EU VAT Reverse Charge — Complete FAQ

VAT reverse charge is a mechanism under Article 196 of EU VAT Directive 2006/112/EC where, instead of the supplier charging VAT, the customer accounts for VAT themselves. It applies to cross-border B2B services within the EU when both parties are VAT registered and located in different member states. The supplier invoices at 0% VAT; the customer declares and simultaneously deducts VAT in their local VAT return.

Reverse charge applies when: (1) the supplier and customer are in different EU member states, (2) the customer is VAT registered in their country, and (3) the supply is a B2B service where the place of supply is the customer's country. It does not apply to B2C supplies, same-country transactions, or certain special-rule services like those related to immovable property.

If your EU business client is VAT registered in a different EU country, you do not charge your country's VAT. Instead, you issue a zero-rated invoice and the customer applies reverse charge. You must include their VAT number on the invoice and add the note: "VAT reverse charge — Article 196, Directive 2006/112/EC". Always verify their VAT number via the EU VIES system before invoicing.

0%. Under the reverse charge mechanism, the supplier does not add VAT to the invoice. The invoice shows the net amount with 0% VAT. The customer self-accounts for VAT at their local rate in their own country's VAT return and simultaneously claims it back as input VAT — so the net cash cost is zero for a fully VAT-registered business.

Your invoice must include: (1) Your VAT number, (2) The customer's VAT number, (3) VAT at 0%, (4) The legal note: "VAT reverse charge — Article 196, Council Directive 2006/112/EC". Some businesses also add the equivalent in the customer's language, for example "Steuerschuldnerschaft des Leistungsempfängers" in German or "Autoliquidation de la TVA" in French. The invoice amount should equal the net amount only — no VAT amount.

A compliant EU VAT invoice for B2B cross-border services must include: full name and address of supplier and customer, invoice date and unique sequential number, your VAT number, customer's VAT number, description of services supplied, date of supply or payment, net amount, VAT rate (0%), VAT amount (0.00), total amount, and the reverse charge legal reference. Invoices must be issued within 15 days of month-end in most EU countries.

Yes. A correct reverse charge invoice shows: Supplier: Your Company, VAT: DE123456789 | Customer: Client GmbH, VAT: FR98765432100 | Description: Consulting services — January 2025 | Net amount: €5,000.00 | VAT (0% — Reverse Charge): €0.00 | Total: €5,000.00 | Note: "VAT reverse charge — Article 196, Council Directive 2006/112/EC". The customer will then declare €1,000 VAT (at France's 20% rate) in their French VAT return and claim it as input VAT.

Yes. You must report cross-border B2B service supplies in your EC Sales List (ESL), also called the Recapitulative Statement or VIES return. Report them as services — not goods. Filing frequency varies by country (monthly or quarterly). You also declare the net value of these supplies in your VAT return as zero-rated outputs. Failure to file the ESL correctly can result in penalties even if no VAT is owed.

The EC Sales List (ESL) — also called the VIES return or Recapitulative Statement — is a report submitted to your tax authority listing all zero-rated B2B cross-border supplies of goods and services to VAT-registered customers in other EU countries. It includes each customer's VAT number and the total value of supplies. It is separate from your regular VAT return. Filing deadlines are typically monthly (if supplies exceed thresholds) or quarterly.

If you are VAT registered and your EU client is also VAT registered in a different country, you do not charge VAT — you apply reverse charge and issue a 0% invoice. If you are below the VAT registration threshold in your country and not VAT registered, different rules apply. If your client is a non-business consumer (B2C), you generally charge your country's VAT rate, or use the EU One Stop Shop (OSS) scheme for digital services.

For B2B digital services (SaaS, software, online tools) between VAT-registered businesses in different EU countries, reverse charge applies — invoice at 0% VAT. For B2C digital services (to consumers), the VAT rate of the customer's country applies, regardless of where you are based. Suppliers can use the EU One Stop Shop (OSS) scheme to declare and pay consumer VAT across all EU countries via a single return in their home country.

Yes. SaaS and software-as-a-service is classified as an electronically supplied service. When sold B2B to a VAT-registered business in a different EU country, reverse charge applies under Article 196 of the EU VAT Directive. You invoice at 0% VAT and include the customer's VAT number. When sold to consumers (B2C), the customer's country VAT rate applies and OSS registration is recommended.

If the customer does not have a valid VAT registration number, reverse charge does not apply. For B2C or unregistered customers: for most services, you charge VAT at your country's rate. For electronically supplied/digital services, the VAT of the customer's country applies — you may need to register for the EU One Stop Shop (OSS) scheme to account for this. Always verify VAT numbers via VIES before issuing a zero-rated invoice.

Yes. Several services have special place-of-supply rules that override the general reverse charge: (1) Services related to immovable property are taxed where the property is located, (2) Passenger transport is taxed based on distance traveled in each country, (3) Restaurant and catering services are taxed where physically carried out, (4) Short-term vehicle hire is taxed where the vehicle is put at the customer's disposal. For these, standard local VAT may apply even in cross-border B2B transactions.

Reverse charge (Article 196) applies to B2B services between VAT-registered businesses in different EU countries — the customer self-accounts for VAT. OSS (One Stop Shop) applies to B2C supplies, particularly digital services to EU consumers — the supplier charges the customer's country VAT rate and reports it centrally via OSS. They are complementary: use reverse charge for B2B, use OSS for B2C digital services.

Use the EU VIES (VAT Information Exchange System) at ec.europa.eu/taxation_customs/vies. Enter the country code and VAT number. If valid, you will see the business name and address. Always perform and save this check before issuing a zero-rated reverse charge invoice — it is your evidence that reverse charge was correctly applied. If VIES shows invalid, do not apply reverse charge; charge your local VAT rate instead.