If you sell digital services or goods B2B to customers in other EU countries, you've likely seen "reverse charge" on an invoice template — it's one of the most misunderstood parts of EU VAT for non-EU sellers.
What reverse charge actually means
Normally, the seller charges VAT and remits it to the tax authority. Under reverse charge, the buyer self-accounts for the VAT instead — they declare it on their own VAT return as both a payable and (usually) a fully-reclaimable input tax, netting to zero for a fully-taxable business. The seller charges 0% VAT on the invoice.
When it applies
- The sale is B2B (buyer is VAT-registered in another EU country)
- The buyer provides a valid VAT ID that you verify (via the EU's VIES system)
- It does not apply to B2C sales — those follow the EU Digital Services VAT rules, where you charge the buyer's country rate
What must appear on the invoice
- Both parties' VAT numbers
- The words "Reverse charge" or "VAT reverse charge — Article 196, EU VAT Directive"
- No VAT amount charged (0%)
Why this exists
Reverse charge removes the need for a foreign seller to register for VAT in every buyer country for B2B transactions — without it, a US or UK SaaS company selling to businesses across 27 EU member states would need dozens of local VAT registrations. It shifts the compliance burden to the buyer, who already has a VAT registration and is best positioned to self-account correctly.
What can go wrong
Charging VAT when reverse charge should have applied means the buyer can't reclaim it the normal way and you've collected a tax you shouldn't have. Conversely, applying reverse charge without verifying the buyer's VAT ID (e.g., it's invalid or the buyer isn't actually VAT-registered) can leave you liable for the VAT you should have charged.
Frequently asked questions
Do I need to verify the VAT ID every time? Yes — use the EU VIES lookup tool before each new B2B customer, and keep a record of the verification for your own compliance file.
What about UK sales after Brexit? UK-to-EU B2B sales generally still qualify for a similar zero-rated treatment, but UK VAT rules diverged from the EU framework — check current HMRC guidance rather than assuming EU rules apply unchanged.
Use the VAT Calculator for standard VAT-inclusive/exclusive calculations on the transactions where VAT does apply.