EU reverse charge: how to invoice a business in another EU country
Selling to a business in another EU country? In most cases you invoice without VAT and the customer accounts for it. Here is when that applies, what the invoice must show and what to declare.
You run a company in Luxembourg and sell a service to a business in Spain. Do you charge Luxembourg VAT, Spanish VAT, or none? For most business-to-business (B2B) sales inside the EU, the answer is: none on your invoice. Your customer accounts for the VAT in their own country. This is the reverse charge.
What the reverse charge is
Normally the seller charges VAT and pays it to the tax office. With the reverse charge, the obligation moves to the buyer: they calculate the VAT at their own country’s rate in their VAT return and, when they are entitled to, deduct it in the same return. For the buyer it usually costs nothing, and for you it means no VAT registration in your customer’s country.
When it applies
- Services to an EU business: for most services the place of supply is the customer’s country (the general B2B rule, Article 44 of the EU VAT Directive), and the customer pays the VAT through the reverse charge (Article 196).
- Goods shipped to an EU business: the sale is an exempt intra-Community supply in your country (Article 138), and the buyer declares an intra-Community acquisition in theirs. The effect on your invoice is the same: no VAT.
- The conditions: the customer is a business with a valid VAT number in another EU country and, for goods, the goods actually leave your country.
It does not apply to private customers. For them you normally charge your own VAT, or your customer’s VAT through the One-Stop Shop (OSS) for distance sales of goods and digital services above the EU threshold of €10,000 a year. Some services also follow special rules, such as work on a building, taxed where the building is, or tickets to an event, taxed where the event takes place. When in doubt, ask your accountant.
What your invoice must show
- Your VAT number and your customer’s VAT number.
- The net amount, with 0 % VAT.
- A clear mention: “Reverse charge” for services; for goods, the exempt intra-Community supply, for example “Exempt intra-Community supply, Article 138 of Directive 2006/112/EC”.
- All the usual details: number, date, names and addresses, description, quantities and prices.
The mention matters: without it, a tax inspector can ask you for the VAT you did not charge.
Check the VAT number first
Before invoicing without VAT, check that your customer’s VAT number is valid in VIES, the European Commission’s register, and keep a record of the check. If the number is not valid, the sale is taxed like a sale to a private customer.
What to declare
Report these sales in your VAT return, in the box for intra-Community supplies of goods or services. Most EU countries also ask for a recapitulative statement (EC Sales List) with each customer’s VAT number and the amounts, monthly or quarterly depending on the country and the type of sale.
The domestic reverse charge is something else
Several countries also apply a reverse charge between two local businesses in certain sectors, such as construction, scrap metal or some electronics. These rules differ from country to country and are separate from the cross-border EU rules above.
How Tavalle handles it
In Tavalle each customer has a country, a VAT number and a type, business or private. Quotes and orders get the right rate on their own: your domestic VAT, 0 % with the reverse-charge mention for services to EU businesses, the intra-Community supply mention for goods, 0 % outside the EU. Both VAT numbers and the legal text are printed on the invoice, and VAT numbers can be checked in VIES from the customer form. See invoicing and VAT.
This guide is general information, not tax advice. Rules and filing deadlines differ between EU countries: check your own situation with your accountant.
