What is reverse charge VAT?
Originally published February 2021 | Reviewed January 2025
Introduction
In a global tax environment that’s evolving fast — especially in the wake of Brexit — understanding how Reverse Charge VAT works is essential for businesses trading across borders.
This article breaks down how reverse charge mechanisms apply within the EU and with third countries like the UK post-Brexit. Whether you’re an EU-based business buying from or selling to the UK, knowing when and how to self-account for VAT can help you stay compliant and avoid costly errors.
Value-Added Tax (VAT) is normally charged and accounted for by the supplier of goods or services. However, in certain cases, the recipient — not the supplier — is responsible for accounting for the VAT. This is known as the reverse charge mechanism.
EU reverse charge VAT
On 31 December 2020, the United Kingdom left the EU and as a result, became a third country for VAT purposes. Therefore, for companies trading with the UK (excluding trade in goods with Northern Ireland*), the rules of trade with a non-EU country apply.
For B2B supply of goods:
- The supply and movement of taxable goods between Ireland and Great Britain are subject to the VAT rules on imports and exports.
- You do not have to report details of trade with the UK (excluding Northern Ireland) on the Intrastat system or VIES (VAT Information Exchange system).
- You do have to report details of trade with Northern Ireland on the Intrastat system or VIES.
- Agreed EU simplifications, such as triangulation, do not apply to transactions involving Great Britain.
For B2B supply of services:
If an EU established business supply or receive general services to/from a UK business, including Northern Ireland, post-Brexit, the place of supply continues to be the place where the business receiving the services is established in accordance with the general place of supply of services rules.
The location of the business customer to whom the services are supplied can be:
- where he or she has established their business
- where that person’s fixed establishment is located or
- in the absence of such place of business or a fixed establishment, the place where he or she has a permanent address or usual place of residence.
Self-accounting (Reverse charge)
Where the business customer is located outside the EU, such as the UK post-Brexit, the EU supplier will not charge VAT on its services. Instead, the business customer will self-account for the VAT in their State.
If you as an EU established business receive services from a UK established business, the UK business will not charge VAT on its services. Instead, you should self-account for the VAT in your VAT return in your EU Member State of the establishment. You are treated as if you had made the supply yourself.
This is known as self-accounting or reverse charge. Businesses are also entitled to reclaim the VAT in the same VAT return if you are a taxable business.
After Brexit: Changes to import / export rules
Since 31 January 2021, trade in goods with the UK is no longer covered by the EU’s reverse charge rules. Goods must now be treated as imports or exports, and businesses trading with the UK should also consider how VAT rules apply to:
- Triangular transactions
- Call-off stock arrangements
Understanding these changes is key to staying compliant and efficient in your cross-border trade.
Conclusion
As the VAT landscape continues to evolve, particularly under the impacts of Brexit and upcoming frameworks like ViDA, it’s more important than ever to stay on top of reverse charge VAT rules.
Getting it right means:
- Knowing when to self-account
- Understanding your reporting obligations
- Preparing your systems for continued regulatory change
By staying informed — and using technology like Fintua’s Comply platform — businesses can simplify compliance, reduce risk, and operate with confidence across borders.
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