The VAT reverse charge: what you need to know as a self-employed professional

Got a tax question? We’ll answer for free by email.

Bitte gib eine gültige E-Mail-Adresse ein

Ask your question

The VAT reverse charge is a complicated word for a simple concept. It helps you purchase and sell smoothly across the European Union. We tell you here all that you need to know!

No time to read the full article? These are the key takeaways:

• Reverse charge VAT means that the client abroad accounts for and pays the VAT, not the supplier (you).
• You must apply the reverse charge for transactions between VAT-registered businesses within the EU. For example, when invoicing a client in The Netherlands.
• You do not charge VAT on the invoice, but you must include the compulsory mention.
• Before applying the reverse charge, it’s best to check whether your client has a valid foreign VAT number (via the VIES system).
• The reverse-charged VAT is both declared and reclaimed in your VAT return (usually with neutral impact).
• Accountable ensures the correct application of reverse charge VAT on all your invoices and VAT returns.

The reverse charge regime in Belgium

This regime has been in place for almost 20 years in the European Union: when selling goods or providing services between two VAT taxable entities in the European Union, the seller does not charge VAT. However, the customer declares, pays, and deducts VAT in their own country, according to the procedures in force in their country. The idea? To facilitate as much as possible the free movement of goods and services within the European Union.

In concrete terms, this is of interest to you if  (i) you are subject to VAT and (ii) file periodic declarations.

⚠️ This scheme does not apply if the customer is a private individual.

• Let's say that you give a training course to a French company based in Lille. You charge for the service you provide, without VAT. Your invoice mentions the reverse charge regime. Your French customer declares the VAT on your service, pays it, and deducts it as part of his VAT payment.
• Alternatively, you buy a second screen for your computer in Poland, which is delivered to you in Belgium. You pay and recover the VAT up to the amount of the professional use you have of this screen and the rules in force in your country. Please note that, in general, VAT on technological equipment is deductible in Belgium up to a maximum of 75%.

If you buy or sell in Europe under the reverse charge system, you should always make sure that the VAT identification number of your counterparty is valid. The European Commission has even set up a site to make your life easier, the "VIES", where you can double-check the validity of any European VAT number.

If, after verification, your customer is not subject to VAT, you will have to charge VAT to him instead of exempting your goods or services.

How to write an invoice to a client in the European Union?

It is in your best interest to issue invoices in accordance with the rules: once you have checked that your customer is indeed liable for VAT, make sure you mention that you apply the reverse charge system, as compulsory.

This will allow them to declare and recover VAT at the rates applicable in their country.

Do you deliver goods within the European Union?

Indicate on your invoice the compulsory mention "Reverse charge Art 39 bis - intra-Community supply". You can also generate automatically your invoices via our app. The appropriate mention will be included without you even having to think about it.

Do you provide services within the European Union?

Indicate on your invoice the compulsory mention "Reverse charge Art 21 § 2 of the Belgian VAT Code". As in the previous case, if you create your invoice in our app, this mention will be automatically included.

In any of both cases, you can also refer to the European directive and simply add "Reverse charge - Art 196 of the VAT Directive 2006/ 112/CE".

⚠️ When you are a customer, check that the invoice you receive sticks to these rules. You would otherwise be penalized.

The co contractor regime

You (i) are subject to VAT and file periodic returns and (ii) renovate your office, workshop, workspace?  The contractor must apply this famous co-contractor regime and give you an invoice without VAT. It is up to you, the customer, to declare the VAT and to reverse charge it.

As with the intra-EU reverse charge, the system must be handled with care. Otherwise the administration will apply sanctions!

What is the impact on your VAT return?

It's quite simple: the same amount appears twice, to be paid and deducted.  Under the reverse charge regime, a purchase in the European Union should cost you nothing the same as a purchase in your country. It's a zero-sum game, and you have to master the rules (or let our app take care of it for you!).

You can choose to keep an eye on it and apply it carefully, to avoid the fines that can be steep. You can also simply let our app do the job. It will automatically generate invoices with the necessary mentions and include them in your VAT return. To try it for free, click here.

Author - Valesca Wilms

As content marketing lead at Accountable Belgium, Valesca writes about freelancing, self-employment, and taxes based on her own experience as a freelancer.

Who is Valesca ?