| Friday, October 12th, 2018

What to consider when invoicing international payments or receiving invoices in foreign currencies

Small business owners who want to grow their enterprises will frequently consider selling their goods and services to customers living abroad or source materials from them. Many have done this to very good effect – but there are considerations to weigh up.

For one thing, there’s the goods and services tax or GST tax invoices ruling, which many countries have a version of (although some simply call it a Value Added Tax or VAT): an indirect government sales tax that businesses must add to the price of a product or service. Customers who purchase these (including overseas customers) must pay the sales price plus the GST.

Then there’s the whole issue of issuing invoices in foreign currency for foreign customers who wish to pay in their local currency.

When you’re selling to foreign clients, you’ll need to know how to prepare a tax invoice in foreign currency and a VAT invoice in foreign currency, and you’ll need an understanding of forex tax trading implications.

However, once your invoicing procedure is fully legally compliant, you can look forward to boosted sales and a healthier bottom line. Here’s our FXCompared guide to what to watch out for.

Tax implications

·         All assessable foreign income, deductions and foreign tax must be converted by domestic businesses into domestic currency for tax purposes

·         This information must be included in their tax return

There are two ways of doing this. Businesses can either:

·         Use the exchange rates prevailing at the specific time of the trade

·         Use an average foreign exchange conversion rate


Generally, when planning invoices and providing information for tax purposes, businesses trading abroad will need to consider:

·         Their foreign clients

·         Their foreign customers

·         Any employees they have engaged

·         Their suppliers

All income and costs from each of these will have implications for total tax payable.

Invoice format

The VAT or GST tax invoices ruling in countries where it applies imposes a number of compulsory fields when issuing invoices in foreign currencies to foreign clients to include on the form:

·         The GST payable in domestic currency

·         “Sufficient information” to the recipient to calculate the GST payable in domestic currency

Sufficient information includes:

·         The price or value expressed in domestic

·         The GST payable, the price/value expressed in the foreign currency, plus the conversion rate used by a supplier, or a statement to enable the calculation of the amount of GST payable in domestic currency

Doing it yourself or outsourcing?

Before the advent of software solutions, bookkeeping was an exceptionally time-consuming process for entrepreneurs, involving sorting clients/customers into categories, making sure that every claim was paid on time, and preventing missed deadlines.

However, while software solutions have simplified this and slashed time, investing in them as an in-house resource can be exceptionally expensive and beyond the reach of many small enterprises. That’s where invoice processing services come into their own. However, there are a few pros and cons to consider:


·         You can change the mailing address on invoices to the outsourced agency and, in one fell swoop, prevent a deluge of mail coming through your actual and virtual letterboxes.

·         Outsourcing agencies have invested in the most advanced accounting software: state-of-the-art recognition tools automatically scan invoices with impeccable accuracy while covering all fields, from client ID to invoice date to amounts and special instructions. Human error is effectively eliminated.

·         Outsourced invoicing agencies can continually track and monitor all invoices and will prepare reports giving businesses a clear overall picture of their finance and liabilities, thereby enabling them to take crucial business and investment decisions.


·         There are always security issues when sending sensitive data such as invoices between different locations, even though reputable invoice processing agencies will have in place many layers of security.

·         Scanned copies of all invoices diverted to the processing agency will be available at all times, but there are occasions when disputes arise and original invoices are required for court hearings. Reputable agencies will circumvent this by maintaining all their records with the utmost diligence.

·         Customers who do not wish to receive invoices electronically (i.e. by email) have to be catered for, even though most business information exchanges these day occur online. Check that the processing agency maintains dual electronic and paper invoicing systems.

There are undoubtedly lucrative gains to be made by selling your goods and services to foreign customers/clients. However, to get the benefits of such a move, you have to abide by the tax requirements. This means taking heed of the GST tax invoices ruling and familiarising yourself with how to prepare a tax invoice and a VAT invoice in foreign currency, as well as how to go about issuing invoices in foreign currencies. In turn, that involves being aware of the forex tax trading implications of receiving payments in foreign currency and converting them back to domestic currency for the tax return.

However, the good news is that there is cutting-edge software to assist you . The crucial point to bear in mind if you choose this option is to ensure that you use only a reputable forex agent, such as those that you can find here at FXCompared. That way, you can rest assured that you’ll enjoy the best value and the best practice when making and receiving payments.

FXcompared.com is an fx money comparison site for international money transfer and to compare rates from currency brokers for sending money abroad. The website and the information provided is for informational purposes only and does not constitute an offer, solicitation or advice on any financial service or transaction. None of the information presented is intended to form the basis for any investment decision, and no specific recommendations are intended.  FXC Group Ltd and FX Compared Ltd does not provide any guarantees of any data from third parties listed on this website. FX compared Ltd expressly disclaims any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from (i) any error, omission or inaccuracy in any such information or (ii) any action resulting therefrom.