How the Reverse Charge Works in Practice
Under the reverse charge, VAT is accounted for by the customer, not the supplier. The invoice is issued without tax and the recipient both declares and (usually) deducts it. Where the regime applies and what to watch for.
Under the reverse charge, VAT is declared and paid by the customer, not the supplier. The supplier issues an invoice without tax marked "VAT to be accounted for by the customer", and the recipient declares the tax in their own return — and, if conditions are met, deducts it at the same time.
Where the reverse charge applies
Domestic regime (Sec. 92a et seq. of the Czech VAT Act) between Czech VAT payers for selected supplies — typically construction and assembly works, selected metals and waste, emission allowances.
Cross-border regime for B2B services within the EU: the general place-of-supply rule taxes the service in the customer's state (Art. 44 of the VAT Directive) and the recipient accounts for the tax.
Practical example
A construction company (VAT payer) performs a CZK 500,000 subcontract for a general contractor (VAT payer). The invoice carries no VAT; the general contractor declares output tax of CZK 105,000 and simultaneously claims a CZK 105,000 deduction — net cash-flow impact is zero.
What to watch out for
Getting the regime wrong is expensive. If a supplier mistakenly charges VAT where the reverse charge applied, the customer has no right to deduct that incorrectly invoiced tax — they must recover it from the supplier via a corrected document. The Court of Justice of the EU addressed exactly this in C‑424/12 Fatorie.
Before invoicing, verify that your partner really is a VAT payer — the reverse charge only applies between registered payers.