Several rules must be observed when a sale of goods is to be invoiced without VAT, either because it is covered by the rules of reverse charge or goes to a country outside the EU.
The scheme of having the buyer be responsible for calculating and settling VAT - so-called reverse charge - applies primarily to sales of goods to customers in other EU countries as well as to sales to Danish customers of certain specific product types.
Under certain conditions, customers in countries outside the EU can also be invoiced without VAT. This is not due to the rules on reverse charge, but due to the fact that sales of goods to countries outside the EU are generally exempt from VAT.
In all three cases, some formalities must be observed.
Sales to customers in other EU countries
Sales to customers in other EU countries are subject to the rules on reverse charge if (1) the goods are physically shipped to another EU country and (2) the shipment is provided by either buyer or seller or at their expense, and (3) the buyer is registered for VAT in another EU country.
Invoicing must be made no later than the 15th of the month following the month of delivery. The invoice shall not contain information on VAT rate and VAT amount, but the recipient's national VAT number must be stated. Further, the invoice must state that the delivery is exempt from Danish VAT – for example by stating that the invoice is “zero-rated”.
The seller must enter the amount in box B – goods, on the VAT declaration and report the sale in the sales item column in the EU sales list.
Sales to customers in countries outside the EU
Sales to customers in countries outside the EU are not subject to the rules on reverse charge. However, such sales can be exempt from VAT, if the seller can document that the goods are transported out of the EU.
An invoice must be issued, but no information regarding VAT shall be stated on the invoice.
The seller must be registered for export, and he must report his sales to the Export System (e-Export). Most businesses choose to let a freight forwarder take care of this.
Additionally, the seller must include the invoiced amount in box C on the VAT declaration.
Domestic sales of goods that are subject to the rules on reverse charge
Currently, domestic sales of goods that are subject to the rules on reverse charge only cover the following specific items:
- Gas and electricity
- Metal scrap
- Certain types of gold, including both investment gold and gold as raw material
- Cellular phones
- Integrated circuit devices
- Game consoles, tablets and laptops
For the sale of such goods, no information regarding VAT rate and VAT amount shall be stated on the invoice. However, the invoice must state that the buyer pays the VAT - e.g. the invoice is subject to "reverse charge".
The seller must include the sale in box C on the VAT declaration.
In relation to cellular phones, integrated circuit devices and game consoles etc., reverse charge does not apply, if the company’s sale is exclusively or mainly to consumers.
The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge. Please sign up here.