The tax liability mechanism plays a decisive role in VAT law, especially in cross-border situations. Because sometimes there is a double taxation of supplies or services if the respective principles are disregarded. One of the greatest significance here is the reverse charge procedure according to § 13b UStG. If the conditions are met, the recipient must pay the sales tax to the tax office. But when does the regulation become important for entrepreneurs?
1. The reverse charge procedure at a glance
The reverse charge procedure is finally regulated in § 13b UStG, whereby various regulations also refer to this standard. It is an exception to the rule, because the tax liability mechanism usually lies with the provider. Anyone who provides a delivery or other service usually owes 19 % sales tax if the service is taxable. The beneficiary pays, the payer pays the tax to the competent tax office.
The reverse charge procedure now reverses this principle. As a result, it is not the supplier who owes the tax, but the recipient of the service. The recipient is the natural or legal person who commissions a service. The ‘recipient’s charge’ therefore applies.
Within § 13b UStG, several cases in which the reverse charge procedure is used are regulated. What is essential here are paragraphs 1 and 2, respectively in conjunction with paragraph 5 and 7. Let us take a closer look at the differences between § 13b paragraph 1 and paragraph 2 UStG.
1.1. Operators in the rest of the Community
According to § 13b paragraph 1 UStG, other services whose location is in Germany pursuant to § 3a paragraph 2 UStG are covered by the reverse charge procedure. The respective service must be provided by an entrepreneur who is based in the “rest of the Community territory” – i.e. within the European Union. Section 3a(2) of the UStG only covers B2B sales, i.e. other services between entrepreneurs within the meaning of VAT law.
Example: A Polish lawyer advises a German client on the conversion of his company into a corporation. The service is carried out in Germany according to § 3a paragraph 2 UStG, the taxpayer is the domestic entrepreneur.
In reverse charge cases, the provider provides a net invoice with a corresponding indication. This can, for example, read: “the recipient’s liability for tax pursuant to § 13b (1) UStG”.
Services to private individuals do not fall under § 13b paragraph 1 UStG, as a rule also under no other facts of the norm. Because here the place of performance is regularly located where the performing entrepreneur has his seat.
1.2 Other cases of the reverse charge procedure – § 13b paragraph 2 UStG
In § 13b paragraph 2 of the UStG, further facts are standardized in which the reverse charge procedure also applies. This is the case, inter alia, for the following deliveries and other services:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.