Reverse Charge

Reverse Charge on EU VAT

20/12/2021Taxation , VAT

When an individual has experience with suppliers to avail their products or services in the EU countries, due to reverse charge the responsibility of recording VAT transactions moves from the supplier to the buyer to avail the products or services. This makes the supplier free from the responsibility of recording VAT registration in the very country where he is making the supply.

Moreover, in case the seller has to deal with any local VAT for the products and services supplied by them due to the reverse charge, even that can be easily reclaimed and recovered with the help of EU VAT. In order to make the VAT simple among 27 member states, a reverse charged mechanism was introduced in 1993 when the tax system was of the European Union was reformed as well to ensure the single market.

Before we delve into further discussion, we need to have a look at the following points of discussion in this article. This includes the following:


Reverse Charge


  • Reverse Charge – How Does It Work?
  • Exapmles and Use of Reverse Chaarge
  • The Bottom Line


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Reverse Charge – How Does It Work?

The moment the reverse charge is actually applied, the declaration is made about the purchase and sale that include input VAT and output VAT by the recipient of the products and the services while doing the VAT return. In this process, the same return is associated with the cancellation of the cash payment of both entries.

However, the authorities are of the view that the transaction is still reported to them by some of the special boxes that are in the return for the supply of the products and services made for cross-border purchasers.


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Exapmles and Use of Reverse Chaarge:

Here is the discussion of some examples that will explain how to reverse charge is applied among EU members states. This includes the following:

  1. The reverse charge is applied when there is a supply of required products or services is made in an EU state to a business that is VAT registered.
  2. Some of the services like live events and immovable properties come under the special rule and this depends on the place where the supply is made for any product or service.
  3. The reverse charge is also applied when the products or services are being provided to a person or business who is in another EU state

Moreover, if the EU business is not VAT registered, it becomes an obligation to get VAT registration completed before the supply is made. In order to get yourself the services outside of Europe.


The Bottom Line:

Now that you have developed a basic understanding of the reverse charge and the relevant details, we can sum up the discussion by saying that the process in itself is simple with its rules, however, if not followed according to the set of rules it may cause problems for the supply and recording.

We hope this article helped to develop a better understanding and ensure the seamless working for your supplies.


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Disclaimer: This article intends to provide general information based on reverse charge and the relevant details.

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