You want to understand what is meant by 'Reverse Charge' when talking about VAT.
A Reverse Charge is a transaction used to create a VAT entry when the supplier of a product or service doesn't charge the recipient VAT. The recipient of the goods or services makes the declaration of both their purchase (input VAT) and the supplier’s sale (output VAT) in their VAT return. Reverse Charges are commonly required in the European Union (EU) to facilitate cross-border, business-to-business trade within the EU without requiring the supplier to register in all EU Member States.
In AvaTax, Reverse Charge transactions have important requirements:
- The transaction type must be a PurchaseOrder or PurchaseInvoice
- The transaction is a business to business transaction identified by the seller's VAT registration ID used in the businessIdentificationNo field
- The BIN must also include the two-digit ISO country code
- The supplier does not charge VAT
- The destination address is in an EU country
- The goodsPlaceOrServiceRendered address is not the same country as the pointOfOrderAcceptance country
For more information about Domestic Reverse Charge calculations, see Domestic reverse charge transactions on the Avalara Developer website.