The reverse charge, explained

What the reverse charge is

Normally the seller charges VAT and passes it on. Under the reverse charge, that responsibility flips: the buyer accounts for the VAT on their own return instead. The seller invoices with no VAT charged and adds a note saying the reverse charge applies.

The mechanism exists mainly to simplify cross-border trade (no need to register in the supplier's country just to reclaim) and to fight fraud in sectors where it is abused.

When it applies

• Cross-border services, business to business: within the EU, services between businesses in different member states are generally reverse-charged. The supplier charges no VAT; the buyer self-assesses at their own country's rate.
• Cross-border goods: acquisitions of goods between EU businesses (and many import scenarios) follow the same idea — the buyer accounts for the VAT.
• Domestic sectors: some countries apply a domestic reverse charge — the UK construction industry is the classic example, where the customer accounts for the VAT instead of the builder.

The common thread: a VAT-registered business customer. The reverse charge is a business-to-business mechanism — sales to private consumers follow normal rules (often collected via a one-stop-shop scheme).

How to invoice it

A compliant reverse-charge invoice:

• Shows both parties' VAT numbers (the customer's is what makes the reverse charge legitimate — check it, in the EU via VIES);
• Does not charge VAT, and shows no VAT amount;
• States that the reverse charge applies — wording such as “Reverse charge: customer to account for VAT” is standard.

How both sides account for it — with numbers

A German consultancy invoices a French business €5,000 for a project.

• The seller (Germany): invoices €5,000 with no VAT and the reverse-charge note. Nothing to pay on this sale; it reports the sale as a cross-border supply.
• The buyer (France): self-assesses French VAT at 20%: that is €1,000 as output VAT — and €1,000 as input VAT, because the purchase is for its taxable business. Net effect on the French return: zero, provided the business can fully reclaim.

That zero-on-both-lines outcome is why the mechanism is elegant: VAT is recorded where consumption happens, but no cash moves on the cross-border invoice. If the buyer cannot fully reclaim (mixed exempt use), the self-assessed VAT becomes a real cost — which is why the numbers still have to be run.

Common confusions

• Reverse charge vs “reverse VAT calculation”: this page is about liability shifting; working backwards from a gross price is a different task — see the reverse VAT calculator.
• B2B vs B2C: the reverse charge is not for consumers. Selling to consumers abroad usually means the OSS/IOSS schemes instead.
• “No VAT” vs “zero-rated”: both show no VAT, but zero-rated sales let you reclaim input VAT as normal, while a reverse-charged sale shifts the whole accounting to the buyer.

Quick checklist

1. Is the customer a registered business in another country (or a sector where the domestic reverse charge applies)?
2. Is their VAT number valid? (VIES for the EU.)
3. Invoice without VAT, with the reverse-charge wording.
4. Report the sale correctly; the customer self-assesses on their return.

Common questions

Last reviewed: 16 October 2026 · Principles, not advice for your specific transaction — cross-border cases depend on place-of-supply rules. Methodology · Editorial standards · Report an error