Reverse Charge(BTW Verlegd)
A VAT mechanism where the buyer, rather than the seller, is responsible for accounting for and paying VAT on a transaction, commonly used for EU B2B cross-border sales.
What is Reverse Charge?
Reverse charge (known as 'BTW verlegd' in Dutch or 'Umkehrung der Steuerschuldnerschaft' in German) is a VAT mechanism that shifts the obligation to account for VAT from the seller to the buyer. Instead of the seller charging VAT and remitting it to tax authorities, the buyer reports the VAT on their own tax return as both output and input tax.
The reverse charge mechanism is primarily used for intra-EU B2B transactions. When a Dutch business sells services or goods to a registered business in another EU country, they invoice at 0% VAT and note 'BTW verlegd' (or 'VAT Reverse Charge') on the invoice. The buyer then accounts for VAT at their local rate.
This system simplifies cross-border trade by eliminating the need for sellers to register for VAT in every EU country where they have customers. It prevents fraud by ensuring VAT is paid in the country of consumption and removes the administrative burden of foreign VAT reclaims.
For reverse charge to apply, both parties must be VAT-registered businesses, the customer's VAT number must be valid (verified via VIES), and the transaction must be for business purposes. The invoice must clearly state that reverse charge applies and include both parties' VAT numbers.
Key Reverse Charge Requirements
- Buyer must be VAT-registered in another EU country
- Seller's invoice shows 0% VAT with 'BTW verlegd' notation
- Customer VAT number must be verified via VIES
- Buyer reports VAT on their local tax return
- Both parties' VAT numbers must appear on invoice
- Transaction must be for business purposes (B2B)
Reverse Charge Scenarios
Common situations where reverse charge applies.
Dutch → German B2B
A Dutch consultancy invoices a German company €5,000 for services. Invoice shows 0% BTW with 'BTW verlegd'. The German company reports 19% VAT on their German return.
Software Services
A Dutch SaaS company bills a French business €200/month. Each invoice shows 0% VAT, reverse charge applies, French customer handles VAT locally.
Cross-Border Goods
A Dutch wholesaler sells products to a Belgian retailer. With valid Belgian VAT number, goods ship with 0% BTW and reverse charge applies.
Agency Services
A Dutch design agency creates a website for an Italian business. Invoice notes 'Reverse charge - Art. 44 EU VAT Directive' at 0% VAT.
Professional Services
A Dutch accountant provides services to a Spanish company. The €1,500 invoice is issued at 0% BTW with reverse charge notation.
Invalid VAT Number
If the customer's VAT number is invalid in VIES, reverse charge cannot apply. The seller must charge their local VAT rate instead.
Reverse Charge with PayRequest
PayRequest automatically applies reverse charge for qualifying EU B2B transactions, ensuring compliant invoices without manual configuration.
Automatic Detection
When a customer has a valid EU VAT number in another country, reverse charge is automatically applied to their invoices.
VIES Validation
Customer VAT numbers are validated against the official EU VIES database to ensure reverse charge eligibility.
Compliant Invoices
Invoices automatically include 'BTW verlegd' notation, both VAT numbers, and proper reverse charge references.
Tax Exemption Toggle
Mark B2B customers as tax-exempt for automatic 0% VAT on all their transactions with proper documentation.
Related PayRequest Features
Features for EU cross-border compliance.
Related Glossary Terms
Automatic reverse charge handling
Sell across the EU without VAT complexity. PayRequest handles reverse charge automatically for compliant B2B invoicing.