GlossaryEN1 min readUpdated: Jun 26, 2026

Reverse Charge

A freight forwarder commissions a transport service from a foreign provider – the invoice arrives without VAT, yet the forwarder owes tax.

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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 freight forwarder commissions a transport service from a foreign provider – the invoice arrives without VAT, yet the forwarder owes tax. Under the reverse charge mechanism, the recipient of the supply, not the supplier, is responsible for calculating, reporting, and remitting VAT to the local tax authority. This eliminates the need for foreign businesses to register for VAT in every country where they provide services and closes a common route for tax evasion. Because the recipient can simultaneously reclaim the self-assessed amount as input tax, the mechanism is typically cash-flow neutral for fully taxable businesses. It applies to a broad range of cross-border B2B transactions and is anchored in the EU VAT Directive.

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