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Book a call ↗VAT (value added tax) is the consumption tax charged across the European Union on most goods and services. Businesses charge it to their customers and pay it over to the tax authority, and business customers usually recover it.
For a US company paying an independent contractor in Europe, the practical point is simple: on business-to-business services to a US company, the contractor usually charges no VAT. The reason is the place-of-supply rule.
Where a service is taxed
For services between businesses, the place of supply is where the customer has established its business (VAT Directive, Article 44). A service to a US business is therefore supplied outside the EU, and EU guidance says that for services to customers outside the EU you usually do not charge VAT, although a member state can tax a service that is used inside its territory (Your Europe).
Inside the EU, the same rule produces the reverse charge: when a supplier in one country bills a business in another, the customer accounts for the VAT, not the supplier (Article 196).
| Contractor bills | VAT on the invoice | Who accounts for VAT |
|---|---|---|
| A US business | Usually none | Generally outside EU VAT |
| A business in another EU country | None, marked "Reverse charge" | The customer, at its own country's rate |
| A business in the same country | Local VAT at the local rate | The contractor |
Standard VAT rates in five hiring markets
EU rules set a minimum standard rate of 15% with no maximum (European Commission). Rates in five countries where US companies often hire, from each national authority:
| Country | Standard rate | Source |
|---|---|---|
| Estonia | 24% (since 1 July 2025) | Estonian Tax and Customs Board |
| Poland | 23% | podatki.gov.pl |
| Portugal (mainland) | 23% | gov.pt |
| Spain | 21% | Agencia Tributaria |
| Germany | 19% | Germany Trade and Invest |
These rates matter to you only in the unusual cases where VAT applies, for example if your company has an EU entity that is billed instead.
What it means when you hire in Europe
If a contractor adds VAT to an invoice addressed to your US company, ask why before paying; most likely the invoice is addressed to the wrong entity or uses the wrong template. The invoice content is covered in invoice, and the paperwork you collect in W-8BEN. VAT does not change the comparison in our US vs Europe salary calculator for a standard contractor setup.
This is general information, not legal or tax advice. Rules differ by country and change, so confirm your case with a local lawyer or accountant.
Euro Remote Talent runs searches across Europe for a flat $6,500, with a shortlist of three vetted candidates in 21 days and a 12-month replacement guarantee, through Hiring Done For You. If you would rather run the search yourself, a job post is $299, live for 60 days, and the fee is credited in full if you later move to the done-for-you service.
