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German reverse charge on non-established companies

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German reverse charge on non-established companies

According to art 194 of the VAT Directive, Member States may implement an optional reverse charge on supplies made by non-established businesses. Germany has introduced this optional reverse charge for domestic supplies of services and supplies of goods with installation.

Where a non-established supplier provides services or sells goods with installation to a taxable person, domestic reverse charge applies. It is not relevant if the supplier is registered or not. Regarding the customer, it is not relevant if it is established or VAT registered. Even when the customer is not VAT registered, reverse charge applies, hence requiring this customer to register and account for VAT.

To this general rule there are a few number of exceptions:

  • Certain passenger traffic services
  • Entrance fees for fairs, exhibitions and conferences
  • Services rendered by a coordinating company associated with the organization of fairs and exhibitions in Germany
  • Local services of food and beverage when they take place onboard a ship, in an aircraft or on a railway

In these cases, the supplier is the only liable person for German VAT, and so the reverse charge mechanism does not apply. The supplier must charge German VAT on the invoice, and for the customer to recover that VAT, he should apply the International Refund Procedure.

 Supplier requirements

 Customer requirements


 Not established in Germany

 (irrelevant if the supplier is  registered or not for VAT)

 Taxable person

 (irrelevant if the customer is  established or VAT  registered)

 All supplies of services – see exemptions

 Supplies of goods with  installation