In European Union countries, the value-added tax (VAT) is a nationwide tax charged on goods and services. Customarily, this tax is paid by the buyer but collected by the seller and remitted to the national tax agency. Reverse VATs work differently.
Reverse VAT
Using the reverse VAT scheme, the VAT due is not collected by the seller; the buyer is independently responsible for paying the correct amount of VAT to the national tax agency. Reverse VAT is to be used only by businesses, not by private individuals.
Product Type
HM Revenue & Customs, the United Kingdom’s national tax agency, mandates that the business purchase of specific products requires the use of the reverse VAT scheme. These include carbon trades and computer chips.
Foreign Supplier
If goods are received by a VAT-registered U.K. business from a foreign supplier, the reverse VAT scheme is used, meaning that the recipient of the goods, not the foreign supplier, is responsible for making the VAT payment to HM Revenue & Customs.
References
Writer Bio
Sarah Rogers has been a professional writer since 2007. Her writing has appeared on Nile Guide, Spain Expat and Matador, as well as in “InMadrid.” She is also the author of “Living in Sunny Spain Made Easy.” Rogers often writes about living abroad and immigration law. She holds a Bachelor of Arts in history and Spanish from San Francisco State University.