Last updated: 2026-04-01
What is reverse charge VAT and why does it exist?
The reverse charge mechanism is a fundamental principle of intra-EU VAT for business-to-business (B2B) transactions. Under normal VAT rules, the supplier charges VAT and remits it to their national tax authority. Under the reverse charge, the supplier does not charge VAT. Instead, the buyer (recipient) self-assesses the VAT in their own country and reports it on their VAT return.
The purpose of this mechanism is to prevent VAT fraud and simplify cross-border trade within the EU. Without it, a French freelancer selling services to a German company would need to register for German VAT, charge German VAT rates, and file German VAT returns — an impractical burden for small businesses. The reverse charge eliminates this complexity: you invoice without VAT, and your client handles the tax in their jurisdiction.
The legal basis is Article 196 of the EU VAT Directive (2006/112/EC), which states that the person liable for VAT on B2B services where the supplier and customer are in different EU member states is the customer.
When does the reverse charge apply?
The reverse charge applies when all of the following conditions are met:
1. The supplier and the customer are in different EU member states 2. The transaction is B2B — both parties are VAT-registered businesses (or at least the customer is a taxable person for VAT purposes) 3. The supply is of services that fall under the "general rule" for place of supply (Article 44 of the VAT Directive) — meaning the place of supply is where the customer is established 4. The customer has a valid EU VAT identification number
Most professional services fall under the general rule: consulting, IT development, design, marketing, legal services, accounting, translation, and similar. There are exceptions for services related to immovable property (taxed where the property is located), passenger transport, restaurant services, and certain cultural or educational events.
The reverse charge does NOT apply to: - Domestic transactions (supplier and customer in the same country) - B2C sales (the customer is a private individual) - Sales to customers outside the EU (these are outside the scope of EU VAT entirely) - Supplies of goods (these follow different rules — typically the intra-community supply/acquisition regime)
Required invoice mentions for reverse charge
When you apply the reverse charge, your invoice must include specific mentions. The standard English-language mention is:
"Reverse charge — VAT to be accounted for by the recipient pursuant to Article 196 of Directive 2006/112/EC"
Your invoice must also:
- Show the net amount (excluding VAT) for each line item and the total - NOT include any VAT amount or VAT rate — the VAT fields should be zero or absent - Include your own EU VAT identification number - Include your client's EU VAT identification number - State the date of supply and a sequential invoice number
The reverse charge mention is mandatory. Without it, your client may not be able to correctly process the invoice for VAT purposes, and tax authorities may challenge the treatment during an audit.
How to verify a client's VAT number using VIES
Before applying the reverse charge, you must verify that your client's VAT number is valid. The official tool for this is VIES (VAT Information Exchange System), operated by the European Commission at ec.europa.eu/taxation_customs/vies.
To verify: 1. Go to the VIES website or use the VIES API 2. Select the member state of your client's VAT number 3. Enter the VAT number (without the country prefix, as VIES adds it automatically) 4. Submit the query
VIES will confirm whether the number is valid and, in most cases, display the registered name and address of the business. Save or print the verification result — this is your proof that you checked the number, which you may need if audited.
If the VAT number is invalid or VIES is unavailable, do not apply the reverse charge. Instead, charge your domestic VAT rate. You can try again later or ask your client to provide a corrected number.
Country-specific terminology and mentions
While the reverse charge mechanism is an EU-wide rule, different countries use different terminology on invoices. Using the locally recognised term can help your client's accounting team process the invoice correctly:
- France: "Autoliquidation de la TVA — article 283-2 du CGI" (the French tax code reference) - Germany: "Steuerschuldnerschaft des Leistungsempfangers" (literally, "tax liability of the service recipient") - Netherlands: "BTW verlegd" (VAT shifted) - Spain: "Inversion del sujeto pasivo" (reversal of the taxable person) - Italy: "Inversione contabile" (reverse accounting) — governed by Article 17 of DPR 633/72 - Belgium: "Autoliquidation" (same term as French, reflecting the bilingual business environment) - Portugal: "Autoliquidacao do IVA" - Poland: "Odwrotne obciazenie"
It is always acceptable to use the English mention ("Reverse charge — Article 196, Directive 2006/112/EC") alongside or instead of the local term. When in doubt, include both the English reference and the local term.
Common mistakes freelancers make with reverse charge
These are the most frequent errors we see freelancers make when applying the reverse charge:
1. Not verifying the VAT number: Applying the reverse charge without checking VIES first. If the number is invalid, you are liable for the VAT yourself.
2. Applying reverse charge to B2C sales: The reverse charge only applies to B2B transactions. If your client is an individual without a VAT number, you must charge VAT at your domestic rate (or the rate of the client's country for certain digital services).
3. Forgetting the mandatory mention: Issuing a zero-VAT invoice without the reverse charge statement. This looks like an error and may cause your client to reject the invoice or trigger an audit flag.
4. Using reverse charge for domestic sales: The reverse charge is for cross-border intra-EU B2B only. If you and your client are in the same country, normal VAT rules apply (with limited domestic reverse charge exceptions for specific sectors like construction in some countries).
5. Not requesting an intra-community VAT number: In some countries (notably France for auto-entrepreneurs), you need to specifically request an EU VAT number from your tax office before you can invoice with the reverse charge. Your standard domestic tax ID may not be sufficient.
6. Confusing reverse charge with zero-rating: Zero-rated supplies are still subject to VAT — at a 0% rate. Reverse charge means the supplier does not charge VAT at all, and the liability shifts to the buyer. These are different concepts with different reporting requirements.
Record-keeping and VAT return reporting
Even though you do not charge VAT on reverse charge invoices, you must report these transactions. In most EU countries, reverse charge sales appear in a specific box on your periodic VAT return (for example, Box 8 on the French CA3 return). You may also need to file an EC Sales List (also called a recapitulative statement) — a periodic report listing all your intra-EU B2B sales by client VAT number and total amount.
Keep copies of: - Every reverse charge invoice issued - The VIES verification result for each client VAT number - Any correspondence confirming the B2B nature of the transaction
These records must be retained for the statutory period in your country — typically 6 to 10 years depending on the member state.
How Invoicey auto-detects and applies the reverse charge
Invoicey removes the guesswork from reverse charge invoicing. Here is what happens automatically when you create an invoice:
- When you add a client with an EU VAT number from a different member state, Invoicey queries the VIES database in real time to validate the number - If the number is valid and the client is in a different EU country, Invoicey applies the reverse charge automatically — setting the VAT amount to zero and adding the correct legal mention - The mention is generated in both English and the client's local language (e.g., "Autoliquidation" for French clients, "Steuerschuldnerschaft des Leistungsempfangers" for German clients) - If the VAT number is invalid, Invoicey warns you and defaults to charging your domestic VAT rate - Your exported PDF includes all required fields for a compliant reverse charge invoice - Invoicey tracks your reverse charge sales separately, making it easy to complete your EC Sales List and VAT return
You do not need to memorise Article 196 or check VIES manually. Create your invoice, add your client, and Invoicey handles the compliance.
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