What is VAT transferred?

VAT (Value Added Tax) is an indirect tax that consumers pay when purchasing goods or services. Businesses collect this tax and remit it to the tax authorities through a VAT return.

In a standard transaction, VAT is charged by the supplier to the customer on the invoice. With 'VAT reverse charge', the responsibility for declaring and paying VAT shifts from the supplier to the customer. This only applies to business-to-business (B2B) transactions.

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Specifically, this means that

• the supplier does not charge VAT on the invoice;
• the customer (the buyer) must declare and remit the VAT due himself through his own VAT return;
• the customer can often deduct this VAT directly as input tax, if VAT deduction is possible.

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Why is "VAT reverse charge" applied?

The VAT reverse charge mechanism is applied for several reasons:

1. In an international B2B context

In certain cross-border B2B transactions, VAT rules stipulate that the transaction is taxable in the country where the customer is located. In such cases, VAT is usually transferred to the customer. This means that the customer itself has to declare and pay the VAT, meaning that the supplier does not have to register for VAT in the customer's country.

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2. Combating VAT fraud

In a national context, certain transactions are also invoiced with "reverse charge VAT," as for example in the construction industry. This system is often used to prevent VAT fraud and other abuses. In such cases, not the supplier but the customer bears the responsibility for declaring and paying the VAT.

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When is "VAT reverse charge" applied?

VAT reverse charge is applied in specific situations, including:

• Intra-Community supplies: Deliveries of goods between EU member states.
• Import of goods from non-EU countries: If the importer has a reverse charge permit.
• Specific sectors: such as construction, where subcontractors often work with reverse charge VAT.

For a complete list or specific cases, it is wise to seek advice from your accountant.

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'VAT transferred' in Billtobox

Billtobox offers convenient reverse charge VAT solutions:

• For incoming invoices: Billtobox automatically recognizes the 'reverse VAT' entry and passes this information directly to your accountant.
• For outgoing invoices: In the DIY module, you can easily select the 'reverse VAT' option when creating your invoices.

Conclusion

VAT reverse charge is an important system that helps businesses with administrative simplification, cash flow management and fraud prevention. Thanks to tools such as Billtobox , VAT reverse charge processing becomes easier and more efficient for both incoming and outgoing invoices.

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Do you have questions about how the VAT reverse charge applies in your situation? Contact your accountant for more information and advice.