The reverse charge procedure is somewhat confusing and it has changed multiple times throughout the years; it is crucial to treat these invoices properly, as they have to be disclosed separately in the annual VAT return and they have specific bookkeeping features.
Read the full article below to understand how to treat the reverse charge procedure and how to avoid unwanted fines and penalties!
What is the reverse charge?
This process applies only in B2B operations.
Which activities are subject to the reverse charge?
The Italian VAT law clearly identifies which activities are subject to the reverse charge, as follow:
- Intra EU purchase of goods and services
- Sale of gold for investment purposes (not jewellery)
- Building renovation and restructuring activities
- Sale of commercial property
- Building contractor activities
- PC, tablet, and cellphone sale
- Building cleaning, levelling, and plant design activities
If I receive a reverse charge invoice, what should I do?
After that, the client must register the invoice remembering to include both in the sale and purchase VAT registrar (known as sterilization process).
Finally, the client must write on the invoice the applicable amount of VAT.
Which fines and penalties apply?
There are many fines and penalties applying to the wrong reverse charge application, such as:
- Reverse charge adoption instead of the “regular” VAT; fine between € 250 and € 10,000
- Reverse charge adoption instead of exempt VAT; fine between 5% and 10% of the VAT base, minimum fine € 1,000
- Wrongful bookkeeping; fine between 5% and 10% of the VAT base
- Wrongful VAT return; fine between 90% and 180% of the VAT due
How can Accounting Bolla help?
Accounting Bolla can help you with:
- Adoption of the correct VAT treatment
- Proper bookkeeping
- Correct VAT return filing
Fine and penalties can be harsh, be smart! Choose us!