Germany: Reverse charge process for telecom company services


The German Authorities introduced a reverse charge procedure for telecommunication services.


This process is provided to telecom companies who are resellers of their services and it was introduced in order to avoid the creation of fraud schemes.  Before the introduction of this process, the general rule (VAT due by the supplier) was used and many cases of VAT evasion were noticed specifically in the reseller business. By applying this reverse charge mechanism the original seller of the services is liable for VAT which reduces the risk of VAT fraud.


However, the new reverse charge provision applies only if the recipient of telecommunication services is a taxable person whose main activity with regard to the acquisition of these services consists in their provision and whose own consumption of these services is of secondary importance (5% threshold; so-called reseller). These two criteria have to be cumulatively fulfilled.


Companies that buy and/or sell telecommunication services must, therefore, adapt their internal processes and systems accordingly on the input and output side.





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