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Reverse charge (inversión del sujeto pasivo)

Mechanism under which the customer, not the supplier, accounts for the VAT on a transaction. The invoice is issued without VAT and with a reverse-charge note; the buyer declares the output VAT and, where entitled, the matching input VAT in its own return.

Applies to: Global, Spain Updated: Editorial review: pending

What it is

Normally the seller charges VAT to the buyer and pays it to the tax authority. Under the reverse charge the roles flip: the person liable for the tax, the one who must account for it, is the customer. It is used mainly when the seller is not established in the country, and in specific sectors that the law lists. The EU framework is articles 194 to 197 and 199 of the VAT Directive; in Spain it is article 84 of Law 37/1992.

When it applies in Spain

Article 84(1)(2) makes the business or professional recipient the taxable person in several cases. The most common is a supply by a person or entity not established in the territory where the tax applies, with listed exceptions. It also covers domestic situations between businesses: unwrought gold, scrap and other recovery materials, services involving greenhouse-gas emission allowances, certain supplies of real estate (for example in insolvency proceedings), construction work for land development or building where the contract is between developer and contractor or between contractors and subcontractors, and supplies of mobile phones, consoles and laptops to resellers or above 10,000 euros on one invoice.

How it is invoiced

The invoice is issued without VAT and must carry the note “inversión del sujeto pasivo” when the recipient is the taxable person (invoicing regulation, article 6.1.m). The buyer records the transaction twice: as output VAT, because it owes it, and as deductible input VAT, if it has the right to deduct. With full deduction rights the net effect is zero, but both entries must appear in its return. Intra-EU acquisitions and supplies are also reported in the recapitulative statement of intra-Community operations, modelo 349.

Common mistakes

  • Charging the customer VAT on a transaction that should be invoiced under the reverse charge.
  • Leaving out the mandatory note on the invoice.
  • Declaring only the output VAT and forgetting the deduction, or the other way round.
  • Applying the reverse charge to a sale to a private individual: in the cases the law sets, the mechanism needs a business or professional recipient.
  • Not filing modelo 349 for EU transactions.

How Frihet handles it

When you change the buyer’s country on an invoice, Frihet shows hints about the reverse charge, among others. It also calculates a preview of modelo 349 for intra-EU operations. The hints guide rather than decide: whether a transaction falls into one of the article 84 cases is for your advisor to confirm.

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