The idea in one paragraph
Normally the seller charges VAT and pays it to the tax authority, while the buyer reclaims it. With a reverse charge, the seller does not charge VAT. The buyer declares both the VAT due and the VAT recoverable on their own return, which for a fully taxable business usually nets to zero. The seller’s invoice shows the net price, no VAT, and a statement that the reverse charge applies.
Cross-border B2B services in the EU
For most services sold by a business in one EU member state to a business in another, the place of supply is where the customer is established. The supplier invoices without VAT, shows both VAT numbers, and states “Reverse charge”, often citing Article 196 of the VAT Directive (2006/112/EC). The customer self-assesses VAT. Many countries also require an EC Sales List or recapitulative statement. Goods follow different rules, such as zero-rating for intra-EU supplies when conditions are met.
Always confirm your customer’s VAT number is valid (the EU VIES service checks this) and keep evidence.
UK: after Brexit and in construction
- Services to the EU and elsewhere: for B2B services the place of supply is usually the customer’s country, so UK VAT is not charged. Invoices commonly state that the supply is outside the scope of UK VAT. Check HMRC’s place-of-supply guidance.
- Domestic reverse charge (construction): for certain building and construction services reported under the Construction Industry Scheme, between VAT-registered businesses, the customer accounts for the VAT. The invoice must show the reverse-charge note and the VAT rate and amount that the customer will account for. See HMRC’s guidance.
Other countries
Australia, New Zealand and Canada have “reverse charge” or self-assessment rules for imported services and other situations, which depend on the customer’s GST registration and use. Check the national tax authority before applying them, as the wording and conditions differ from the EU model.
What an invoice with reverse charge shows
- The net amount and no VAT charged.
- Your VAT number and the customer’s VAT number.
- The wording required by the customer’s country, such as “Reverse charge” or its local equivalent (for example Autoliquidation, Steuerschuldnerschaft des Leistungsempfängers, Verlegd).
- The service description and the date of supply.
- For UK construction, the reverse-charge statement and the VAT rate and amount for the customer to account for.
The generators on the EU page and country pages include a reverse-charge note you can switch on.
Mistakes to avoid
- Applying it to consumers. The reverse charge is for business customers.
- Not checking the customer’s VAT number.
- Using the wrong wording for the customer’s country.
- Forgetting the related return or listing, such as an EC Sales List.
- Assuming goods and services are treated the same way.
- Wording requirements for reverse-charge notes differ by member state. Check the customer’s national authority.
Frequently asked questions
Do I charge VAT if my customer is in another EU country?
For B2B services, usually not: apply the reverse charge. For B2C sales and many goods, different rules apply, including the One-Stop Shop (OSS) for distance sales.
What if the customer is not VAT registered?
You generally treat them as a consumer and charge VAT under the standard place-of-supply rules.
Does reverse charge mean zero VAT?
The seller charges none, but the buyer accounts for VAT. For a business that can fully reclaim VAT, the net cost is zero.
What wording should I use?
Use “Reverse charge”, plus the local-language wording if the customer’s country requires it. Check its tax authority.
Where do I check a VAT number?
The European Commission’s VIES service for EU numbers, and HMRC’s checker for UK numbers.
Related topics
- reverse charge VAT
- Article 196
- B2B cross-border VAT
- VIES check
- CIS reverse charge
- EC sales list
- EU invoice reverse charge