German VAT reverse charge

The "Reverse Charge System" was introduced after an EU VAT Directive in Germany. The reverse charge states that the VAT for many kinds of services provided inside Germany by a foreign company or provided by a German VAT-registered company to a company in another EU state, is owed by the recipient of the service and not by the service provider. Germany does not use the Reverse Charge Systems for the delivery of goods (in opposite to many other EU states).

If reverse charge is relevant, VAT must not be charged on invoices to the recipient. In the invoice must a clear statement refer to the liability for the VAT payment of recipient as well as the EU VAT ID No. of the recipient must be named.

The recipient of the service has to calculate, report and pay the VAT (normally this VAT is recoverable for the recipient, if he is VAT registered). If a foreign company receives a service which is subject to the German VAT reverse charge system, the foreign company must register for German VAT and report the received reverse charge service.

If you have any questions to the German reverse charge system or if you need a service, please contact us by email to office@german-tax-consultants.com.