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Optional reverse charge for non-resident suppliers (art. 194 of the VAT Directive)

The EU VAT system is essentially based on fractionised payments, VAT being collected at each stage of the production and distribution chain after offsetting the input VAT paid on purchases against output VAT received on sales. According to the main rule laid down by Article 193 of VAT Directive, the person liable for the payment of this VAT is the person supplying goods or services. The liable person is the person who is obliged to pay VAT to the Treasury.

Member States in which the VAT is due may provide for that the person liable for the payment of VAT is the person acquiring the goods or services where the transaction is carried out by a supplier who is not established in the country in which VAT is due. Such reverse charge is defined by national regulation.


The Expert's eye

The reverse charge system in Austria is a mechanism where the liability to pay the VAT is shifted from the supplier to the recipient of goods or services. Reverse charge means that under certain conditions, the liability to pay the VAT is shifted to the recipient. The recipient has to calculate and pay the VAT on the transaction. They have to announce that tax in their tax returns, and they are allowed to deduct that VAT under certain conditions.

The supplier prepares an invoice that does not include tax rates and notes that it is a reverse charge invoice. The service provider must check the VAT ID of the recipient with the Federal Central Tax Office and mention this together with his own on the invoice.

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