The reverse charge procedure is a special rule for VAT. When this is used, the seller or service provider has to issue an invoice without showing the VAT. The buyer or service recipient then has to add the VAT to the invoice they get.
The reverse charge procedure is most commonly used for intra-Community supplies and services. However, it is also used for subcontractors in the construction industry (subcontracts) or for various construction services on buildings.
The procedure can only be applied if the purchaser or recipient of the service can integrate the VAT. This means that it always applies to business transactions between VAT-registered entities. This special rule therefore does not apply to invoices issued to private individuals.
Invoices are issued without showing VAT. In addition, the relevant legal text must be specified according to the service provided. The most common ones are as follows:
| Business transaction |
Legal reference |
| Intra-Community supply of goods |
Reverse charge – non-taxable turnover in accordance with Art. 41, G.D. 331/1993 |
| Intra-Community service |
Reverse charge – non-taxable transaction pursuant to Art. 7-ter DPR 633/1972 |
| Subcontractors in the construction industry |
Reverse charge pursuant to Art. 17, para. 6, letter a, DPR 633/1972 |
| Services provided on buildings |
Reverse charge pursuant to Art. 17, para. 6, letter a-ter, DPR 633/1972 |
Upon receipt of an invoice under the reverse charge procedure, the invoice recipient is considered the tax debtor and, as already mentioned, must include VAT on the invoice amount.
The reversal of tax liability is achieved by double-entry accounting of the invoice. By posting the invoice received in the register of incoming invoices and in that of outgoing invoices, a neutral result is achieved in the case of deductible VAT.