European B2B VAT reverse charge tracker

Countries shift VAT reporting from suppliers to customers to reduce VAT fraud – General & Domestic Reverse Charge by country

In attempt to reduce the VAT Gap – the shortfall of VAT revenues compared to expected receipts – EU and other states apply the Reverse Charge mechanism in a number of transactions. This means instead of suppliers collecting the VAT element cash from their customers and then being responsible to pay the VAT to the appropriate tax authorities, the customers pay only the net transaction amount to the supplier and account for the VAT on their own VAT return. This takes the VAT cash element – and therefore the fraud opportunity – out of the equation.

The common situations where the reverse charge is used to combat VAT fraud on B2B transactions are below. For B2B cross border services, transactions in most countries around the world use the reverse charge (article 44 of the EU VAT Directive):

1. General Reverse Charge:  Non-resident companies selling goods domestically to other businesses, where countries elect the may provision of Article 194 of the EU VAT Directive, or similar rules outside of the EU (see list below); and
2. Domestic Reverse Charge: resident and non-resident companies selling fraud-sensitive goods where the country has elected under Article 199 of the EU VAT Directive (see below).

EU VAT General and Domestic Reverse Charge rule by country

Death of the VAT Return – reverse charge part of global trend

The use of the reverse charge is part of the wider shift towards the death of the VAT return, including pre-filled VAT returns and e-invoicing. VAT Calc’s in real-time global Calculator and Auditor  services produce instant and accurate tax calculations including the Reverse Charge in all scenarios into your ERP, billing, e-commerce or e-invoicing systems.