Tax Jurisdiction

Reverse Charge Determination

The system determines whether a voucher is subject to reverse charge by evaluating key factors, including whether the transaction is cross-border, whether it involves a business-to-business (B2B) relationship, and the applicable tax jurisdiction rules. Additionally, contextual factors such as the billing address, place of supply and tax jurisdiction settings are considered. However, if the reverseCharge flag in voucher.detail is explicitly set, it overrides the default determination logic and takes precedence over all other conditions.

Tax Profile Resolution

1. Billing address determination:

• The billing address is identified as the first active entry marked as "billing." If unavailable, the "default" address is used, or the first available address in the list.

2. Country of supply assignment:

• If the place of supply country is explicitly provided else the country of the billing address (see above) will be used as country of supply. If the billing address does not specify a country, the issuing country from the tax jurisdiction settings is used.

3. Cross border transaction check:

• Our system tests if the country of supply is included in your issuing countries. If you are issuing in the country of supply, it is not a cross-border transaction, else either reverse-charge or third country tax settings will be used.

4. Application of tax jurisdiction to items:

• Each voucher item is processed to determine the applicable tax rules based on:
  • The assigned tax jurisdiction settings and the selected profile.
• Any specific tax-related texts resulting from this process are collected.

By following this process, the system ensures that tax compliance rules, including reverse charge applicability, are correctly applied based on jurisdictional and recipient details. This includes adherence to VAT regulations, proper determination of tax liabilities based on business location, and compliance with cross-border transaction requirements.

Examples

Example 1: EU B2B Customer

• Your company is registered in: Germany
• You are issuing from: Germany
• Customer Billing Address: France
• Customer Type: B2B
• Customer VAT ID: Yes
• Specified Country of Supply: -

→ Determined Country of Supply: France

→ Reverse Charge: Yes

• Tax Jurisdiction Settings: The reverse charge tax profile will be used.
• Result: Reverse charge is applied, and the appropriate tax settings are used as configured in the Abillify Platform.
• Tax Text: "Reverse charge applies. Customer is liable for VAT." (or as defined in the reverse charge settings)
• Tax Rate: 0%
• Tax Amount: 0.00 EUR
• TaxAccount: -
• Revenue Account: 8336 (or as defined in the reverse charge settings)

Example 2: Domestic B2B Transaction

• Your company is registered in: Germany
• You are issuing from: Germany
• Customer Billing Address: Germany
• Customer Type: B2B
• Customer VAT ID: Yes
• Specified Country of Supply: -

→ Determined Country of Supply: Germany

→ Reverse Charge: No

• Tax Jurisdiction Settings: The standard tax profile for DE will be used.
• Result: Standard VAT is applied, and the appropriate tax settings are used as configured in the Abillify Platform.
• Tax Text: "" (or as defined in the standard tax settings)
• Tax Rate: 19% (or as defined in the standard tax profile)
• Tax Amount: 19.00 EUR (or as defined in the standard tax settings)
• TaxAccount: 1776 (or as defined in the standard tax settings)
• Revenue Account: 8400 (or as defined in the standard tax settings)

Example 3: EU B2B Customer, but service supplied in germany

• Your company is registered in: Germany
• You are issuing from: Germany
• Customer Billing Address: France
• Customer Type: B2B
• Customer VAT ID: Yes
• Specified Country of Supply: Germany

→ Determined Country of Supply: Germany

→ Reverse Charge: No

• Tax Jurisdiction Settings: The standard tax profile for DE will be used.
• Result: Standard VAT is applied, and the appropriate tax settings are used as configured in the Abillify Platform.
• Tax Text: "" (or as defined in the standard tax settings)
• Tax Rate: 19% (or as defined in the standard tax profile)
• Tax Amount: 19.00 EUR (or as defined in the standard tax settings)
• TaxAccount: 1776 (or as defined in the standard tax settings)
• Revenue Account: 8400 (or as defined in the standard tax settings)
• Note: The system will not apply reverse charge in this case, as the service is supplied in Germany, and the customer is located in France. The standard VAT rate applies.