Reverse Charge
Reverse charge shifts the responsibility for VAT/GST from the seller to the buyer.
Under the reverse charge mechanism, the buyer — not the seller — accounts for the VAT or GST on a transaction. It is common in cross-border B2B services and in specific domestic sectors prone to fraud, such as construction. The invoice states that reverse charge applies and no tax is added by the seller.
Example
A German consultant invoices a French business client without VAT, noting 'reverse charge applies' — the French client reports the VAT.
Related terms
Frequently asked questions
When does reverse charge apply?
Typically on cross-border B2B supplies of services within the EU and in designated domestic sectors. The buyer must usually be VAT-registered. Always verify the specific rule for your transaction type and country.
What should the invoice say under reverse charge?
It must state that the reverse charge applies (wording varies by country) and show no VAT charged. The buyer's VAT number should also appear on the invoice.
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