Reverse charge (medecontractant)

What does reverse charge (medecontractant) mean?

The statement 'medecontractant' only occurs between two companies for work on immovable property. On such an invoice, the entrepreneur or supplier does not charge VAT. You must therefore include the following provision on the invoice:"Reverse charge. In the absence of a written objection within one month of receipt of the invoice, the customer is deemed to acknowledge that he is a taxable person required to file periodic returns. If that condition is not met, the customer is liable, with regard to that condition, for the payment of the tax due, interest and fines." The customer enters the invoice in the appropriate boxes of his periodic VAT return. Work on immovable property consists of services and supplies such as building, renovating, finishing, repairing, etc., so that the result becomes immovable, i.e. cannot be separated from a building or plot.

Work on immovable property

An example: new sanitary facilities are installed in your business premises, or you have your windows cleaned. Under normal circumstances, the supplier must charge 21% VAT on the invoice. As a customer-entrepreneur, you pay the full invoice including VAT, and the latter is offset via the VAT return. Not so under the reverse charge (medecontractant) scheme! There, the contractor invoices without VAT. That is an advantage, because nobody has to pre-finance the VAT. The accounts process these invoices as the VAT administration prescribes on the return forms. In practice the customer does this, so that the VAT is 'shifted from the supplier to the customer', hence the terminology.

Important: the statement “VAT reverse charged” on the invoice is essential! If it is missing and no VAT was charged, you will pay both the fine and the VAT in the event of an audit. If VAT was charged on work on immovable property and paid, the customer cannot recover it. So both customer and supplier have every interest in applying the “VAT reverse charged” scheme correctly.

Note: this rule does not apply to small businesses that are exempt from VAT. After all, they do not file periodic VAT returns and never deduct VAT paid.

If you are not entirely sure whether your activities fall under the ‘VAT reverse charged’ system with medecontractant, be sure to contact your competent VAT office. After all, incorrect use of a VAT exception can result in fines. So find out which VAT system applies to your business.