The person liable to pay that VAT due on a transaction to the tax authorities is usually the supplier, but it may also be the customer.
In the case of the customer, it is not only taxable persons (businesses) who may have to pay the tax (as in a reverse-charge supply or an intra-EU acquisition). Sometimes, a non-taxable legal entity is also liable for the payment of VAT.
The basic rule: VAT is payable by any taxable person making a taxable supply (‘the supplier’) of goods or services, unless it is payable by another person (Article 193, VAT Directive).
Exceptions to the basic rule
The person liable to pay the VAT due is the supplier, except in:
- Transactions where the customer must pay the VAT
- Transactions where the customer may be the person liable (EU countries may choose to designate the customer as the person who pays)
- Obligation to pay: imports – the importation of goods where the importer or other designated person must pay the tax
- Obligation to pay: end of suspensive arrangements – cases where goods are removed from customs warehouses and other suspensive arrangements and where the person causing the removal must pay
- Obligation to pay: VAT on an invoice – cases where a person (rightly or wrongly) enters an amount of VAT on an invoice
1. Transactions where the customer must pay the VAT
The transactions in which the recipient of the supply (customer) must be the person liable to tax are set out in Articles 195-198 and 200 of the VAT Directive.
In what follows, ‘a non-established business’ means a business not established in the EU country where the tax is due. For these purposes, even if a business has a fixed establishment in a particular EU country, it is not regarded as established there if that fixed establishment does not intervene in a taxable supply of goods or services the business makes in that EU country (Article 192a VAT Directive).
The transactions in which the customers must pay the tax are:
For supplies of natural gas through a natural gas system or connected network and supplies of electricity, heat or cooling energy through a heating or cooling network, the obligation to pay VAT is the customer’s where the supply is one of:
- natural gas through a natural gas system or any network connected to such a system,
- electricity, or
- heat or cooling energy through a heating or cooling network
to
- a taxable dealer.
In the case of a supply to a taxable dealer, that is the EU country in which the dealer is established (Article 38 VAT Directive).
Under Article 196 VAT Directive, the person liable for VAT is the customer when:
- that customer is a business acting as such or a non-taxable legal entity registered for VAT;
- the supply is one of services of which the place of supply is where the customer is established (this is the default rule for services supplied to taxable persons - see Article 44, VAT Directive); and
- the supplier is a business not established in the EU country of the customer.
A triangular transaction occurs when a business established in EU country A supplies goods to a customer in EU country B, but the goods are shipped directly to the customer from a third EU country (C).
In a triangular transaction, the ultimate customer is the person liable to pay VAT, provided that the customer is a taxable person or a non-taxable legal person registered for VAT in the EU country where the final supply takes place.
Example: A business in Belgium receives an order for widgets from a customer in Italy. The widgets are made on behalf of the Belgian supplier by a manufacturer in Ireland, who ships them directly to the Italian customer. Thus, there are two supplies and an intra-EU acquisition:
- The Irish manufacturer makes an intra-EU supply of goods to the Belgian business. The place of that supply is Ireland (Article 32 VAT Directive).
- The Belgian business makes an intra-EU acquisition of goods. The place of that acquisition is Italy (Article 40 VAT Directive).
- The Belgian business makes a supply of goods to its Italian customer. The place of that supply is Italy (Article 31 VAT Directive).
- The Italian customer is liable for the VAT on the supply to him from the Belgian business.
The precise conditions for triangulation to apply and the customer to be liable to tax are:
- the taxable transaction is a supply of goods carried out in accordance with the conditions laid down (for the simplification method for triangular transactions);
- the person to whom the goods are supplied is another business, or a non-taxable legal entity, registered for VAT in the EU country in which the supply is carried out; and
- the invoice issued by the supplier not established in the EU country of the person to whom the goods are supplied is drawn up in accordance with the rules for a valid VAT invoice.
Exception: Where the supplier has appointed a tax representative to comply with VAT obligations on their behalf, EU countries may not apply the rule.
When the customer must be liable: As part of the special scheme for transactions in investments gold, an EU country may tax specific transactions between taxable persons who are members of a regulated gold bullion market or between a taxable person who is such a member and another taxable person who is not (Article 352, VAT Directive). Where this is in operation, the customer must be the person designated as liable for payment of VAT.
Exception: if the customer is a taxable person who is not a member of a regulated bullion market and needs to register for VAT in the EU country in which the supply takes place solely because of a taxed transaction, the vendor (the supplier) must take over the customer’s tax obligations in the way that the EU country provides.
When the customer may be liable: EU countries may opt to designate the customer as the person liable to pay the tax in transactions:
- involving gold material or semi-manufactured products of a purity of 32.5% or more or investment gold;
- where the supplier is a taxable person producing, processing or supplying gold who has waived exemption under Articles 348-350, VAT Directive
A person who makes a taxable intra-EU acquisition of goods is the person liable to pay the tax. An intra-EU supply will normally be exempt (see Exemptions for intra-EU supplies), and the obligation to pay the VAT on the intra-EU acquisition falls on the customer.
2. Transactions where the customer may be the person liable to pay
In addition to those instances where it is mandatory that the customer pays the VAT due on a transaction, there are also instances where EU countries may choose to designate the customer as the person liable for payment. These instances are set out in Articles 194, 199, 199a and 199b VAT Directive and are:
When the supplier is a taxable person who is not established in the EU country where the tax is due, a very broad option is given to EU countries to designate the customer, rather than the supplier, as the person liable to pay the VAT on a supply, provided the supplier is a taxable person not established in the EU country where the VAT is due (Article 194, VAT Directive).
For these purposes, even if a taxable person has a fixed establishment in a particular EU country, they are not regarded as established there if that fixed establishment does not intervene in a taxable supply of goods or services the taxable person makes in that EU country (Article 192a, VAT Directive).
EU countries may choose to designate the customer as the person liable to pay the VAT where the customer is a taxable person and the supply is any one of a number prescribed (Article 199, VAT Directive).
Most of these supplies are connected with immovable property. Remember that the place of supply of services connected with immovable property is where the property is located (see Place of taxation).
The supplies in question are:
- the supply of construction work, including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property, as well as the handing over of construction works treated by the EU country concerned as a supply of goods ( Article 14(3), VAT Directive);
- the supply of staff engaged in activities covered under the above bullet point;
- the supply of a building or part of a building and of the land on which it stands (other than the supply of that building or part prior to its first occupation), and of land that has not been built on (other than building land), where the supplier has opted for taxation of the supply (which would otherwise be exempt);
- the supply of used material, used material that cannot be reused in the same state, scrap, industrial and non-industrial waste, recyclable waste, part-processed waste and certain goods and services, such as scrap metal, listed (Annex VI VAT Directive);
- the supply of goods provided as security by one taxable person to another in execution of that security;
- the supply of goods following the cession of a reservation of ownership to an assignee and the exercising of this right by the assignee;
- the supply of immovable property sold by a judgment debtor in a compulsory sale procedure.
Where EU countries choose to make the customer liable, they are at liberty to choose which of these supplies will be covered by the option and to which categories of suppliers and customers it will refer. For these purposes, EU countries may also regard non-taxable legal entities covered by public law (public bodies) as taxable persons where they receive the last three categories of supply mentioned.
Until 31 December 2026, EU countries may designate the customer who is a taxable person as the person liable to pay the VAT due on fraud-sensitive goods or services such as a transfer of emissions allowances and related supplies. The primary reason for allowing this option is to fight fraud.
The supplies concerned are:
- the transfer of allowances to emit greenhouse gases as defined in Article 3, Directive 2003/87/EC (establishing a scheme for greenhouse-gas emission allowance trading within the European Union), transferable in accordance with Article 12 of that Directive;
- the transfer of other units that may be used by operators for compliance with the same Directive;
- supplies of mobile telephones, being devices made or adapted for use in connection with a licensed network and operated on specified frequencies, whether or not they have any other use;
- supplies of integrated circuit devices such as microprocessors and central processing units in a state prior to integration into end user products;
- supplies of gas and electricity to a taxable dealer as defined in Article 38(2);
- supplies of gas and electricity certificates;
- supplies of telecommunication services as defined in Article 24(2);
- supplies of game consoles, tablet PCs and laptops;
- supplies of cereals and industrial crops including oil seeds and sugar beet, that are not normally used in the unaltered state for final consumption;
- supplies of raw and semi-finished metals, including precious metals (if not otherwise covered as used material under point (d) of Article 199(1), the special arrangements for second-hand goods etc. or the special scheme for investment gold).
Where EU countries exercise this option, they must provide information to the Commission concerning:
- a statement on the scope of the measure applying the option and a detailed description of accompanying measures, including any reporting obligations on taxable persons and any control measures;
- evaluation criteria to enable comparison between fraudulent activities in relation to the services concerned before and after the application of the option, fraudulent activities in relation to other services before and after the application of the option, and any increase in other types of fraudulent activities before and after the application of the option;
- the date of commencement and the period to be covered by the measure applying the option.
3. Obligation to pay: imports
When goods are imported, the person liable to pay the VAT is the person designated or recognised as liable to pay by the EU country in which the importation takes place (Article 201, VAT Directive).
This is usually the customer or an import agent acting on the customer’s behalf. The customer may be a taxable person or a non-taxable person, such as a private individual.
Where the customer is a taxable person who imports the goods for the purposes of their taxed transactions, they may claim the import VAT as deductible input VAT.
4. Obligation to pay: end of suspensive arrangements
When goods are imported, they may be placed in a customs warehouse or some other ‘suspensive arrangement’ – an arrangement for deferring import VAT and/or customs duties and possibly also excise duties on the goods until they are released into free circulation for final use or consumption.
When goods leave such an arrangement, the person causing them to be removed is the person liable to pay the VAT (Article 202, VAT Directive).
For more details on customs warehouses and other such arrangements, see Exemptions for customs warehousing and tax warehouses.
5. Obligation to pay: VAT on an invoice
Whoever enters an amount of VAT as due on an invoice must pay that VAT, even if the entry was in error or if the person is not entitled to charge VAT (Article 203, VAT Directive).
Legal texts
Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax