Principle:

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.

We come into play

Contact us if you would like us to review your tax situation. We have vast experience in overseas tax matters for american companies. When it comes to American companies we have more than 15 years of experience in helping them establish in Europe.