What is a Reverse Charge VAT in Business Central?

Reverse Charge VAT is a VAT calculation type where the buyer accounts for the tax instead of the vendor charging it on the invoice.

Reverse charge VAT is a mechanism where the buyer, not the seller, accounts for the VAT on a transaction. In Business Central it is one of the VAT calculation types available in VAT posting setup: the purchase posts a VAT amount to the purchase VAT account and the same amount to a reverse charge VAT account, so the two postings offset each other while the transaction still produces VAT entries. It is typically used for cross border services and for domestic reverse charge cases defined by local law.

Press Alt+Q and open VAT Posting Setup, then find the combination of VAT business posting group and VAT product posting group used for those vendors. Set the VAT calculation type to reverse charge VAT and fill both the purchase VAT account and the reverse charge VAT account on that line. The VAT percentage must be the rate that applies in your country, not zero, otherwise nothing meaningful is recorded.

A Swiss company buys consulting from a German supplier. The vendor carries a VAT business posting group used for foreign suppliers, and the service line uses a product group tied to the standard rate. On the purchase invoice of 8 April 2026 for CHF 4,800 net, Business Central calculates 8.1 percent, that is CHF 388.80, and posts that amount to the purchase VAT account and to the reverse charge VAT account. The vendor is credited with CHF 4,800 only, which matches the invoice received.

The classic blocker is an empty reverse charge VAT account in the setup, which stops posting with a message about a missing account. Another frequent error is leaving a normal VAT calculation type on a foreign vendor: VAT is then added to the amount owed, the payment no longer matches the invoice, and the VAT entries are wrong. Setting the rate to zero instead of the domestic rate creates VAT entries with no amount, so the transaction disappears from VAT analysis.

Use posting preview on the first invoice after changing a setup: it shows the general ledger and VAT entries that would be created, so you can confirm both accounts are hit before anything is committed. Reviewing the VAT entries of a period afterwards is the quickest way to spot vendors that were set up with the wrong VAT business posting group.

Frequently asked questions

Related terms

• VAT Posting Setup, The Business Central matrix of VAT business and product posting group combinations that determines VAT rates, calculation types, and VAT accounts.
• VAT Registration No., The VAT Registration No. is the tax identification number stored on a customer, a vendor or your own company record and printed on Business Central documents.
• Purchase Invoice, A document recording a vendor's bill for goods or services received, used for accounts payable processing in Business Central.
• General Ledger, The core accounting record in Business Central where all financial transactions are ultimately posted and stored.
• Posting Preview, Posting Preview simulates a posting and shows the ledger entries it would create, then rolls everything back so nothing is actually posted.

How Zentriq helps

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