How to invoice a foreign client

Doing business internationally is an attractive activity for SMEs, but it is also a headache. Why? Because we usually look for security, and international trade involves constant uncertainty: how do I know I will be paid when the goods arrive? How do I know I will be paid for the invoice I issue for my services? How do I issue the invoice? What do I do if my client does not pay me?

Questions that, although they have answers, are difficult to find the right option for our company.

So, let's see what possibilities international trade offers us.

Let's start with the payment methods, since, in the end, we sell to get paid, either for our merchandise or our service.

How do we ensure payment from a foreign client?

First, learning to negotiate. You must reach an agreement that is fair for both parties but, above all, that covers you a minimum of the costs you have assumed to carry out the operation.

Let's say you are going to export services worth €100.000 to Brazil. Try to get the importer to pay 60% upon signing the contract and 40% upon completion of the service. And with that 40%, what would happen if the buyer did not want to pay?

Well, in international trade we can classify payment mechanisms into three groups: simple payments, documentary remittances and documented credits. While the first are the most used also at the national level, transfer, for example; The documentary remittance consists of the exporter issuing exchange documents (bills, promissory notes or checks) in charge of the importer, through the intervening financial entities, so that the payment is executed in an international transaction.

Although it is the documentary credit that provides the highest level of security for both parties. It is a payment mandate that the importer issues through his financial institution to directly or through another bank pay the exporter the amount of the operation, as long as said exporter strictly complies with the conditions of the credit itself.

That is, we could use tools from financial entities to ensure that payment of the remaining 40%. However, we have to know that it will depend on the solvency of our company, and that of the exporter/importer, as well as other circumstances, whether or not the bank decides to grant us these credits.

In any case, there are also export credit insurance policies through direct entities such as CESCE. One insurance policy that is usually contracted is the “risk of non-payment or undue termination of an export contract”. Through this policy, the entity would cover the exporter both from the possible non-payment of an export contract (or for works abroad), as well as from the risk of early termination, with a coverage of up to 99% of political and commercial risks.

In any case, the payment method must be included in the international contract for services or merchandise that you make. Here I leave you a link that will guide you on How to write an international contract:

How to write an international contract

How to invoice a foreign client

This form of payment must also be included in the international commercial invoice.

The international commercial invoice is the administrative document that contains all the export information. That is, this document details the concept, quantity and amount of the products or services sold, the delivery and payment conditions, and the taxes and other expenses generated by the sale. It is very similar to the invoice that is issued at the national level, only this will go to the importer and also the customs of the importer's country.

This invoice must contain the following information:

• Invoice date and expiration date.
• Company name and tax addresses of seller and buyer.
• VAT (in intra-community operations of the European Union).
• Concepts of services/goods and quantity.
• Unit and total price of the merchandise, in the agreed currency
• Form and conditions of payment.
• Merchandise delivery terms (INCOTERMS).
• Reference to the order or proforma invoice.
• Origin of the merchandise and means of transport.

All this data must coincide with that of the operation and all the documents related to it.

Furthermore, they must be adapted, to the extent possible, to the regulations of both the exporter and the importer in order for them to be valid.

How to invoice a foreign client from Spain

First of all, you must start by differentiating between your foreign clients and your national clients (different types of invoice numbers, for example). Your foreign clients will be those foreign companies that are not within the "VAT area", that is, all the territories of the European Union, with the exception of the Canary Islands, Ceuta and Melilla, which have special taxes.

To continue, you must differentiate between your foreign clients (outside the VAT area) as individuals and companies/professionals; and among your intra-community clients, in professionals or companies, and individuals. Each case will be treated differently.

Bill intra-community clients

An intra-community client is one who lives within the "VAT area" and is a member of the European Union. That is, they can be companies or professionals, or private clients.

Invoices to companies

Again, depending on the company we sell to, we will have to invoice one way or another.

In this case, we find ourselves with two options: the company is registered in the ROI (Registry of Intra-Community Operators), which acts as a census of professionals and companies that have a NIF-VAT that allows them to operate under the intra-community VAT regulations; or that it is not.

If it is, our client will be exempt from the application of VAT; although you must declare it through forms 303 and 349. If it is not, we must make the invoice as if it were a national operation.

Invoices to private clients

As a general rule, VAT will be applied to the invoice as if it were a national one. However, there is an exception: invoice sales of electronic products or services. In this case, you must apply the VAT that corresponds to the country in which your client is located. only if you go over a certain amount of billing in that country.

Ask us directly: click aquí.

In any case, we, as EU companies, will also have to appear in the ROI. If you are a Spanish company.

Bill non-EU clients

A non-EU client is an international client who is located outside the "VAT area" and with whom we carry out exports or imports, both labelled under the terms "Non-EU Operations".

As we said, the invoice must be processed as an export. Therefore, the goods or services that we sell will be exempt from VAT and the invoice must be issued indicating that “Article 21.1 of Law 37/1992” applies. What you must do is declare the relevant VAT using Form 303.

Along with the commercial invoice, the Export DUA and the international transport document (in case of sale of goods) must be issued. In the case of services, you must ensure that the service is provided in the buyer's country; since, if not, VAT should be applied.

How to accept international payments

We already know how to invoice or what mechanisms to ensure payment to use, but how do we accept international payments? Transfer? Check? Virtual POS from your bank? PayPal?

All of these options are valid.

In this case, you should study which option is the one that costs you the least (% of the sale that the platform or entity you use would receive); Which is the one that costs the buyer the least; which one the buyer is used to or can use; which one accepts local payments (if you are interested), etc.

All options can be complementary and not exclusive. That is, if you normally sell to Colombia, as in the case of RRYP, you can use your own virtual POS, as long as it is your own so that your customers can easily carry out transactions. At the same time, you can allow payment by transfer or PayPal, since this way your client will decide what is best for them. It will also depend on the operation.

Do you already sell internationally, but want to continue growing?

International trade mentoring

Book a consultation with the RRYP team and continue growing.