Glossary · Accounting & finance

VAT reverse charge: who, when, how?

6 min read · Updated on 3 July 2026

Definition Reverse charge VAT is a mechanism that shifts the tax liability: instead of being collected by the seller, VAT is declared and paid directly by the customer (who usually deducts it on the same return). The seller invoices net of VAT with a mandatory note. Purpose: avoid requiring foreign sellers to register in France and combat fraud in certain sectors.

The full entry

The essentials in brief

Principle: the customer declares VAT on behalf of the seller — the invoice is issued net with a mandatory mention.
4 common SME cases: intra-EU service purchases, construction subcontracting, imports (automatic since 2022), purchases from a non-established foreign seller.
Often cash-flow neutral: the customer collects AND deducts the same VAT on their CA3 return.
Omission is not neutral: 5% penalty on non-self-assessed amounts (Art. 1788 A of the French Tax Code) — even if the state loses nothing.
The exact wording matters: “Autoliquidation” + reference to the applicable text, otherwise the customer risks deduction rejection.

I Cases

The 4 situations where reverse charge applies

Situation	Who reverse charges	Reference text
Services purchased from an EU business (Google/Meta ads, SaaS, EU freelancers)	French buyer	Art. 196 of Directive 2006/112/EC
Construction subcontracting in France	Principal contractor	Art. 283-2 nonies of the French Tax Code
Imports from outside the EU	Importer (automatic on CA3)	Since 1 Jan 2022
Purchase from a non-established foreign seller delivering in France	French VAT-registered buyer	Art. 283-1 of the French Tax Code

The case all SMEs experience without realising: invoices from Google Ads, Meta, AWS or LinkedIn arrive from Ireland or Luxembourg, net of VAT. It is YOUR responsibility to reverse charge French VAT on these amounts — dedicated line on the CA3. Many small businesses overlook this for years; audits cover 3 years, with a 5% penalty.

The construction case, the #1 source of disputes: since 2014, subcontractors performing work for a VAT-registered principal invoice net of VAT. Common mistakes go both ways — the subcontractor invoicing with VAT (the principal cannot deduct it!) or the principal forgetting to reverse charge. In a subcontracting chain, every link must be vigilant.

5 %

penalty on undeclared amounts (Art. 1788 A French Tax Code) — even with no loss to the state

2022

since 1 January, reverse charge VAT on imports is automatic

3 years

of possible backdating in case of audit

II In practice

Invoicing and declaring a reverse charge transaction

Seller’s side (you invoice net of VAT):

Invoice without VAT, with the note matching the case: "Reverse charge, Article 283-2 nonies of the French Tax Code" (construction subcontracting), "Reverse charge by the customer, Article 196 of Directive 2006/112/EC" (B2B EU services), "VAT exemption, Article 262 ter I of the French Tax Code" (intra-EU goods supplies).
Revenue is still declared on your CA3 (non-taxable transaction lines).

Buyer’s side (you reverse charge):

On the CA3, the net amount is recorded in both collected VAT (depending on the case: intra-EU acquisitions, other taxable transactions, etc.) and deductible VAT.
If you recover 100% of your VAT: cash-neutral operation. If your deduction right is partial (mixed sector, passenger cars, etc.), the difference remains due.

Typical accounting entry (EU service purchase: €1,000 net, 20% VAT):

Debit 604/611 (expense): €1,000
Debit 44566 (deductible VAT): €200
Credit 401 (supplier): €1,000
Credit 4452 (intra-Community VAT due): €200

Properly configured accounting software generates these lines automatically once the supplier is marked as "EU" or "reverse charge" — initial setup prevents recurring omissions.

💡

Golden rule

The 5% penalty under Article 1788 A applies even when the transaction was neutral (VAT collected = deducted). On 3 years of un-declared Google Ads invoices at €2,000/month, that’s ~€720 in penalties for a purely declarative error. Set up your EU suppliers correctly once and for all.

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III Frequently asked questions

Answers to the questions we get asked most.

I am VAT-exempt (micro-business): do I need to reverse charge my Google Ads purchases?

Yes — and it’s the classic tax surprise for micro-entrepreneurs. The franchise en base exempts you from collecting VAT on your sales, but not from paying VAT due on your intra-EU service purchases. You must obtain a VAT intra-Community number, provide it to Google/Meta, then declare and PAY French VAT on these purchases (form 3310-CA3 filed for the relevant month) — without being able to deduct it, since you’re under the franchise scheme. The real cost of your ad therefore increases by 20%.

My BTP subcontractor invoiced me with VAT by mistake: can I deduct it?

No — that’s the trap. VAT incorrectly charged on a transaction subject to reverse charge is NOT deductible for the customer (consistent case law). You must request a corrected invoice from the subcontractor, excluding VAT, with the reverse charge mention, refund them… and recover the VAT wrongly paid from them. Get it corrected immediately: the longer you wait (and if the subcontractor goes into liquidation), the more recovery becomes theoretical.

How can I tell if my foreign supplier is “not established” in France?

The criterion is the permanent establishment involved in the transaction, not nationality: a French subsidiary of an American group that invoices you via its French SIREN number charges standard French VAT. Practical indicators: the VAT number on the invoice (FR = established, IE/LU/DE… = not established for this transaction) and the billing address. If in doubt on a large contract, request a certificate of establishment — you bear the declarative risk.

The 4 situations where reverse charge applies

Invoicing and declaring a reverse charge transaction

What if a tool handled this for you?

Answers to the questions we get asked most.

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