Glossary
Reverse charge
Definition
Under the reverse charge, the buyer, not the seller, accounts for the VAT on certain cross-border sales between VAT-registered businesses. The seller's invoice shows no VAT, with a note that the reverse charge applies. The buyer records both the output and the input VAT.
Example. A VAT-registered Estonian company buys a €2,000 service from a company in Latvia under the reverse charge. The invoice shows no VAT, and the buyer records €480 of output and input VAT.
Why it matters for your company
Buying services from businesses in other EU countries often means reverse charge. Getting it wrong either overpays VAT or leaves a gap in your return.
Where you see it in Sapita
On a purchase invoice from an EU supplier, where the VAT class shows reverse charge, and in the VAT return.