VAT Reverse Charge Explained: Why Your EU Invoice Says €0 VAT
A supplier in Berlin invoices a customer in Madrid and charges no VAT at all. Nothing has gone wrong. The reverse charge moves the VAT to the buyer's side of the transaction — and for most businesses the entry that follows nets to exactly zero.
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Quick answer: On a cross-border B2B supply the reverse charge makes the buyer, not the seller, responsible for accounting for VAT. The seller invoices with no VAT and marks the invoice accordingly. The buyer declares the VAT at their own national rate as output tax and reclaims the same amount as input tax on the same return — so for a fully taxable business the net cash effect is zero. It applies only where the customer is a business with a valid VAT number.
A design agency in Dublin hires a developer in Poland. The invoice arrives for €5,000 with a VAT line reading €0.00 and a note saying “reverse charge — VAT to be accounted for by the recipient.” The agency's bookkeeper assumes the developer made a mistake, or perhaps is not VAT registered, and asks for a corrected invoice showing Polish VAT.
The invoice is correct, and the correction being requested would be wrong. Under the reverse charge, the Polish developer must not charge VAT on this supply. Instead the Dublin agency accounts for Irish VAT on the €5,000 itself — €1,150 at 23% — declaring it as output tax and, in the same breath, reclaiming €1,150 as input tax. Net effect: zero euros move. Two entries, one return, nothing paid.
The problem the reverse charge solves
VAT is charged where consumption happens. A service consumed by a business in Ireland should bear Irish VAT. But the supplier is Polish — and without the reverse charge the only way to get Irish VAT onto that supply would be for the Polish developer to register for VAT in Ireland.
Now multiply by reality. That developer might serve clients in fifteen countries. Registering in all fifteen, filing fifteen sets of returns, in fifteen languages, to bill a handful of invoices each, would make cross-border B2B services commercially impossible for anyone smaller than a multinational.
The reverse charge sidesteps the whole problem. The customer is already VAT-registered in their own country and already files returns there. Rather than importing the supplier into a foreign tax system, the tax is accounted for by the party who is already inside it. The right amount of VAT lands in the right country, with no foreign registration at all.
Without the reverse charge
The Polish supplier would need an Irish VAT registration, Irish returns, and Irish compliance — to invoice one client. Repeat per country.
With the reverse charge
The supplier invoices with no VAT. The Irish customer self-accounts on its existing Irish return. Correct tax, correct country, no new registration.
The accounting entry, both sides
The reason this confuses people is that the buyer records VAT they never paid and reclaims VAT they never handed over. Written out, it is straightforward.
Both entries must appear on the return. It is tempting to reason that since they cancel, neither is necessary — that is a common and incorrect shortcut. The declarations feed statistical and cross-checking systems, and tax authorities match supplier reporting against buyer reporting. An omitted reverse charge entry shows up as a mismatch even though no money was ever at stake.
It is only neutral if you can recover input VAT. A business making exempt supplies — many financial services, insurance, healthcare, education — cannot reclaim the input side. For them the reverse charge is a genuine cost: they declare the output VAT and recover none of it, so a €5,000 invoice really does cost €6,150. Partially exempt businesses recover a proportion. This is exactly the outcome the rules intend, because it puts the foreign supply on the same footing as a domestic one.
The four conditions
The reverse charge is not optional and it is not universal. Four things generally need to be true at once.
| Condition | What it means in practice |
|---|---|
| Cross-border supply | Supplier and customer are established in different countries. A domestic supply follows normal rules, with narrow domestic reverse charge exceptions in areas like construction and certain goods prone to fraud. |
| Business customer | The customer is a taxable person acting as such. An individual consumer cannot self-account, so B2C supplies are outside it entirely. |
| Valid VAT registration | The customer holds a VAT number valid for cross-border transactions, and you have validated it. This is the condition that most often fails. |
| Place of supply is the customer's country | For most B2B services this is where the customer belongs. Some categories — land, admission to events, certain transport — have special rules that override it. |
Validation is the control that matters
Everything rests on the customer genuinely being a VAT-registered business. If they are not, the supply is B2C and you should have charged VAT — and the authority will look to you for it, because you are the one who chose not to charge.
The European Commission's VIES system confirms whether a VAT number is valid for intra-EU transactions. Three practices separate businesses that survive a review from those that do not:
- Validate at the time of supply, not at onboarding. Registrations get cancelled. A number validated two years ago proves nothing about today's invoice.
- Keep the evidence. VIES issues a consultation reference for exactly this purpose. Store it against the transaction. A screenshot is better than nothing; the reference number is better than a screenshot.
- Re-validate periodically for recurring customers. A monthly SaaS subscription is a stream of supplies, not one supply. Many businesses re-check quarterly and automate it against the VIES service.
If validation fails, charge VAT. Do not accept the customer's assurance that the number is fine and the system is wrong. Treat the supply as B2C, charge the destination country's VAT — declared through OSS where applicable — and issue a credit and corrected invoice if they later produce a valid registration. The cost of over-charging is an administrative correction; the cost of under-charging is the tax.
What goes on the invoice
A reverse charge invoice differs from a normal one in three respects, and all three are usually mandatory rather than good practice.
- No VAT amount and no VAT rate. Not 0% as a rate, but the absence of a charge. Some systems will render this as a zero line, which is acceptable so long as the wording is present.
- Both VAT numbers. Yours and the customer's, each with its country prefix.
- Explicit reverse charge wording. A statement such as “Reverse charge — VAT to be accounted for by the recipient,” often with a reference to the relevant article of the VAT Directive or the national provision. Some member states are strict about the precise formulation, so check the requirement in your own country.
Where the underlying confusion is really about inclusive versus exclusive pricing rather than the reverse charge itself, the inc VAT vs ex VAT guide is the better starting point, and the working out VAT backwards guide covers extracting VAT from a gross figure.
Goods, services, and the UK
Three distinctions are worth keeping straight, because they are frequently conflated.
- Cross-border B2B services are the classic reverse charge case — SaaS, consulting, advertising, legal and professional services, licensing.
- Intra-EU B2B supplies of goods work through a related but distinct mechanism: the supply is zero-rated as an intra-Community supply and the customer accounts for acquisition VAT. The commercial effect resembles the reverse charge, but the rules, the evidence requirements, and the reporting differ.
- UK–EU trade no longer follows intra-EU rules. The UK is a third country, so goods move as imports and exports with customs procedures. For services, UK businesses buying from overseas suppliers generally still self-account under the UK's own reverse charge, and EU suppliers to UK businesses generally do not charge EU VAT. The UK VAT calculator handles the domestic side.
The one-line test for a buyer: if a foreign supplier's invoice has no VAT on it and you are VAT registered, assume you owe a reverse charge entry until you have established otherwise. The commonest error is not miscalculating the entry — it is never making it, because the invoice showed nothing to account for.
Related tools
- Reverse VAT calculator — compute the VAT to self-account for at any national rate.
- Global tax rates — 2026 standard and reduced VAT rates for 30 European countries.
- International VAT calculators — per-country tools for the major EU markets.
- EU VAT OSS & IOSS guide — the B2C counterpart to the reverse charge.
Frequently asked questions
Quick answers to the most common questions users ask.
What is the VAT reverse charge?
A mechanism that shifts responsibility for accounting for VAT from the supplier to the customer. On a qualifying cross-border B2B supply the supplier invoices without VAT, and the customer self-accounts for it in their own country at their own rate.
Why does my invoice from an EU supplier show no VAT?
Because you are a VAT-registered business in another country and the supply falls under the reverse charge. The supplier is required not to charge VAT; you account for it yourself on your own VAT return. The invoice should carry a note such as 'reverse charge' or a reference to the relevant article of the VAT Directive.
Does the reverse charge mean no VAT is due?
No. The VAT is still due — it is just accounted for by the buyer instead of the seller. For a fully taxable business the self-accounting entry is cash-neutral, because the VAT declared as output is simultaneously reclaimed as input. For a business that cannot fully recover VAT, it is a real cost.
When does the reverse charge apply?
Typically when the supplier and customer are in different countries, the customer is a business acting as such with a valid VAT registration, and the place of supply rules put the supply in the customer's country. It covers most cross-border B2B services, including SaaS, consulting, advertising, and licensing.
What do I need on the invoice?
Both parties' VAT numbers, a clear indication that the reverse charge applies, and no VAT amount. Many jurisdictions expect explicit wording referencing the reverse charge. The customer's VAT number should be validated and the validation evidenced before you rely on it.
How do I validate an EU customer's VAT number?
Through the European Commission's VIES system, which confirms whether a number is valid for cross-border transactions. Save the consultation reference or a timestamped record, because the evidence of validation at the time of supply is what protects you if the number is later found to be invalid.
What happens if the customer's VAT number is invalid?
You generally cannot treat the supply as B2B reverse charge and should charge VAT as a B2C supply instead. If you applied the reverse charge on an invalid number, the tax authority can look to you for the VAT that should have been charged, which is why validation at the point of supply matters.
Does the reverse charge apply to B2C sales?
No. The reverse charge requires a business customer who can self-account. B2C cross-border supplies are handled by charging the customer's own country's VAT, typically declared through the One Stop Shop.
Does the reverse charge apply to UK–EU trade after Brexit?
The UK is now a third country to the EU, so intra-EU rules no longer apply between them. UK businesses buying services from overseas suppliers generally still self-account under the UK's own reverse charge rules, and EU suppliers to UK businesses generally do not charge EU VAT. Goods movements follow import and export rules instead.
Work out the VAT either way
Calculate the VAT the buyer must self-account for on a reverse-charge supply.
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oecd.orgTaxesLedger is an independent educational tool. We are not affiliated with any government agency. Rate records include source metadata and verification status; always confirm with your jurisdiction's official Department of Revenue before filing. Last registry update: September 11, 2026.
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