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The reverse charge rule for cross-border services

The reverse charge rule for cross-border services

Definition of the term "reverse charge rule"

With cross-border services Within the EU, special VAT regulations apply in accordance with the place of destination principle. This has an impact on invoicing and the payment of VAT. Value added tax. The so-called reverse charge rule regulates who is liable for VAT in such cases.
The reverse charge procedure is only intended for B2B transactions (between companies) within the EU. In this procedure, the tax liability is transferred to the recipient of the service, who then pays the tax. Value added tax in his country

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 "reverse charge" or "reverse charge" or "tax liability of the recipient"

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.

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Disclaimer: Please note that the above dates, tax rates and regulations may change over time. Do not make any independent decisions without first consulting an expert for your individual situation. It is in your interest to always receive individual information from an experienced expert who knows your situation.

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