How does the reverse charge procedure work in relation to input tax?
January 13, 2022 | 40,00 EUR | answered by Phillip Buchner
Dear Mr. Kockel,
I operate a small construction company and have recently heard about the reverse charge procedure in connection with input tax. However, I am unsure about how exactly this procedure works and what impact it has on my VAT return.
Currently, I am not very familiar with the topic and do not know whether in certain cases I as a service recipient or service provider must pay the VAT. I am concerned that in the future I may make errors in calculating my input tax and thus incur financial disadvantages for my company.
Can you please explain to me in detail how the reverse charge procedure works in relation to input tax? What steps must my company take to correctly account for VAT? Are there specific deadlines or requirements that I need to adhere to? And how can I ensure that I calculate the input tax correctly and avoid making mistakes?
I thank you in advance for your support and look forward to your detailed explanation on this complex topic.
Best regards,
Ben Kockel
Dear Mr. Kockel,
Thank you for your inquiry regarding the reverse charge procedure in connection with input tax. I understand that this topic can be confusing for many entrepreneurs in the construction industry at first. Therefore, I would be happy to provide you with a detailed explanation to help you better understand this procedure.
The reverse charge procedure concerns the taxation of sales in certain areas, such as construction services. Under this scheme, the VAT liability is transferred from the service provider to the recipient of the service. In other words, the recipient of the service must calculate, declare, and remit the VAT on the service itself, instead of the service provider doing so.
For your company in the construction industry, this means that in certain cases as the recipient of the service, you must remit the VAT yourself. This is especially the case when you receive construction services from a business in another EU country. In such cases, you must declare the VAT in your VAT return and pay it to the tax office.
To correctly account for the VAT, make sure that the invoices you receive as the recipient of the service contain a note indicating the application of the reverse charge procedure. You must then declare and remit the VAT accordingly. There are no specific deadlines for remitting the VAT, but you should include it in your regular VAT return.
To ensure that you calculate the input tax correctly and avoid errors, I recommend keeping accurate records of all incoming and outgoing invoices. Carefully review whether the reverse charge procedure must be applied and consult a tax advisor if you are unsure. It is important to remit the VAT correctly to avoid financial disadvantages.
I hope this explanation has helped you better understand the reverse charge procedure. If you have any further questions or need assistance, please do not hesitate to contact me.
Kind regards,
Phillip Buchner.
