What is Reverse Charge?

Under the EU VAT rules, when you receive certain services from suppliers based in other countries, you may be required to account for the VAT yourself. This mechanism is called the Reverse Charge (Umkehrung der Steuerschuldnerschaft). Where it applies, you act as if you are both the supplier and the customer — you charge yourself the VAT and, if the service relates to VAT taxable supplies that you make, you also claim it back. The two entries cancel each other out.

The reverse charge applies to cross-border B2B services where the place of supply is Germany. It also applies to certain domestic supplies, such as construction services, where specific German VAT rules require the recipient of the service to account for the VAT.