Reverse Charge

    A mechanism where the buyer, not the seller, accounts for VAT.

    Definition

    The reverse charge mechanism shifts the responsibility for VAT reporting from the seller to the buyer. This is commonly used for cross-border B2B transactions within the EU to simplify tax compliance. The buyer self-assesses VAT on the purchase and reports it on their VAT return.

    Related Terms

    VAT (Value Added Tax)
    A consumption tax levied at each stage of the supply chain.
    B2B Transactions
    Business-to-business sales with specific VAT rules.
    Cross-Border VAT
    VAT implications for transactions between different EU countries.

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