Overview
- Background and specifics of the Reverse Charge procedure in the DACH region
- How Reverse Charge is incorporated in Alasco
Background
Usually, the supplier (contractor) is liable for VAT. However, the Reverse Charge procedure shifts VAT liability to the customer (client). The main goal of this procedure is to prevent VAT fraud and facilitate tax collection in international transactions.
When Reverse Charge is required, the customer (client) pays the net invoice amount to the supplier (contractor) and the VAT to the tax authority or includes them in their advance return. All EU member states utilise the Reverse Charge procedure for cross-border services and deliveries, as well as for cross-border deliveries to countries such as Switzerland, the USA, and the UK.
DACH Region specifics
The shift of VAT liability to the customer is regulated on a country-specific basis, for example:
In Germany through §13b Paragraph 1 and Paragraph 2, Numbers 1 to 11, of the German VAT Act (UStG).
In Austria through §19 Paragraph 1a of the Austrian VAT Act (UStG).
In Switzerland through Articles 45 MWSTG, 46 MWSTG, and 91 MWSTV.
- In Germany through §13b Paragraph 1 and Paragraph 2, Numbers 1 to 11, of the German VAT Act (UStG).
- In Austria through §19 Paragraph 1a of the Austrian VAT Act (UStG).
- In Switzerland through Articles 45 MWSTG, 46 MWSTG, and 91 MWSTV.
- In the United Kingdom (UK), the Reverse Charge procedure continues to apply after Brexit for cross-border transactions, particularly for the import of services.
Significance in Alasco
Alasco generally acknowledges the Reverse Charge procedure under the label "Reverse Charge" and refers to the relevant country-specific legal regulations and requirements, including the necessary coordination with tax advisors.
For Contracts
The two types of contracts that can be created are:
- Regular Contracts and
- Contracts with Reverse Charge.
When the "Reverse Charge" procedure is activated, all invoices assigned to that contract are processed accordingly. If a contract includes both invoices with and without Reverse Charge, these should be separated into two distinct contracts.
For Invoices
Alasco implements the Reverse Charge procedure by ensuring that the supplier (contractor) does not indicate VAT on the invoice (net invoice), and is, therefore, only paid the net invoice amount. The amount to be paid is shown in net terms on the invoices and on the invoice cover sheet in Alasco.
During Payment
During the payment process, a yellow notice field on the invoice cover sheet emphasizes the special nature of the invoice.
In the Contract and Invoice Overview
In the contract and invoice overviews, a "Reverse charge invoice" column can be added, which allows all contracts and invoices to be filtered by this criterion.
Considerations for missing exemption certificates
For invoices without a valid exemption certificate (only applicable in Germany), if the contractor lacks a valid exemption certificate under §48b EStG, a construction withholding tax of 15% of the net payment amount, plus the applicable VAT (according to §13b UStG) must be deducted. A notice field on the invoice cover sheet in Alasco will account and highlight this.