What is a Reverse Charge Invoice?
A Reverse Charge Invoice is a special type of VAT invoice where the responsibility for paying VAT is shifted from the seller to the buyer. It is commonly used in cases where the seller and the buyer are both VAT-registered and the goods or services are subject to reverse charge VAT rules. The buyer is then responsible for calculating and paying the VAT directly to the tax authorities, rather than the seller collecting it.
What must a Reverse Charge Invoice contain?
Basic Elements:
Document title: "Reverse Charge Invoice" or "VAT Reverse Charge"
Invoice number: A unique sequential number.
Invoice date: The date when the invoice is issued.
Supply date (if different from the invoice date): When the goods or services were supplied.
Seller details: Business name or personal name, address, VAT registration number.
Buyer details: Business name or personal name, address, VAT registration number.
Description of goods or services: List of the goods or services provided, quantity or units, unit price (excluding VAT), total value excluding VAT.
VAT details: Include a statement such as “Reverse charge: VAT is to be accounted for by the buyer”.
Total amount: The total amount due for the goods or services, excluding VAT.
Payment terms: Details of how and when payment is due.
When is a Reverse Charge Invoice used?
A Reverse Charge Invoice is typically used in the following situations:
B2B transactions within the EU: If the seller and buyer are both VAT-registered businesses and the transaction is cross-border.
Certain goods and services: Such as the sale of property, construction services, or other goods and services where reverse charge VAT applies by law.
Sales between VAT-registered businesses: Where both parties are registered for VAT, and the goods or services fall under reverse charge rules.
Import of services: Where the buyer is required to account for VAT on imported services under the reverse charge mechanism.
Remember:
Always include the reverse charge statement to indicate the buyer is responsible for VAT payment.
Ensure that both the seller and buyer are VAT-registered and that the reverse charge rule applies to the transaction.
Cross-border transactions often require reverse charge VAT, so be sure to check VAT rules based on the country of the buyer.
Maintain clear records of reverse charge invoices for tax compliance and reporting.