Reverse charge procedure is a VAT procedure where the tax liability is transferred from the supplier to the recipient of the service. The tax treatment is regulated in the Financial accounting as shown.
Basics
As a rule, the performing contractor owes the VAT. Under the reverse charge procedure, this obligation is transferred to the recipient of the service. They must calculate the VAT themselves and account for it in their bookkeeping.
The correct Account assignment as well as the creation of a suitable Booking entry are crucial for the correct mapping.
Legal framework
The application of the reverse charge mechanism is regulated by law. It only applies in expressly specified cases, for example, for certain cross-border services or special domestic situations.
Note: Whether the procedure is to be applied depends on the specific claim and the legal requirements.
Systematic classification
The reverse charge mechanism specifically concerns the VAT treatment of intra-Community and outbound supplies and is closely linked to:
- VAT Return
- Current financial accounting
- Tax account reconciliation
The effects are shown directly in the monthly or quarterly report.
Requirements
- Checking the place of performance
- Determination of statutory applicability
- Correct invoice issuing
- Proper accounting record
Typical procedure
- Check whether reverse charge is applicable
- Recording of revenue excluding VAT
- Self-assessment of VAT by the recipient of the service
- Accounting for VAT and input tax
Practical relevance
A faulty application can lead to deviations in the VAT Return Therefore, careful examination and accounting treatment are required.
Typical sources of error
- Incorrect application of the procedure
- Incorrect accounting classification
- Unreconciled tax accounts
FAQ
Was ist das Reverse-Charge-Verfahren?
The tax liability is transferred from the performing entrepreneur to the recipient of the service.
Does the procedure always have to be applied?
No, it only applies in legally defined cases.
Where does it have an effect?
Specifically in financial accounting and VAT pre-registration.
Conclusion
The reverse charge mechanism is a special VAT regulation where the tax liability is transferred to the recipient of the service. Correct accounting implementation is essential for proper financial accounting.
Brasser Accounting Solutions GmbH is a specialised accounting service provider and part of a corporate group with Quint GmbH (tax consultancy/auditing) and Service Place Årjäng AB (Swedish tax office). BAS exclusively performs services according to § 6 No. 3 and 4 StBerG and does not provide tax or legal advice.
