Sales tax glossary
What is the VAT reverse charge?
The reverse charge is a VAT rule that shifts responsibility for reporting VAT from the seller to the business buyer. The seller invoices without VAT, and the buyer accounts for it on its own VAT return, often reclaiming it at the same time. It's common for cross-border business-to-business services.
Example
A US software company sells a subscription to a VAT-registered business in the Netherlands. The invoice shows no VAT and notes that the reverse charge applies, and the Dutch business reports the VAT.
Why it matters for sellers
The reverse charge can spare foreign sellers from registering for VAT on business sales, but only if they confirm the buyer is a business, typically by checking its VAT number. Sales to consumers don't qualify.
Related terms
This definition is general information, not tax or legal advice. Rules vary by jurisdiction and change over time.
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