Reverse Charge for Cross-Border Invoices: Simply Explained

Under the reverse charge mechanism, VAT liability shifts from the service provider to the service recipient. You issue an invoice without VAT, and your business customer in another EU country pays VAT in their own country.

This prevents double taxation: Your French customer would otherwise pay Irish or UK VAT, which they cannot deduct as input tax.

The mechanism applies to B2B services within the EU. Three requirements: Service (not goods delivery), company with valid VAT ID, another EU country.

Typical cases: Software development, consulting, design work for customers in other EU countries. Reverse charge does not apply to private individuals, goods deliveries, or non-EU customers.

Without a valid VAT ID, reverse charge doesn't work. Validate the number before invoicing:

GrandTotal stores the VAT ID with the customer. If the number is invalid, charge VAT from your own country.

On the invoice: No VAT, both VAT IDs (yours and the customer's), notice "Reverse Charge – VAT liability of the recipient".

In GrandTotal, create a separate payment method under Settings/Payments for reverse charge customers. Enter the notice text under Settings/Invoices in the "Terms" of this payment method – it will then appear automatically on every invoice.

VAT ID not validated or invalid number used. Reverse charge applied to private individuals (who don't have VAT IDs). Reverse charge notice forgotten on the invoice.

Goods shipments invoiced with reverse charge (only applies to services). Own VAT ID not stated on the invoice. Reporting to tax authorities forgotten.