Invoice questions › What does reverse charge mean?
What does reverse charge mean?
Under the reverse charge your customer pays the VAT to the tax authority, not you. You charge no VAT and put "Reverse charge" on the invoice.
Normally you charge VAT and pay it over. The reverse charge turns that round: your customer declares the VAT and pays it. You put no VAT amount on the invoice, but the words "Reverse charge" together with your customer's VAT number. Those words are not a courtesy — the EU invoicing rules require them.
When does it apply?
Only in the situations the law names. The best known are:
- Goods or services supplied to a business in another EU country.
- Subcontracting and hiring out staff in certain sectors, such as construction, shipbuilding and cleaning.
- Certain domestic goods, such as scrap and waste, or mobile phones and integrated circuits above a threshold.
The list is only partly the same everywhere: several of those categories are optional, and each country decides whether to apply them. Not sure your situation is on your country's list? Ask your tax authority or your accountant. When in doubt, charge VAT.
Always say clearly on the invoice that the VAT is reverse charged. Otherwise it looks as though you forgot it, and that means trouble at both your customer and the tax authority. In the editor you set the VAT on a line to reverse charged and fill in your customer's VAT number.
In the editor you set the VAT on a line to reverse charged and fill in your customer's VAT number. No account needed to look around.
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This page is a summary, not legal advice. Invoicing is set at EU level but the details are national, so check with the European Commission or your own tax authority if your situation is unusual.