Reverse Charge

Reverse Charge, known in German as the recipient’s liability for tax, is a VAT procedure in which the business recipient, rather than the supplying business, is liable for and pays the tax. It is used primarily for services between businesses in different countries.

What this looks like for a booking abroad

Suppose a studio from another EU member state books you for a day of filming. For services between businesses, the service is generally deemed to have been supplied where the client is based. German VAT therefore does not apply. You issue a net invoice, and the studio declares and pays tax on the amount itself in its country.

Your invoice must also include your own VAT identification number, the client’s VAT identification number, and a note stating that the recipient is liable for the tax. If the note is missing or you nevertheless charge German tax, the invoice is incorrect. The other mandatory details of an invoice remain unchanged.

This does not change the agreed fee: the net amount is what you receive. The important thing is that the fee was agreed as a net amount from the outset. Otherwise, a dispute may arise during settlement over whether the figure was meant to include tax that does not apply after all.

For clients outside the EU, the basic principle is similar, but the formal requirements differ. It is best to have the required wording for the invoice confirmed once and then use a standard template.

The reverse situation

Reverse Charge also applies to you as a customer. If you purchase services from businesses abroad, such as a software subscription, advertising or image editing, the provider often does not charge VAT. You then owe German tax on this purchase yourself and must report it.

Under the standard VAT regime, this is usually a zero-sum transaction because you can simultaneously deduct the same tax as input tax. The situation is different under the small-business scheme: small businesses also owe tax on such purchases, but may not deduct it as input tax. The tax then becomes a genuine cost, and registration with the tax office is still required. This surprises many people who opted for the small-business scheme precisely because of the lower administrative burden.

Platforms as a special case

For fan platforms and webcam providers based abroad, the classification depends on the contractual model. Some platforms are themselves considered sellers to the fans and purchase your service, while others act only as intermediaries. This determines whether and how Reverse Charge applies. The platform’s terms of use and statements provide indications, but do not replace a proper review.

Checklist for your first invoice abroad

• check the client’s number before issuing your first invoice abroad
• create a separate invoice template for Reverse Charge
• keep foreign purchases without tax recorded separately
• clarify any additional reporting obligations for cross-border services

For an overview of your tax obligations at the outset, see Self-employed as a performer: business registration, taxes, invoices.

This entry explains the procedure and does not replace tax advice. A one-time professional review is particularly worthwhile when foreign elements are involved.