VAT Guides Reporting Obligations

The Reverse Charge Mechanism

The EU created the concept of Reverse Charging VAT in order to simplify trade within the Single Market. The Reverse Charge moves the responsibility for the reporting of a VAT transaction from the seller to the buyer of a good or service. This reduces the requirement for sellers to register for VAT in the country where the supply is made.  

When a transaction is subject to Reverse Charge, the recipient of the goods or services reports both their purchase (input VAT) and the supplier’s sale (output VAT) in their VAT return.  These two declarations offset each other from a cash payment point of view, but the authorities have full visibility of the transactions.

Most sales between EU member states will be subject to a reverse charge and there are also many instances where a domestic reverse charge rule exists within specific EU member states.

Related articles

Moving Goods within the EU

If you are involved in the movement of goods between EU countries - whether it's for commercial purposes or simply your own stock - there are several VAT compliance issues to consider.

Read more
What is an Intrastat declaration?

If a business supplies goods cross-border in the EU, over a certain value, additional filings will be required to be submitted to report these.

Read more
What is an EC Sales List?

If a business makes sales to businesses VAT registered elsewhere in the EU, filing of an EC sales list will be necessary.

Read more