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This mechanism applies in different kinds of transactions, both domestic and intra-Community. You can double check many VAT numbers at once in the VIES database with our VAT number checker. In intra-Community and triangular transactions, this number should be valid in VIES. This is additional information that you will need to collect from your client before you issue the invoice.

Although it is not required in all reverse charge supplies, most scenarios require you to add the VAT number of your client. You can check the information on invoicing rules of the EU Commission. For example, article 194 of the VAT Directive is used for Domestic reverse charge, and article 138 of the VAT Directive is used for intra-Community supplies of goods. In EU countries, instead of the Domestic VAT law, you may include the Article of the VAT Directive. Some countries allow you to include the words 'Reverse charge' as sufficient wording on the invoice, but in most jurisdictions you will need to check the exact reference and Article of the Domestic VAT law. You should add a sentence that explains why there is no VAT charged on the invoice.

You will include a reference to reverse charge.

You should still refer to VAT as 0% as you do with other zero-rated or exempt sales. Only the net amount will be stated and only this amount will be paid into your bank account.

You will not charge VAT on the invoice.

If you need to issue an invoice on which reverse charge applies, there are number of considerations and changes from the general rule that you should take into account:

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Since you are doing 'a plus and a minus', you will not pay any VAT to the tax authorities on this invoice. These 20€ are reported under the sales section of Company B´s VAT return (as output VAT) and under the purchases section of the same VAT return (input VAT). When Company B starts preparing its VAT return, it will manually calculate VAT on the 100€, so 20% of 100€ equals 20€ (let´s say we are in France: 20% VAT rate). For example, if company A issues an invoice with reverse charge to Company B for a value of 100€, company B will only pay 100€ to company A. However, at the time of preparing his VAT return, the customer will manually calculate the VAT amount and report it as due and as deductible (both) in his VAT return. Customer: Receives an in invoice without VAT.This invoice will often require some specific content like the customer´s VAT number and a note indicating that ' Reverse charge' applies. Supplier: Issues an invoice without VAT.We should split the requirements for the supplier and the customer in a reverse charge transaction: If reverse charge applies (see below the possible scenarios) you should issue an invoice without VAT and your client will self-assess the VAT amount.

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In some instances, full deduction is not allowed according to partial exemption rules. The client will pay the net amount to the supplier, however, when completing the VAT return, he will manually calculate the VAT on the reverse charge invoice and report that amount as input VAT and as output VAT, hence having a nil effect for the customer’s and supplier’s cash flow. The reverse charge mechanism is a deviation from this rule where the supplier does not charge VAT on the invoice and the customer pays and deducts VAT simultaneously through the VAT return. The answer is in the VAT reverse charge rules, which countries can implement differently in each case.Īs a general rule, businesses charge VAT on supplies and deduct VAT on purchases. If your business has two VAT numbers, one in Germany and another one in France, you may ask yourself why you charge VAT in Germany but not in France for two supplies that are similar in both countries. It is also one of the reasons for which an invoice may not charge VAT.

Reverse charge is a mechanism of calculating VAT.

Reverse charge on postponed import VAT and suspensive regimes.

Domestic VAT reverse charge on specific goods and services.

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