Reverse charge, known in Czech as režim přenesení daňové povinnosti, is a special mechanism applied within the VAT system. In the standard procedure, the supplier (seller) is responsible for remitting the tax to the state; they add VAT to the price, collect it from the customer (buyer), and pay it to the tax office. Under the reverse charge mechanism, this obligation is transferred to the customer. The supplier issues a VAT-free invoice, including a note stating that the customer will pay the tax.
This mechanism is primarily used in transactions between VAT payers, both domestically for specific commodities (e.g., construction work, trading in emission allowances) and, most importantly, when providing services or goods between two EU member states. The main purpose of the reverse charge is to simplify tax administration for cross-border transactions and, crucially, to combat tax evasion, particularly carousel fraud, where fraudulent companies would illegitimately claim VAT refunds that were never actually paid to the state.
