VAT

Reverse charge

A VAT mechanism where the customer, not the supplier, accounts for the tax. Used for cross-border B2B services and some domestic sectors.

What Reverse charge means

Under the reverse charge the supplier issues an invoice without VAT and the business customer self-assesses the tax in its own VAT return, declaring output VAT and, where entitled, deducting the same amount as input VAT. For most customers the net cash effect is zero, but the transaction still has to be reported.

The general EU rule applies the reverse charge to services supplied to a VAT-registered customer in another member state. Member states may also apply it domestically to sectors prone to fraud, for example construction, scrap metal, electronics or emission allowances. The invoice must state that the reverse charge applies and show the customer's VAT ID. Kontevia recognises a reverse-charge invoice from the missing VAT amount and the customer's VAT ID and books it accordingly.

Related terms

VAT (value added tax)A consumption tax charged on most goods and services in every EU country, collected by businesses and paid to the tax authority.VAT identification numberThe number a tax authority assigns to a VAT-registered business. Starts with the country code and is required on invoices and for cross-border trade.VIES (VAT Information Exchange System)The European Commission's system for checking whether an EU VAT ID is valid. Free to use and required evidence for zero-rated cross-border supplies.Intra-community supplyA sale of goods transported from one EU member state to a VAT-registered customer in another. Exempt at origin, taxed as an acquisition at destination.EC sales list (recapitulative statement)A periodic report of sales to VAT-registered customers in other EU countries, listing each customer's VAT ID and the total value.

This entry is general information, not tax advice. Rules change; check the current position with your adviser or the tax authority of your country.

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Kontevia applies these rules for you

Rates, thresholds and e-invoicing formats come from the jurisdiction data of your country. You send the document, Kontevia books it and keeps the VAT summary ready.

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