VAT reverse charge

VAT reverse charge is an anti-fraud measure that applies to the sale and purchase of specific goods and services. These are typically high value, portable, electronics such as mobile phones. The reverse charge procedure holds the purchaser liable to account for the VAT on the sale.

VAT is not charged by the vendor. The invoice must show the value of VAT due under the reverse charge rules. It must state that the reverse charge applies, and that the trading account customer is required to account for the VAT.

Australia specifics

GST on taxable supply is payable by the recipient and not by the offshore supplier. These reverse charge rules apply to purchases from offshore suppliers:

Compulsory reverse charge

Recipient must pay GST for purchases that are made in certain situations, even if you are the purchaser and even if the sale is not normally subjected to GST. The compulsory reverse charge rule applies if all of these conditions apply:

  • The sale is not made by a business that the seller carries on in Australia
  • The purchase is completed or performed outside of Australia
  • The purchase is solely or partly for the purpose of a business that is carried on in Australia
  • The sale is for payment
  • The purchase is partly of a private or domestic nature or relates partly or solely to making input taxed supplies
  • Registered or required to be registered for GST

Voluntary reverse charge

The recipient may agree to pay the GST for purchases that are made in certain situations even if they are not the purchaser and if all of these conditions are met:

  • The supplier is a non-resident
  • The supplier does not make the supply through an enterprise that it carries on in Australia
  • The recipient is registered, or is required to be registered, for GST
  • The supplier and recipient agree that the GST is payable by the recipient

The voluntary reverse charge does not apply if at least one of these circumstances apply:

  • The compulsory reverse charge applies
  • The supply is made by the non-resident through a resident agent

How Infor meets this requirement

Verify that the VAT reverse charge is enabled. See the Financials Setup and Administration Guide.

To create a Payables invoice record for VAT reverse, see the Payables User Guide.