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What does reverse charge procedure mean?

This refers to the reverse charge, which is regulated in § 13b UStG.

In principle, the entrepreneur who carries out a transaction is liable for the VAT. In certain cases, however, the tax liability is shifted from the executing entrepreneur to the recipient of the service. This is referred to as the "reverse charge procedure". A reverse charge only takes place in the so-called B2B area (English for "business-to-business"), i.e. for services provided by one entrepreneur to another entrepreneur. A further prerequisite is that the service in question is taxable in Germany.

The facts mentioned in § 13b UStG paragraph 1 and paragraph 2 fall within the scope of application of the reverse charge

Examples:

  • Supplies of work and services taxable in Germany or other services performed by a trader established abroad;
  • Purchase of construction services. These are supplies of work and services and other services that serve the construction, repair, modification or removal of buildings. The prerequisite for this is that the recipient of the services must himself provide construction services on a sustained basis;
  • Cleaning of buildings and parts of buildings, if the service recipient itself provides building cleaning services on a sustained basis
  • Supplies of precious metals such as gold, silver and platinum;
  • Supplies of certain scrap metals;
  • Supplies of mobile telephones, tablet computers, games consoles and integrated circuits.

Small entrepreneurs or entrepreneurs who only carry out tax-exempt transactions can also be tax debtors as recipients of services under Section 13b UStG.

If the recipient of the service is entitled to deduct input tax, he can generally deduct the VAT due under Section 13b UStG as input tax.

 

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