Reverse charge on VAT: Mechanism, Rules and Possible Scenarios

• This article explains the concept of reverse charge in VAT and its application in various scenarios.
• Reverse charge is a mechanism where the supplier does not charge VAT on the invoice, and the customer pays and deducts VAT simultaneously through the VAT return.
• The client will manually calculate the VAT on the reverse charge invoice and report that amount as input VAT and as output VAT, having a nil effect for the customer’s and supplier’s cash flow.
• Reverse charge applies in different kinds of transactions, both domestic and intra-Community, and requires specific content on the invoice, such as a note indicating that “Reverse charge” applies and the customer’s VAT number.

Source Marosa

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