Q,WHAT IS A REVERSE CHARGE?

Introduction.

Cross-border e-commerce (E-commerce) has been expanding worldwide with Amazon, eBay, Rakuten, Shopify, WooCommerce, and Corona Vortex, and is now the focus of attention by all companies. Cross-border e-commerce has been introduced with the positive aspects of being able to start selling within minutes of creating a site, and new sales opportunities from markets around the world. On the other hand, local taxes and various other costs are not shared much: local taxes such as VAT are levied and collected by the seller on the local buyer, but even in the case of cross-border e-commerce, there are cases of taxation, collection, and reporting.

Not all tax accountants, lawyers, and other domestic professionals have knowledge of overseas tax and legal affairs.

IN THIS COLUMN, OPTI CORPORATION, WHICH HAS EXTENSIVE EXPERIENCE IN THE TAX ASPECTS OF CROSS-BORDER EC, PROVIDES A "CROSS-BORDER EC TAX NAVIGATOR" IN A Q&A FORMAT. WE HOPE THAT THIS CROSS-BORDER EC TAX NAVIGATOR WILL BE OF HELP TO VARIOUS COMPANIES CONSIDERING CROSS-BORDER EC.

Q] What is a reverse charge?

A]

A reverse charge is a taxable transaction in which the taxpayer is the recipient, whereas the taxpayer is originally the supplier.

FOR EXAMPLE, THESE REVERSE CHARGES MAY BE APPLIED IN CASES SUCH AS THE PROVISION OF SERVICES FROM A JAPANESE COMPANY TO AN EU COMPANY. OR, THERE IS A WIDE RANGE OF REVERSE CHARGES FOR SPECIAL TRANSACTIONS SUCH AS THE TRANSFER OF ASSETS BY A FOREIGN ENTITY OR CONSTRUCTION WORK.

The reverse charge also varies from country to country.

If you wish to use reverse charge, the following actions must be taken

OBLIGATION TO ISSUE INVOICES IN ACCORDANCE WITH THE EUVAT DIRECTIVE

A VAT INVOICE MUST BE ISSUED, INDICATING THE REVERSE CHARGE WORDING AND THE ARTICLE NUMBER ON WHICH THE REVERSE CHARGE IS BASED. THE VAT INVOICE MUST BE PREPARED IN ENGLISH OR THE LOCAL LANGUAGE.

• ON THE VAT INVOICE, THE AMOUNT EXCLUSIVE OF TAX AND THE AMOUNT INCLUDING TAX MUST BE ENTERED.
• ON THE VAT INVOICE, THE VAT NUMBER, ADDRESS, AND COMPANY NAME OF THE COMPANY TO WHICH THE GOODS ARE BEING SOLD MUST BE INCLUDED.
• A VAT INVOICE MUST BE ISSUED WITHIN THE DATE SET FOR EACH COUNTRY AFTER THE TAXABLE ACTIVITY OCCURS.

VAT REGISTRATION AND DECLARATION OBLIGATIONS

• JUST BECAUSE ONE TRANSACTION (E.G., PROVISION OF SERVICES) IS SUBJECT TO THE REVERSE CHARGE, ANOTHER TRANSACTION (E.G., PROVISION OF ASSETS, MOVEMENT OF COMPANY ASSETS WITHIN EUROPE, SALE OF GOODS WITHIN EUROPE, ETC.) MAY NOT BE SUBJECT TO THE REVERSE CHARGE AND REQUIRE LOCAL VAT REGISTRATION.
• ONCE REGISTERED FOR VAT, REGULAR TAX RETURNS ARE MANDATORY. SPECIFICALLY, FRANCE REQUIRES 12 TAX RETURNS PER YEAR, GERMANY REQUIRES 13 PER YEAR, THE NETHERLANDS REQUIRES 4 PER YEAR, AND SO ON.
• JUST BECAUSE A REVERSE CHARGE IS APPLIED DOES NOT MEAN THAT THERE IS NO OBLIGATION TO REGISTER AND FILE VAT. FOR THIS REASON, IT IS NECESSARY TO CHECK ALL TRANSACTIONS, NOT JUST ONE.
• EVEN IF A REVERSE CHARGE CAN BE USED, THE INVOICE MUST MEET THE FORMAT OF A VAT INVOICE. THEREFORE, IT IS NECESSARY TO PREPARE IN ADVANCE WITH A EUROPEAN VAT SPECIALIST A VAT INVOICE THAT IS APPROPRIATE FOR YOUR COMPANY'S TRANSACTIONS.

INTRASTAT DECLARATION OBLIGATION, EC SALES LIST DECLARATION OBLIGATION

• JUST BECAUSE A TRANSACTION IS ELIGIBLE FOR THE REVERSE CHARGE SYSTEM DOES NOT MEAN THAT IT IS A STATISTICAL DECLARATION, I.E., AN INTRASTAT DECLARATION OR AN EC SALES LIST DECLARATION. THEREFORE, EVEN IF A TRANSACTION IS ELIGIBLE FOR THE REVERSE CHARGE SYSTEM, IT IS NECESSARY TO CONFIRM THAT THESE REPORTING OBLIGATIONS HAVE BEEN MET.
  
  

penalty

• THERE ARE CASES WHERE YOU MAY THINK THAT A REVERSE CHARGE WILL BE APPLIED AND THINK THAT YOU ARE NOT OBLIGED TO REGISTER AND DECLARE VAT, BUT IN FACT YOU ARE NOT OBLIGED TO REGISTER AND DECLARE VAT, INTRASTAT DECLARATION OR EC SALES LIST DECLARATION WITHOUT A REVERSE CHARGE.
• In such cases, the various amended returns retroactively filed in the past may incur significant penalties.
• IN ADDITION TO THIS, ISSUING INVOICES FOR PAST TRANSACTIONS IS ALSO A PENALTY IN ITSELF, BUT MAY RESULT IN AN AMENDED DECLARATION ON THE PART OF THE CLIENT COMPANY. FOR THIS REASON, WE RECOMMEND THAT YOU CONSULT WITH A EUROPEAN VAT SPECIALIST PRIOR TO THE TRANSACTION TO DETERMINE WHAT TYPE OF INVOICE SHOULD BE PREPARED AND WHAT WORDING SHOULD BE FILLED IN.

Reverse charge (Opti)

Disclaimer

This column contains general information only and is intended to be used at the reader's own risk. While every effort is made to improve the accuracy of the information, it may contain inaccuracies. Readers should consult a suitably qualified professional before making any decision or taking any action and assume the entire risk and responsibility for any loss arising from the use of this column.