The reverse charge rule for cross-border services

What is the reverse charge rule?

The reverse charge rule, also known as the reverse charge procedure, states that in the case of cross-border services, it is not the service provider but the service recipient who is liable for the VAT incurred. The service provider therefore issues an invoice without VAT and notes on it that the "tax liability is transferred to the service recipient".

The latter must then calculate the VAT applicable in the country of destination and pay it to the relevant tax office. At the same time, he can claim this amount as input tax.

Mandatory information on the invoice

Certain information must be included on the invoice for the reverse charge rule to apply:

• Full name and address of the supplier and the recipient of the service
• Date of issue and consecutive invoice number
• Description and scope of the service
• Time of service provision
• VAT ID of the supplier and the recipient of the service
• Reference to the "reversal of the Tax liability" or "reverse charge" or "tax liability of the recipient of the service"

The hint The reverse charge notice may also have to be provided in the national language of the recipient.

Special features to note

The reverse charge rule only applies to cross-border services within the EU, but not to third-country business. It also does not apply to all services, but only to the types defined in EU law. Simplified invoice details can be provided for gross invoice amounts of less than EUR 250.

Companies should find out about the exact requirements and special features in the respective recipient country, as national regulations may differ slightly. The responsible contacts are the local German Chambers of Foreign Trade.