What is reverse charge VAT and when does it apply?

Reverse charge VAT is a term that comes up in several different contexts and can easily become confusing. At its core, it is about who is responsible for reporting the VAT to the state, the seller or the buyer.

The principle in brief

Normally, the seller adds VAT to the invoice, receives payment including VAT, and then reports and pays the VAT to the tax authority. Under the reverse charge mechanism this is flipped, the seller invoices without VAT, and it is instead the buyer who reports the output VAT and, if the buyer has the right to deduct it, simultaneously deducts the same amount as input VAT.

Common situations where reverse charge applies

Two common examples for Swedish small businesses are construction services within Sweden between VAT-registered construction companies, where reverse charge construction VAT applies under specific rules, and the sale of services to VAT-registered businesses in other EU countries, where reverse charge is the general rule. There are further special cases, for example trade in certain metals and emissions allowances, but these are less common for most small businesses.

How does it appear on the invoice?

When reverse charge applies, you still state the amount excluding VAT as usual, but add a clear note explaining that the buyer must account for the VAT, for example "Reverse charge, buyer accounts for VAT" in English, or the Swedish equivalent for domestic invoices. You enter 0 as the VAT amount, but the invoice should still clearly state why.

Always check your specific situation

The rules around reverse charge VAT are detailed and vary depending on industry, who the buyer is, and where the buyer is located. This text provides a general overview, but before applying reverse charge in your invoicing you should always confirm with your accountant or the Tax Agency that it genuinely applies to your situation.

In FakturaKlar you can set the VAT rate to 0% on individual lines and add your own explanatory text to the invoice, so it is correctly worded when reverse charge applies.