Tax liability is the foundation of every tax system. Over the years, however, different mechanisms for handling this tool have developed in different areas. The EU sets clear rules on how to work with it.
Within the EU, invoicing uses a special VAT scheme called the transfer of tax liability, or reverse charge. Under this scheme, the obligation to declare and pay VAT is transferred to the customer. The invoice should state that the customer is required to pay the tax. This is why the VAT rate on the invoice is shown as zero (0%).
What is the reverse charge?
The reverse charge is a VAT (value added tax) mechanism in which the obligation to pay the tax is transferred from the supplier to the customer receiving the goods or services. In practice, this means that instead of the supplier collecting VAT from the customer and then paying it to the tax office (finanční úřad), the customer pays the relevant amount directly to the tax authority in the country concerned.
Reverse charge and construction work
The reverse charge is common in construction work. The reason is the state’s effort to prevent tax evasion in this sector, which is particularly prone to it. When construction work is carried out and the customer is a VAT payer, the customer, not the supplier, is responsible for paying the VAT.
Reverse charge above 100,000
Some countries may apply reverse charge rules to specific transactions or services if their value exceeds a certain limit, for example 100,000 CZK (about 4,600 USD). This means that if the price of the service or goods exceeds this limit, the tax liability is automatically transferred to the customer.
What does the reverse charge apply to? The reverse charge can apply to various types of goods and services, depending on the tax legislation of the country concerned. Apart from construction work, it can cover, for example, trading in emission allowances, gold or certain types of property.
USD amounts are approximate, converted at the Czech National Bank rate of 21.80 CZK per USD on 2 October 2026.
