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.
Not established in Germany
(irrelevant if the supplier is registered or not for VAT)
(irrelevant if the customer is established or VAT registered)
All supplies of services – see exceptions
Supplies of goods with installation