Reverse charge mechanism for VAT within Europe


If a company in a certain member state renders services to another company in another member state, instead of the receiving company paying VAT on the received services, it has to withhold the VAT and pay it in its own country. The invoice it receives from the company that rendered the services should mention that the invoice is subject to the reverse charge mechanism and therefore no VAT is charged. The receiver has to withhold and pay the VAT in its own country at the rate of the receiver┬┤s country. That is different from what one would normally expect when the company that renders the service issues an invoice with VAT.

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