VAT reverse charge: when and how on your invoice

Normally you charge VAT to your customer and pay it to the Dutch Tax Administration. Under the reverse charge scheme it works differently: your business customer reports the VAT instead of you. That sounds simple, but it often goes wrong on the invoice or in the VAT return. Below you can read when it applies, what must be on the invoice and how to report it.

When does the reverse charge apply?

The reverse charge scheme applies in a number of fixed situations. For trades businesses the key ones are:

• Subcontracting and hiring out staff in construction, shipbuilding, cleaning and landscape gardening. You work as a subcontractor for a contractor or main contractor.
• Services to businesses in another EU country. Your customer is a business with a VAT number in another EU member state.
• Mobile phones, chips, game consoles, laptops and tablets that you supply to a business in the Netherlands, if it concerns 10,000 euros or more (excluding VAT) per type of goods per supply.
• A number of other situations, such as waste and scrap materials, certain supplies of real estate and the sale of gold.

If you work for a consumer, or directly for a business that is the end customer, you charge VAT as normal.

Subcontracting: when it applies and when it doesn't

The subcontracting rule covers physical work on a building, an installation or a ship, such as building, demolition, maintenance and cleaning. Design work, like that of an architect or draughtsperson, is not included. There are exceptions too:

• If you carry out more than half of the work in your own workshop, you don't apply the reverse charge.
• If the work is secondary to the sale of a product, for example a supplier who sells a door with the fitting included in the price for a small part, you don't apply it either.

Not sure whether you're the main contractor or the subcontractor? You can be both at once: main contractor for the subcontractor you hire, and subcontractor for the contractor who hires you.

What must be on the invoice?

• The words "VAT reverse charge" (in Dutch: "btw verlegd")
• Your customer's VAT identification number, alongside your own
• No VAT rate and no VAT amount
• Everything else a normal invoice needs

How do you report it?

If you have reverse-charged the VAT to a customer in the Netherlands, you enter the turnover in box 1e of your Dutch VAT return. Your customer calculates the VAT and reports it in the box for domestic reverse charge schemes; if they are entitled to deduct it, they can then deduct that VAT again. For services to a business in another EU country, you enter the turnover in box 3b and also file an EC Sales List (ICP declaration). If in doubt, ask your accountant.

Common mistakes

• Charging VAT anyway on subcontracted work, or reverse-charging VAT to a consumer
• Forgetting the customer's VAT number
• Not reporting the reverse-charged turnover, or reporting it in the wrong box
• Not checking per job whether the scheme applies for a customer with several kinds of work

How does Corvo Apex handle it?

You switch on reverse charge for the business customer. The invoice then charges no VAT, states "VAT reverse charge" with your customer's VAT number, and is correct on the PDF and in the e-invoice too. See Office, our package for jobs and invoices. If you're unsure whether the scheme applies to your situation, check with your accountant; this article is a general explanation, not tax advice.