What is the Reverse Charge Mechanism and When Does It Apply?
The Reverse Charge mechanism (also called "reverse VAT" or "self-accounting") shifts the responsibility for VAT reporting from the supplier to the customer in cross-border B2B transactions within the EU. Instead of you charging and remitting VAT, your business customer accounts for VAT in their own country.
When Reverse Charge Applies:
- B2B Only: Customer MUST have a valid EU VAT ID (verified through VIES)
- Cross-Border: Customer is VAT-registered in a different EU member state than your business
- Goods or Services: Applies to most goods and services (some exceptions exist)
- Both Parties VAT-Registered: You and your customer are both registered for VAT in the EU
When Reverse Charge Does NOT Apply:
- B2C Sales: Customer is a private individual without VAT ID (use OSS instead)
- Domestic Sales: Both parties in the same EU country (charge domestic VAT)
- Invalid VAT ID: Customer's VAT ID fails VIES validation (treat as B2C, charge VAT)
- Non-EU Countries: Different export rules apply
- Certain Services: Some services have special place of supply rules
Critical Legal Requirement: The Exact Wording
Article 196 of EU VAT Directive 2006/112/EC requires reverse charge invoices to state:
"Reverse charge - VAT to be accounted for by the customer in accordance with Article 196, Council Directive 2006/112/EC"
Or the equivalent in your language. Common variations:
- German: "Umkehr der Steuerschuldnerschaft gemäß Artikel 196 der MwStSystRL"
- French: "Autoliquidation de la TVA conformément à l'article 196 de la directive TVA"
- Spanish: "Inversión del sujeto pasivo conforme al artículo 196 de la Directiva del IVA"
- Italian: "Inversione contabile ai sensi dell'articolo 196 della direttiva IVA"
CRITICAL: Omitting this statement or using incorrect wording can result in:
- ❌ Your reverse charge treatment being rejected
- ❌ Having to pay VAT you didn't collect from the customer
- ❌ Penalties for non-compliant invoicing (up to 50% of VAT due)
- ❌ Customer unable to claim input VAT deduction
The Compliance Gap: Why Fiverr's CSV Needs Reverse Charge Fix
If you make B2B sales across EU borders using Fiverr, the reverse charge mechanism is mandatory when your customer has a valid EU VAT ID. While Fiverr provides transaction data in a CSV, this raw data lacks the mandatory legal notations, VIES validation, and dual VAT ID formatting required for compliant reverse charge invoices.
EU VAT regulations (Article 196 Directive 2006/112/EC and Article 226 on invoice requirements) demand specific customer VAT ID validation, zero-rated VAT display, and precise legal statements that Fiverr receipts don't provide.
Problem: Fiverr doesn't validate VAT IDs through VIES or include reverse charge legal notation.
Risk: Double taxation (you pay VAT you didn't collect), audit penalties up to 50% of VAT, rejected input deductions for your customer.
Solution: CSV2Invoice validates customer VAT IDs, applies zero-rated VAT, and adds mandatory legal notation automatically.
VIES VAT ID Validation: Critical Requirement
What is VIES?
VIES (VAT Information Exchange System) is the EU's official database for verifying VAT registration numbers. You MUST validate your customer's VAT ID through VIES before applying reverse charge.
VAT ID Format by Country:
| Country | Format | Example |
|---|---|---|
| Austria | ATU12345678 | ATU12345678 |
| Belgium | BE0123456789 | BE0123456789 |
| Bulgaria | BG1234567890 | BG1234567890 |
| Croatia | HR12345678901 | HR12345678901 |
| Cyprus | CY12345678L | CY12345678L |
| Czech Republic | CZ12345678 | CZ12345678 |
| Denmark | DK12345678 | DK12345678 |
| Estonia | EE123456789 | EE123456789 |
| Finland | FI12345678 | FI12345678 |
| France | FR12345678901 | FR12345678901 |
| Germany | DE123456789 | DE123456789 |
| Greece | EL123456789 | EL123456789 |
| Hungary | HU12345678 | HU12345678 |
| Ireland | IE1234567L | IE1234567L |
| Italy | IT12345678901 | IT12345678901 |
| Latvia | LV12345678901 | LV12345678901 |
| Lithuania | LT123456789012 | LT123456789012 |
| Luxembourg | LU12345678 | LU12345678 |
| Malta | MT12345678 | MT12345678 |
| Netherlands | NL123456789B01 | NL123456789B01 |
| Poland | PL1234567890 | PL1234567890 |
| Portugal | PT123456789 | PT123456789 |
| Romania | RO1234567890 | RO1234567890 |
| Slovakia | SK1234567890 | SK1234567890 |
| Slovenia | SI12345678 | SI12345678 |
| Spain | ESX12345678 | ESX12345678 |
| Sweden | SE123456789012 | SE123456789012 |
What If VAT ID Is Invalid?
If VIES validation fails, you CANNOT use reverse charge. Instead:
- Contact customer to verify/correct their VAT ID
- If still invalid, treat as B2C sale and charge VAT using OSS
- Document VIES check result for audit trail
- Never apply reverse charge without valid VAT ID
Mandatory Reverse Charge Invoice Requirements
| Required Field | Legal Requirement | Why It Matters |
|---|---|---|
| Sequential Invoice Number | Unique, gap-free, chronological | Required per Article 226 VAT Directive |
| Your VAT ID | Full VAT number with country code (e.g., DE123456789) | Proves you're VAT-registered and eligible for reverse charge |
| Customer's VAT ID | Full validated VAT number with country code | Proves B2B status and VIES validation passed |
| Both Business Names & Addresses | Complete legal names and addresses | Required to prove cross-border transaction |
| Product/Service Description | Clear description of what was supplied | Allows correct VAT treatment classification |
| Net Amount (VAT Excluded) | Price before VAT | Shows amount customer will self-account VAT on |
| VAT Rate: 0% with Reverse Charge Notation | Must show 0% or "VAT not applicable" + legal statement | Explains why no VAT is charged |
| Reverse Charge Legal Statement | Article 196 reference (see exact wording above) | Mandatory by law - missing this invalidates the invoice |
| Currency | Currency of transaction | Required for cross-border documentation |
How CSV2Invoice Guarantees Reverse Charge Compliance
The 7 Essential Compliance Fixes
| Compliance Requirement | The Legal Mandate | CSV2Invoice Solution |
|---|---|---|
| VIES VAT ID Validation | REQUIRED per Article 138 VAT Directive. Must verify customer VAT ID is active. | Validates all customer VAT IDs through VIES before generating invoices (coming soon: real-time API). |
| Article 196 Legal Notation | REQUIRED. Exact wording per Article 196 must appear on invoice. | Automatically adds compliant legal statement in correct format and language. |
| Dual VAT ID Display | REQUIRED. Both supplier and customer VAT IDs must be shown with country codes. | Prominently displays both VAT IDs in proper format at top of invoice. |
| Zero-Rated VAT Treatment | REQUIRED. Must show 0% VAT or "VAT not applicable" with explanation. | Automatically applies 0% VAT rate and adds "Reverse charge applies" notation. |
| Sequential Numbering | REQUIRED. Gap-free chronological invoice IDs per Article 226. | Assigns continuous sequential numbers linked to transaction dates. |
| Cross-Border Documentation | REQUIRED. Must prove transaction crossed EU border (different VAT IDs). | Validates VAT ID countries differ, flags same-country errors. |
| Audit Trail Retention | REQUIRED. 10-year retention of invoices and VIES validation proof. | Generates permanent PDFs with embedded transaction IDs and validation timestamp. |
Reverse Charge Filing and Record Keeping
Your VAT Return Obligations:
- Report Sales: Report reverse charge sales in Box 6 (or equivalent) of your VAT return showing €0 VAT
- EC Sales List: Report customer's VAT ID and transaction value on quarterly EC Sales List (ESL)
- Intrastat: If goods over threshold (varies by country, typically €250,000-800,000), submit monthly Intrastat declaration
- VIES Validation Log: Keep record of VIES checks with date, result, and customer details
Record Retention:
You must retain for 10 years:
- All reverse charge invoices
- VIES validation results with timestamps
- Proof of goods dispatch/service provision
- Customer communications confirming VAT ID
- EC Sales List submissions
Step-by-Step: Generating Fiverr Reverse Charge Invoices
Step 1: Verify Customer VAT IDs in Your CSV
Ensure your Fiverr export includes a column with customer VAT IDs. If customers don't provide VAT IDs at checkout, you cannot use reverse charge - they're B2C customers (use OSS instead).
Step 2: Export Fiverr B2B Transaction Data
Export CSV including: Customer Company Name, Billing Address, Customer VAT ID, Product/Service Description, Net Amount, Currency, Transaction Date, Order ID.
Step 3: Upload and Map CSV Fields
Upload to CSV2Invoice and map:Customer VAT ID field (critical - must be in format with country code)
- Customer company details (legal name and address)
- Net amount (excluding any VAT)
Step 4: Enter Your VAT ID
Input your business VAT ID with country code (e.g., DE123456789) in company settings.
Step 5: VAT ID Validation Check
CSV2Invoice will flag any invalid VAT IDs. Review and either:
- Correct formatting errors
- Remove from reverse charge batch (process as OSS/domestic VAT)
- Contact customer for correct VAT ID
Step 6: Generate Compliant Reverse Charge Invoices
Download invoices with proper reverse charge notation, dual VAT IDs, and 0% VAT treatment.
Common Reverse Charge Mistakes to Avoid
| Mistake | Consequence | How to Avoid |
|---|---|---|
| Using reverse charge without VIES validation | Liable for VAT you didn't collect + 50% penalty | Always validate VAT ID through VIES before invoicing |
| Missing Article 196 legal statement | Invoice invalid, must re-issue, potential penalties | Use automated tool to ensure correct wording every time |
| Applying reverse charge to B2C sales | Customer can't account for VAT, you owe it + penalties | Only use reverse charge when customer has valid VAT ID |
| Not showing customer's VAT ID on invoice | Reverse charge invalid, you must pay the VAT | Both VAT IDs must be clearly displayed |
| Forgetting EC Sales List reporting | €500-5,000 penalty per missing/late return | Set quarterly reminders, extract from reverse charge invoices |
| Applying domestic VAT rate instead of 0% | Customer pays VAT twice (to you + in their country) | Reverse charge = always 0% VAT on invoice |
| Using same-country customer VAT ID | Wrong VAT treatment (should be domestic, not reverse charge) | Validate customer's VAT country differs from yours |
B2B vs B2C: Quick Decision Guide
| Customer Situation | VAT Treatment | Invoice Type |
|---|---|---|
| EU business with valid VAT ID (different country) | Reverse Charge (0% VAT) | Reverse Charge Invoice |
| EU business with invalid/missing VAT ID | Treat as B2C - charge destination country VAT | OSS Invoice |
| EU private consumer (no VAT ID) | OSS (destination country VAT rate) | OSS Invoice |
| Same-country business with VAT ID | Domestic VAT (your country's rate) | Domestic Invoice |
| Non-EU business | Export (0% VAT usually) | Export Invoice |
Frequently Asked Questions
Q: Can I use reverse charge for customers in my own country?
A: No. Reverse charge only applies to cross-border B2B sales within the EU. For same-country sales, charge your domestic VAT rate.
Q: What if my customer's VAT ID is valid but they claim they're not VAT registered?
A: Trust VIES, not customer claims. If VIES shows valid, use reverse charge. If customer insists, ask them to deregister their VAT ID first.
Q: Do I need to charge VAT if the customer doesn't pay?
A: For reverse charge, no VAT is involved on your side. However, you must still report the transaction. Bad debt relief rules vary by member state.
Q: Can I apply reverse charge to services provided to non-EU customers?
A: No. Reverse charge is an EU-internal mechanism. For non-EU customers, different export/place of supply rules apply (usually outside scope of EU VAT).
Q: What if I accidentally charged VAT on a reverse charge transaction?
A: Issue a credit note immediately, then issue correct reverse charge invoice. You must refund the VAT to the customer and correct your VAT return.
Q: How often do I need to check VIES validation?
A: Best practice: validate before each transaction or quarterly for recurring customers. VAT registrations can be cancelled, so regular checks protect you.
Professional Disclaimer
This guide provides general information about reverse charge VAT compliance and is not a substitute for professional tax advice. Reverse charge rules, VIES validation requirements, and VAT regulations can vary by member state and change over time. CSV2Invoice helps you create compliant invoices but does not provide tax or legal advice, guarantee acceptance by all tax authorities, assume liability for your VAT obligations, or replace professional VIES validation services. The tool's VAT ID format checking is indicative only; always use official VIES for validation. Consult a qualified VAT advisor, tax professional, or specialist accountant for your specific situation, especially for complex cases involving services, digital goods, triangulation, or multiple jurisdictions.
Ready to Automate Your Fiverr Reverse Charge Compliance?
Transform your Fiverr B2B CSV into legally compliant reverse charge invoices with VIES validation support, Article 196 legal notation, dual VAT ID display, and audit-ready documentation. Eliminate the risk of double taxation and ensure your B2B customers can properly account for VAT.