Reverse charge is a particular accounting procedure regarding VAT; basically, the input VAT is not charged by the supplier (not included in its invoice), instead the client has to "integrate" its invoice and is liable to pay the VAT.
The reverse charge procedure is somewhat confusing and it has changed multiple times throughout the years; it is crucial to treat these invoices properly, as they have to be disclosed separately in the annual VAT return and they have specific bookkeeping features. Read the full article below to understand how to treat the reverse charge procedure and how to avoid unwanted fines and penalties! What is the reverse charge?
Reverse charge is an accounting procedure involving the reversal of VAT duties and obligations from the seller to the purchaser.
This process applies only in B2B operations. Which activities are subject to the reverse charge?
The Italian VAT law clearly identifies which activities are subject to the reverse charge, as follow:
If I receive a reverse charge invoice, what should I do?
First of all, the client has to check if the invoice does not include any VAT and it shows instead the correct law article.
After that, the client must register the invoice remembering to include both in the sale and purchase VAT registrar (known as sterilization process). Finally, the client must write on the invoice the applicable amount of VAT. Which fines and penalties apply?
There are many fines and penalties applying to the wrong reverse charge application, such as:
How can Accounting Bolla help?
Accounting Bolla can help you with:
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February 2021
AuthorAfter moving back to Italy from the United States in 2013, I realized how much an accounting and tax firm was needed to help expats living in Italy to comply with the local tax regulations. |