Foreign Currency Invoice: Which Currency to Bill In

How to issue a foreign currency invoice: choosing USD or local currency, showing the exchange rate, UK and EU rules for VAT in foreign currency, and FX gains.

By Invoice Creator Editorial Team 8 min readPublished: October 24, 2026Applicable jurisdiction: General

Quick answer: A foreign currency invoice is an invoice priced in a currency other than your own, such as a UK freelancer billing in USD. Choose the currency in the contract, write the ISO code next to every amount, state the amount due in one currency only, and, where VAT applies, show the VAT in the local currency using an accepted exchange rate.

Billing in another currency can win you clients who want predictable costs, but it moves currency risk and conversion fees onto your side of the table. It also brings tax rules that many freelancers miss, especially for VAT. This guide covers which currency to bill in, how to show exchange rates, the UK and EU rules on VAT in foreign currency, and how to account for exchange gains and losses. For the broader topic of tax, contracts and payments across borders, see our guide to invoicing international clients.

What is a foreign currency invoice?

A foreign currency invoice is any invoice where the amount due is stated in a currency other than the currency you keep your books in. A US agency invoicing a German client in euros, a Pakistani developer billing an American company in USD and a UK consultant billing a Dubai client in dirhams all issue foreign currency invoices. The invoice is otherwise identical to a domestic one; the differences are in the currency labels, the exchange rate notes and how you record it.

Which currency should you invoice in?

Option	Who carries the exchange risk	Best when
Your own currency	The client	You have pricing power, or your costs are all in your currency
Client's currency	You	The client insists, or you want to look local and remove friction
A major third currency (often USD or EUR)	Shared, depending on both local currencies	Neither local currency is convenient, or your platform pays out in USD

Consider three things before you decide. Volatility: if your currency and the client's move a lot against each other, the side that bears the risk can gain or lose several percent between invoice and payment. Fees: who converts pays the spread, so compare providers in our Wise vs Payoneer guide. Expectations: large companies often have systems set up for their home currency and may pay faster if you invoice in it.

Invoice in USD: why many freelancers do

The US dollar is widely used for cross-border services, and many freelancers outside the US price in USD because international clients expect it and payment platforms support it. If you are in Pakistan, see how to receive payment from abroad in Pakistan for the options that work with USD invoices. Whichever currency you choose, write it into your contract so there is no debate when the invoice arrives.

How to show currency and exchange rate on an invoice

Use ISO 4217 codes such as USD, EUR, GBP, AED, CAD or PKR. The "$" symbol alone is ambiguous between US, Canadian, Australian and other dollars.
State one amount due. "Amount due: USD 2,400.00" is clear. Two equal-looking totals in different currencies are not.
Add the conversion as a note when needed: "GBP equivalent at 1 GBP = 1.27 USD (HMRC period rate for October 2026): £1,889.76. For information only."
Give bank details for the right currency. A USD invoice should point to an account that can receive USD, or the client's bank may convert it en route. See bank details on an invoice.
Say who pays charges, for example "All bank and transfer charges are for the payer's account".

VAT in foreign currency: UK rules

HMRC's VAT Notice 700 says you may issue VAT invoices in any currency, but the total VAT chargeable must be expressed in sterling. If you issue VAT invoices in a foreign currency for supplies that take place in the UK, you must convert the total VAT into pounds. You can convert using:

the UK market selling rate at the time of supply (published rates, such as those in a newspaper, can be evidence); or
HMRC's published period rates, which you can adopt without telling HMRC, but you cannot switch away later without agreement from HMRC's VAT Written Enquiries Team; or
another commercial rate you use, only if you apply in writing and HMRC agrees.

Whichever rate you use, it must be the rate in force at the time of supply. HMRC publishes its rates on the exchange rates for customs and VAT page. Our VAT invoice guide lists the other fields a UK VAT invoice needs.

Worked example: UK VAT invoice priced in USD

A UK VAT-registered designer bills a UK client USD 2,000 plus VAT at 20%. Using an illustrative rate of 1 GBP = 1.27 USD:

Line	USD	GBP (VAT purposes)
Design services	2,000.00	1,574.80
VAT at 20%	400.00	314.96
Total	2,400.00	1,889.76

The arithmetic: $2,000 × 20% = $400; $400 ÷ 1.27 = £314.96; $2,000 ÷ 1.27 = £1,574.80; $2,400 ÷ 1.27 = £1,889.76. The invoice states the amount due as USD 2,400.00 and shows "VAT: £314.96" in sterling, with the rate used. Both businesses use £314.96 on their VAT returns, whatever rate the bank applies when the dollars arrive.

VAT in foreign currency: EU rules

Under Article 230 of the EU VAT Directive (2006/112/EC), the amounts on an invoice may be expressed in any currency, provided the VAT payable is expressed in the national currency of the member state where the VAT is due. Conversion follows Article 91: generally the latest selling rate on the most representative exchange market of that state or the latest rate published by the European Central Bank, depending on the option the member state allows. Check the national rule; some countries prescribe the rate and date to use. For cross-border B2B services where the customer accounts for VAT, see our reverse charge invoice guide.

Foreign currency and income tax: the US example

The US has no federal VAT, but income must be reported in US dollars. The IRS generally expects foreign currency amounts translated at the exchange rate prevailing when you receive, pay or accrue the item, and it publishes yearly average currency exchange rates that may be used in some situations. Other countries have similar rules for income tax, so keep a record of the rate you used for each invoice and payment.

Exchange gains and losses: worked example

A US consultant using accrual accounting invoices EUR 5,000 when 1 EUR = 1.08 USD, so books $5,400 of revenue and receivable. The client pays 30 days later when 1 EUR = 1.05 USD, and $5,250 arrives.

Revenue stays at $5,400.
The receivable of $5,400 is cleared by $5,250 cash.
The $150 difference ($5,400 − $5,250) is recorded as a foreign exchange loss.

If the euro had strengthened instead, you would record a gain. Under cash accounting you generally record the dollars actually received. See cash vs accrual accounting for the difference, and ask your accountant how your country treats realized and unrealized FX gains.

How to reduce exchange rate risk on a foreign currency invoice

Build a buffer into your price. If you carry the risk, quote a little above your break-even rate rather than at today's exact conversion.
Shorten payment terms. The fewer days between invoice and payment, the less the rate can move. Net 14 carries less currency risk than Net 60.
Use a multi-currency account. Holding the foreign currency and converting when it suits you can cost less than converting every payment on arrival.
Add a review clause to long contracts, for example repricing if the rate moves more than an agreed percentage in a quarter.
Match currencies where possible. If some of your costs are in USD, earning USD offsets part of the risk naturally.

None of these removes currency risk entirely, but together they stop one bad month for the exchange rate from wiping out your margin on a project.

Multi currency invoice: should one invoice mix currencies?

Avoid it. Put every line on an invoice in the same currency, and if you pass through costs incurred in another currency, convert them and note the rate in the description, for example "Hotel, Berlin, EUR 420 converted at 1.08 = USD 453.60". A single currency keeps the total meaningful and makes the invoice easy to pay and to record. Use separate invoices if the client must pay parts in different currencies.

Common foreign currency invoice mistakes

Using "$" without a currency code.
Showing two totals and leaving the client to pick one.
Leaving the UK or EU VAT amount in the foreign currency only.
Not recording the exchange rate used for tax.
Sending local bank details for a foreign currency payment, triggering an unexpected conversion.
Editing the currency on an issued invoice instead of using a credit note.

Foreign currency invoice checklist

Currency agreed in the contract.
ISO code on every amount and one clear amount due.
VAT or GST converted to the local currency where required, with the rate stated.
Bank details that accept the invoice currency.
Charges clause stating who pays transfer fees.
Exchange rate recorded at invoice and at payment.

Important: This is general information, not tax or legal advice. Currency rules differ by country and change over time; confirm with the official guidance, such as HMRC's VAT Notice 700 or your national tax authority, and with an accountant.

Next step: create an invoice in another currency

Open the invoice generator and pick the invoice currency from the list (USD, EUR, GBP, INR, AUD, CAD, AED and PKR are available). Each invoice uses one currency. Add any VAT conversion note and the exchange rate in the notes, include bank details for that currency, and download the PDF.

Frequently asked questions

Can I legally invoice in a currency that is not my own?

In most countries, yes. You can usually agree any currency with your client. Where VAT or GST applies, many tax systems still require the tax amount, and sometimes other figures, to be shown or reported in the national currency, so check the rules in the country where the supply is taxed.

Which exchange rate should I use for my accounts?

Use the rate your tax authority accepts for the purpose. For income tax in the US, the IRS generally expects amounts converted to US dollars at the rate prevailing when you receive the income, and publishes yearly average rates. For UK VAT, HMRC allows the market selling rate at the time of supply or its published period rates.

Should I show both currencies on the invoice?

Showing the converted amount as a note is helpful and sometimes required for tax. Make clear which currency is the amount due, for example 'Amount due: USD 2,400.00. GBP equivalent shown for VAT purposes only.' Otherwise the client may try to pay the converted figure at a different rate.

Who pays the currency conversion fees?

Whoever converts usually bears the cost unless your contract says otherwise. If you invoice in your client's currency, you take the conversion cost when the money reaches your account. You can state that bank and transfer charges are for the payer's account, but intermediary fees are not always predictable.

Can I change the invoice currency after sending it?

Do not edit an issued invoice. If the client asks to pay in a different currency, either agree to accept payment in that currency against the original invoice at a stated rate, or cancel the original with a credit note and issue a new invoice in the new currency.

Does invoicing in a foreign currency change whether I charge VAT or sales tax?

No. The currency you bill in does not decide the tax treatment. Whether you charge VAT, GST or sales tax depends on where the supply is taxed, who the customer is and whether you are registered. A UK supply billed in USD can still need UK VAT, while an export service billed in GBP may be outside the scope. Check your tax authority's place-of-supply rules.

How can I receive payment in a currency my bank account does not hold?

Options include a multi-currency account with local receiving details in the client's currency, a payment platform, or letting your bank convert the payment when it arrives. Each has different exchange spreads and fees, so compare them before you choose. Whatever you use, put the correct receiving details for that currency on the invoice so the client's bank does not convert the payment unexpectedly.

What is the difference between a realized and an unrealized exchange gain?

A realized gain or loss happens when the client actually pays and the money you receive differs from the amount you recorded at invoice. An unrealized gain or loss is an estimate at a reporting date, such as year end, for invoices that are still unpaid. Tax treatment of each varies by country, so ask your accountant how to record them.

What if the client pays in the wrong currency?

Your bank will usually convert the payment, and the amount you receive may not match the invoice. Compare the converted amount with the balance due. If it is short, tell the client and ask for the difference, quoting the invoice. If you agree to accept the shortfall, close the gap with a credit note rather than editing the invoice, and record the exchange rate used.

Can I add a fee to cover currency conversion costs?

You can build conversion costs into your price or agree a separate charge in your contract, as long as the client knows in advance. Surprise surcharges added only on the invoice are hard to enforce. Some countries restrict certain payment surcharges, particularly card fees for consumers, so check local rules. A clear clause stating who pays bank and transfer charges usually works better.

Invoice Creator Editorial Team

Guides on invoicing, cash flow and small-business finance from Invoice Creator, operated by Next Software Development Company. Content is reviewed for accuracy against the fields our own invoice generator produces.

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