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Tax Treatments & VAT Rates

Getting the tax treatment and VAT rate wrong means rejected invoices and compliance issues. docs101 reduces that risk by pre-selecting both for common scenarios — domestic sales, cross-border B2B, exports, and small business exemptions. For edge cases, you keep full control and can adjust before finalizing.

What docs101 handles automatically

For the most common invoicing scenarios, docs101 picks the correct tax treatment and rate without any manual input. You only need to intervene for special cases like reduced rates or exempt services.

How docs101 determines tax treatment and rate​

docs101 evaluates three data points when you create an invoice position:

  1. Your company profile — country, VAT registration, small business exemption status
  2. The customer's data — country, contact type (B2B/B2C), VAT ID presence
  3. VAT ID validation — whether a valid EU VAT ID is on file (via VIES)

Based on this, the system pre-selects the most likely tax treatment and rate. The logic works as follows:

ScenarioTax TreatmentRateAuto-detected?
Domestic sale, standard goodsStandard rateCountry standard (e.g. 19% DE)Yes
Small business exemption activeSmall business0%Yes
B2B to another EU country, valid VAT IDReverse charge0%Yes
Export to non-EU countryExport outside EU0%Yes
Intra-community goods delivery with valid VAT IDIntra-community0%Yes
Exempt services (medical, education, financial)Exempt0%Manual selection
Zero-rated by national lawZero-rated0%Manual selection
Reduced rate for specific goodsStandard rateManual overrideManual override
When you need to act

Categories E and Z, as well as reduced VAT rates, depend on the nature of the goods or services — information only you have. docs101 cannot auto-detect these and leaves the choice to you.

The 8 tax treatments explained​

EN 16931 defines seven VAT category codes. docs101 maps these to eight human-readable tax treatments — including a dedicated Small business treatment for the Kleinunternehmerregelung — that automatically resolve to the correct underlying code.

Standard rate​

The default for most domestic invoices. The tax rate is your country's standard VAT rate — for example, 19% in Germany, 20% in Austria, or 21% in the Netherlands. This maps to EN 16931 VAT category code S.

docs101 pre-selects this treatment with the correct country rate whenever no special condition applies.

Reverse charge​

Used for intra-community B2B services and supplies where the buyer accounts for VAT in their own country. The invoice is issued at 0% with a "Reverse Charge" notation. This maps to EN 16931 VAT category code AE.

docs101 detects this automatically when your customer is a B2B contact in another EU country with a valid VAT ID on file.

Make sure the VAT ID is validated

Reverse charge requires a valid VAT ID. Use the VAT ID Validation feature to verify it via VIES before invoicing. For more background, see Reverse Charge Explained.

Not subject to VAT​

Covers transactions that fall entirely outside the scope of VAT — for example, a service provided to a non-EU customer where no VAT mechanism (reverse charge, export) applies. This maps to EN 16931 VAT category code O.

Unlike other 0% treatments, "Not subject to VAT" can be freely combined with any other tax treatment on the same invoice.

Not for small businesses

If you are a small business operating under a VAT exemption (Kleinunternehmerregelung), use the dedicated Small business treatment instead — see below.

Export outside EU​

For exports to countries outside the EU. No VAT is charged. Your tax authority may require proof of export. This maps to EN 16931 VAT category code G.

docs101 applies this automatically when the customer's country is outside the EU.

Intra-community​

Specifically for cross-border delivery of goods within the EU to VAT-registered businesses. Similar to Reverse charge but specifically for physical goods under the intra-community supply rules. This maps to EN 16931 VAT category code K.

Applied when the customer has a valid EU VAT ID in a different member state and the transaction involves goods.

Exempt​

For services that are exempt from VAT by law — such as medical services, educational services, insurance, or certain financial services. This maps to EN 16931 VAT category code E.

Manual selection required

Whether a service qualifies as exempt depends on national law and the specific nature of the service. docs101 cannot determine this automatically — you need to select the "Exempt" treatment manually on the relevant invoice positions.

Zero-rated​

Taxable supplies where the applicable VAT rate is legally 0%. This differs from "Exempt" in that the supply is still within the VAT system, but the rate happens to be zero. This maps to EN 16931 VAT category code Z.

This is relatively rare and depends on specific national legislation. Select it manually when applicable.

Small business​

Dedicated treatment for businesses operating under a small business VAT exemption (Kleinunternehmerregelung in Germany, § 19 UStG). The seller is not registered for VAT and does not charge it. This maps to EN 16931 VAT category code E.

When you enable the small business exemption in your company settings, docs101 automatically assigns the "Small business" treatment with 0% tax to every new invoice position. The tax treatment dropdown is locked because small business positions cannot be mixed with other tax treatments on the same invoice.

Cannot be mixed

An invoice with a small business position cannot contain positions with any other tax treatment. This reflects the legal requirement that Kleinunternehmer invoices must not show VAT. If you need to mix tax treatments, the company-level small business toggle must be turned off first.

Small business VAT exemption​

If your annual revenue is below the threshold for your country, you may qualify for a small business VAT exemption. This is one of the most clear-cut cases where docs101 automation just works.

Setting it up​

  1. Navigate to Business Settings > Details and locate the Business Information section
  2. Enable the Small Business Exemption toggle
  3. Save

From this point on, every new invoice automatically uses the Small business treatment (category E) with 0% tax. No manual intervention needed.

Country thresholds​

CountryAnnual threshold
GermanyEUR 22,000
AustriaEUR 35,000
FranceEUR 36,800
ItalyEUR 85,000
note

Thresholds may change. Always verify the current limits with your tax authority or accountant.

Compliance​

Every invoice generated under the small business exemption passes EN 16931 validation, including business rule BR-CO-26 which verifies the correct VAT breakdown by category.

VAT Breakdown​

Every invoice in docs101 includes a VAT Breakdown — a summary that groups all positions by tax treatment and rate and shows the net, VAT, and gross totals per group. This is a requirement of the EN 16931 standard (business rule BR-CO-26).

How it works​

  • The breakdown is automatically calculated whenever you add, edit, or delete positions
  • Each unique combination of tax treatment and tax rate gets its own row
  • For 0% treatments (Reverse Charge, Export, Exempt, etc.), a legal note is displayed automatically (e.g., "Reverse Charge — VAT liability transfers to the recipient")
  • The breakdown appears in the invoice summary area on the General tab and on the generated PDF

Examples​

Single-rate invoice (all positions at 19%):

  • One breakdown row: "Net (19% VAT)" with cumulated amounts

Mixed-rate invoice (some positions at 19%, some at 7%):

  • Two breakdown rows: one for 19%, one for 7%

Mixed-treatment invoice (domestic 19% + Reverse Charge 0%):

  • Two breakdown rows: "Net (19% VAT)" and "Net (0% — Reverse Charge)" with the corresponding legal note
Old invoices

Invoices finalized before the VAT Breakdown feature was deployed (status OPEN, SENT, PAID, or CANCELED) do not include breakdown data. These are legally binding documents and cannot be retroactively modified. Only invoices created or still in DRAFT status after deployment include the breakdown.

Overriding tax treatment and rate​

You can change both the tax treatment and the VAT rate on any invoice position before finalizing:

  1. Open the invoice in Draft status
  2. Click on a position to edit it
  3. Change the Tax Treatment dropdown to the desired treatment
  4. Adjust the VAT Rate field if needed (e.g. from 19% to 7% for reduced rate)
  5. Save the position

The invoice totals recalculate automatically.

Common override scenario

A German freelancer sells food products that qualify for the reduced 7% VAT rate. docs101 pre-selects S at 19%. The freelancer changes the rate to 7% while keeping category S — and the invoice is correct.

For detailed field descriptions and allowed values, see the reference:

For background knowledge: