Definition
A self-billing invoice is an invoice prepared by the buyer on the supplier's behalf, based on what the buyer received, rather than by the supplier. Both parties sign a self-billing agreement first. It is common where the buyer knows the quantities best, such as in agriculture, scrap metal, royalties, and gig platforms.
Also called: Self-billing, Buyer-created invoice
Self-billing invoice in practice
Self-billing reverses the usual flow. The buyer measures what was delivered, calculates what it owes, issues the invoice in the supplier's name, and sends a copy to the supplier along with the payment.
In VAT and GST countries, self-billing is allowed only under a written agreement that sets the period it covers and confirms the supplier will not issue its own invoices for the same supplies. The supplier still declares the tax on its return, so it must check each self-billed invoice.
Self-billed invoices usually follow a numbering sequence that is separate for each supplier, so they are not confused with the buyer's own sales invoices.
Example
A dairy collects milk from a farm every day. At the end of the month it issues a self-billing invoice to itself in the farm's name for 42,000 liters at the agreed price and pays the farm the same week.
Frequently Asked Questions
Do I need an agreement to use self-billing?
In most VAT and GST systems, yes. The agreement must be in writing, cover a set period, and state that the supplier will not issue its own invoices for those supplies.
What if a self-billing invoice is wrong?
Tell the buyer quickly. The buyer issues a correcting document, such as a self-billed credit note or an additional invoice, because the original invoice was created under its name for your supplies.
Related terms
- Invoice An invoice is a document a seller sends to a buyer to request payment for goods or services that have been delivered.
- Tax invoice A tax invoice is an invoice that meets the legal requirements for the buyer to claim a tax credit, typically under a VAT or GST system.
- VAT VAT (value added tax) is a consumption tax charged at each stage of the supply chain on the value added, used in the EU, UK, and more than 160 other countries.
- GST GST (goods and services tax) is a broad consumption tax applied to most goods and services, functioning like VAT.
- Remittance advice Remittance advice is a notice a client sends to a supplier to say a payment has been made and which invoices it covers.
- Recipient-created tax invoice A recipient-created tax invoice (RCTI) is a tax invoice issued by the buyer of goods or services instead of the supplier, used in Australia under GST rules.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.