Reverse charge
A VAT mechanism that shifts the obligation to account for VAT from the supplier to the business customer in cross-border B2B sales.
What it is
Reverse charge is the rule that moves the liability to report VAT from the seller to the buyer when both are VAT-registered businesses in different EU member states. The seller issues a zero-rated invoice; the buyer self-accounts for VAT at their local rate in their own return.
Where you meet it
You meet reverse charge whenever a tax-rules engine returns "reverseCharge": true for a cross-border B2B sale. On the invoice side, EU rules require the supplier to include a note such as "Reverse charge" (Article 226(11a) of the VAT Directive 2006/112/EC) and omit their own VAT line. In Stripe Tax, this shows up as a zero tax rate with a reason of reverse_charge. In vatverify's /v1/validate response, the decision object surfaces the reverse-charge determination alongside the VAT number validation result.
EU intra-Community vs domestic reverse-charge
Reverse charge appears in two distinct contexts that share the same name:
- EU intra-Community reverse-charge: the cross-border B2B mechanism described above, anchored in Article 138 (zero-rate on intra-Community supplies) and Article 196 (recipient liable) of the EU VAT Directive. Triggered by a valid VAT number on the buyer side.
- Domestic reverse-charge: a member-state-specific rule applied to high-fraud-risk sectors (construction, scrap metal, mobile phones, integrated circuits, and others) between two VAT-registered businesses inside the same country. Each member state publishes its own list of in-scope sectors. See the Germany, Belgium, and Netherlands country pages for examples of domestic reverse-charge for construction.
The two contexts can compose: a Belgian construction service supplied to a French buyer is both intra-Community (cross-border) and within scope of Belgium's domestic construction reverse-charge regime; the cross-border classification dominates.
Audit-trail consequences
A reverse-charged invoice has zero VAT collected by the seller. The seller's audit trail must justify the zero-rate position with two pieces of evidence: the buyer's VAT number was valid at the time of supply, and the buyer is established in a different member state. VIES validation (or BZSt qualified confirmation for German sellers) is the standard way to evidence the first point. See the §18e UStG glossary for the German qualified-confirmation requirement.
Common confusions
- Reverse charge is B2B only. A B2C cross-border sale falls under OSS or the destination country's local VAT, not reverse charge.
- A valid VAT number on the buyer side is what qualifies a sale for reverse charge. If the number fails registry validation, the seller must usually charge local VAT instead.