EU VAT Reverse Charge
When the buyer pays VAT instead of the seller
The reverse charge mechanism shifts VAT liability from the supplier to the customer. Instead of the seller charging VAT on their invoice, the buyer self-assesses and reports VAT in their own country's VAT return.
This mechanism generally applies to B2B transactions where VAT is due in an EU country and the supplier is not established there. For intra-EU B2B transactions, both parties are usually VAT-registered and the customer's VAT number is validated. For B2C cross-border sales, the One Stop Shop (OSS) scheme may apply instead.
How It Works
- The supplier issues an invoice without adding VAT to the final price, noting "Reverse charge" on the invoice
- The buyer reports the VAT on their VAT return as both output tax and input tax
- If the buyer is entitled to full VAT recovery, the net VAT effect is zero
- The buyer must include both their own and the supplier's VAT number on the declaration
When Does Reverse Charge Apply?
✘ Reverse charge does NOT apply if:
- You are selling to individual consumers (B2C), use the OSS scheme instead.
- You and your customer are in the same country, normal domestic VAT rules apply
- One of the parties is not VAT-registered and you cannot verify taxable-person status
✔ Reverse charge generally applies if:
- Seller and buyer are in different EU countries
- Both parties are VAT-registered businesses with a valid VAT number
There is no minimum threshold. Reverse charge can be applied from the very first euro. Any qualifying cross-border B2B transaction must use it, regardless of the invoice amount or your annual sales volume.
| Scenario | Customer Has Valid EU VAT Number? | Reverse Charge? | What Happens |
|---|---|---|---|
|
B2B, different EU countries |
Yes | Yes |
Supplier invoices without VAT. Buyer self-assesses VAT in their country. |
|
B2B, same EU country |
Yes | No |
Normal domestic VAT rules. Supplier charges local VAT. |
|
B2C, different EU countries |
— N/A | No |
Supplier charges VAT. OSS scheme may apply. |
|
B2C, same country |
— N/A | No |
Normal domestic VAT. Supplier charges local rate. |
|
Customer is outside the EU |
— N/A | No |
EU reverse charge does not apply. |
Validating EU VAT Numbers
For intra-EU B2B transactions, you should verify that your customer's VAT number is active, valid and really belongs to them. Manual checks work for occasional transactions, but businesses processing cross-border sales at scale need automated validation. VatDB provides both a lookup tool and an API for real-time VAT number validation. The API let's you automate VAT validation in your checkout flow, invoicing system, or ERP. The API returns VAT validation status, company name, and address, everything you need to document the reverse charge on your invoice and satisfy audit requirements.
Invoicing and Record Keeping
Your reverse charge invoice must include both VAT numbers, the net amount without VAT, and a clear reverse charge reference. See our full guide on how to create a reverse charge VAT invoice for required information and correct wording.
Record Keeping
Keep proof of VAT number validation for each reverse charge transaction. Tax authorities may request evidence that you verified the number at the time of supply.
Every VatDB API validation returns an audit_id. Use it to retrieve a full
audit record at any time, including the exact timestamp, the request you
made, and the validation result. This gives you permanent, retrievable proof that you verified
the VAT number before applying reverse charge.
Frequently Asked Questions
What happens if I don't apply reverse charge when I should?
If you charge VAT on a transaction that qualifies for reverse charge, your customer may face difficulties reclaiming the VAT in your country. It creates administrative burden for both parties but is not typically penalized.
What if my customer provides an invalid VAT number?
If the VAT number cannot be verified, do not apply reverse charge automatically. First collect other reliable evidence that your customer is a taxable business. If you cannot establish B2B status, treat the sale as non-taxable-customer/B2C and charge VAT accordingly (for cross-border consumer sales, OSS may apply).
Does reverse charge apply to digital services?
For B2B digital services sold cross-border within the EU, yes. Reverse charge applies and the buyer self-assesses VAT. For B2C digital services, the supplier must charge VAT at the customer's country rate, typically using the One Stop Shop (OSS) scheme.
Does reverse charge apply to non-EU businesses?
It can. For many B2B services taxed in an EU Member State, reverse charge applies whenever the supplier is not established in that Member State, including some non-EU supplier scenarios. For intra-EU supplies, a valid EU VAT number remains the standard evidence.
Do I need to register for VAT in my customer's country?
No, that's the main benefit of reverse charge. The mechanism eliminates the need for suppliers to register for VAT in every EU country where they sell to businesses.
How do I validate a VAT number?
Use a service like VatDB to validate EU VAT numbers. The VatDB API provides real-time validation with structured responses, retry handling, and proof-of-validation records for your audit trail.
Automate VAT Number Validation
Verify EU VAT numbers in real-time before applying reverse charge. Get structured responses with proof-of-validation for your records.
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