by Theodor Artenie, Managing Director Schoenherr Tax Bucharest
The reverse charge mechanism is a means by which,
in certain circumstances, the liability to charge VAT on a particular
transaction shifts from the supplier to the beneficiary. In most of
the cases, this liability arises at the same time as the
beneficiary’s right to claim input VAT credit for the same amount
of VAT.
In practical terms, if a particular transaction is
subject to the VAT reverse charge rules, the supplier issues an
invoice without VAT to the buyer, while the latter will include that
transaction in his VAT return and account for both the output and
input VAT related thereto. This way, VAT cash settlements with
business partners and the state budget are no longer an issue.
