declaration is unavoidable. Particularly, the question of when and how to declare value-added tax (VAT) regularly raises uncertainties—both when calculating offers and issuing invoices.
In this article, I will address the essential points about correct tax declaration (gross/net) and explain typical pitfalls that can occur, especially in B2B and B2C transactions.
- Principle: Net Prices in B2B, Gross Prices in B2C
B2B (Business-to-Business): Most commercial customers expect net prices. The VAT is then shown separately on the invoice. It is important here: The recipient of the service must be entitled to deduct input tax.
B2C (Business-to-Consumer): End customers are only interested in the gross price. The final price, including VAT, must be stated in offers, price lists, and invoices.
Example:
Offer to a company: “Web hosting package for €10.00 plus 19% VAT.”
Offer to a private individual: “Web hosting package for €11.90 (incl. 19% VAT).”
- Tax Declaration on the Invoice: Mandatory Information According to § 14 UStG
For a proper invoice—especially in B2B transactions—the following must be included:
- Name and address of both parties
- Tax number or VAT ID of the issuer
- Invoice number
- Service period/date
- Net amount
- VAT amount and rate
- Gross amount
If one of these items is missing, the customer cannot deduct input tax—which often leads to follow-up questions or even payment delays.
- Reverse Charge Procedure: Do Not Declare Tax!
When offering services to EU countries or customers outside the EU, it depends on the type of service and the location of the client. For B2B transactions with foreign entrepreneurs, the reverse charge procedure often applies.
Important:
Do not declare VAT!
Note on the invoice: “The recipient is responsible for VAT.”
This also applies to customers outside the EU (e.g., Switzerland, USA): No German VAT is charged, but it should be documented that it is a service to a third country. It is recommended to use the text “Service not subject to domestic taxes” on the invoice.
- VAT Exemption for Small Businesses
If you operate as a small business according to § 19 UStG, no VAT may be declared—neither in offers nor on invoices. However, a corresponding note is mandatory, for example:
“According to § 19 UStG, no VAT is charged.”
Caution: If VAT is mistakenly declared, it must still be paid to the tax office, even if it should not have been calculated.
- Practical Tip: Uniform Pricing System & Transparent Communication
Particularly when serving both B2C and B2B customers, it is advisable either to label gross prices as a standard (e.g., in the online shop) and add the net amounts in parentheses, or to clearly differentiate whether it is a business or a private person during onboarding/checkout.
Additionally, a note during support or offer creation such as: “All prices are subject to statutory VAT – where applicable.”
- Case Example: WHMCS & Reverse Charge – The Price Remains the Same, but Not the Tax
A common case in practice involves the hosting billing system WHMCS, which is used by many providers in the B2B sector.
Example: You operate WHMCS in gross mode (“Inclusive Tax”) because you have both B2C and B2B customers. An Austrian customer with a valid UID is correctly recognized as a reverse charge recipient. WHMCS then does not show VAT on the invoice—correct so far.
Problem: The customer now sees an invoice for the gross price—without tax. In effect, they pay the same amount as a German end customer with VAT. This is incorrect because VAT should not be charged for B2B services to EU countries. The customer pays too much.
Why does this happen? WHMCS does not automatically recalculate the net price from the gross price in case of a reverse charge situation, leading to the gross price being erroneously treated as net.
Solution Options:
Option 1: Switch WHMCS to “Exclusive Tax” mode and maintain net prices—this is the cleanest solution for pure B2B shops.
Option 2: Workaround via hook: subsequently reduce the gross price for reverse charge customers by the tax.
Option 3: Adjust price logic and communication in the ordering process, e.g., note: “Prices include VAT – reduced on invoice for reverse charge.”