Self-billing

What it means

Self-billing means the customer issues the invoice for a supply in the name and on behalf of the supplier. The VAT Act allows it only where the parties agreed in writing in advance and the agreement sets out how the supplier approves each invoice.

It has nothing to do with the reverse charge, which settles who declares the tax; self-billing settles only who issues the tax document. Responsibility for its accuracy and for paying the tax stays with the supplier.

In law a self-billed invoice is the supplier’s invoice, not a document of the customer: the supplier appears in it as the one who supplies and pays the tax, and the customer merely produces it. It must not be confused with an internal document, with which the customer records its own operations and which has no effect for the supplier.

How it works in practice

Platforms, affiliate networks, scrap metal buyers and buyers of agricultural commodities use it, because the customer knows the quantity and the price first. The invoice has to state in words that it was issued by the customer.

The supplier books self-billed invoices into its own records and into the control statement even though they arrived from outside, and usually keeps a separate number series for them. A correction runs through a corrective invoice in the same regime, not through a document issued outside the agreement.

Self-billing also works where the supplier is not VAT registered, for instance a sole trader selling through a platform. For such a client we watch turnover and, ahead of registration, tell the platform that from its effective date the self-billed invoices must carry the client’s VAT ID and the tax; otherwise documents issued the old way would have to be corrected in bulk.

What to watch out for

The damage comes where a supplier never checks the self-billed documents and simply posts them. A wrong rate or a missed supply is still the supplier’s liability, assessed against the supplier with default interest, even though someone else wrote the invoice.

If the written agreement is missing or signed only afterwards, the self-billed invoices may not stand as tax documents. For the customer an audit then puts the input tax deduction for the whole period before the agreement in doubt, and for the supplier it raises tax on supplies it never recorded because nobody sent it the documents.