GlossaryEN1 min readUpdated: Jun 26, 2026

EU reverse charge mechanism

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Last updated: 26 June 2026Published: 27 January 2026

Source: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32006L0112

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Definition & Explanation

A UK-based business hires a French consultant and receives an invoice with no VAT – the EU reverse charge mechanism applies: the customer, not the French supplier, accounts for VAT directly with its own tax authority. The mechanism covers specific cross-border B2B supplies of goods and services between EU member states and is reported through the recipient's standard VAT return. Businesses with full input tax recovery rights offset the self-assessed tax in the same return, resulting in no net cash outflow. The scheme reduces the administrative burden for cross-border suppliers and is a key instrument against VAT carousel fraud in the single market. It is distinct from import VAT, which arises on goods crossing the EU's external customs border from third countries.

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