Reverse Charge and VAT Categories in E-Invoices: A Practical Guide

Most invoices carry plain German VAT at 19 or 7 percent. But invoice an EU business customer, or fall under one of Germany's reverse charge rules, and suddenly the invoice shows zero VAT and needs specific wording and codes. In an e-invoice these cases are expressed through standardized VAT category codes, and getting them right decides whether the file validates.

Reverse charge in one paragraph

Normally the supplier charges VAT and pays it to the tax office. Reverse charge flips this: the customer accounts for the VAT in their own return, and the supplier invoices the net amount without VAT. In Germany this applies to the cases in section 13b UStG, for example many services received from businesses abroad, certain construction services, and a list of specific goods. Cross-border B2B services within the EU commonly fall under the general reverse charge rule as well. The invoice must say why no VAT is charged; German law prescribes the wording 'Steuerschuldnerschaft des Leistungsempfaengers'.

Intra-community supply: goods to EU businesses

Deliveries of goods to a VAT-registered business in another EU member state can be exempt as an innergemeinschaftliche Lieferung under the conditions of the law, typically including a valid foreign USt-IdNr. of the customer and proof of transport. The invoice then shows no German VAT, must carry both your USt-IdNr. and the customer's, and references the exemption. In EN 16931 terms this is its own category, distinct from reverse charge.

The VAT category codes in EN 16931

Structured e-invoices do not express these situations in prose alone. Every invoice line and every entry in the VAT breakdown carries a category code from a standardized list. The ones German freelancers and small businesses meet most often:

• S: standard rate, regular German VAT at 19 or 7 percent, with the rate stated per line.
• AE: reverse charge, VAT owed by the recipient. Rate 0 on the invoice, plus the exemption reason.
• K: intra-community supply of goods, exempt with credit, both VAT IDs required.
• E: exempt from VAT, for example certain medical, educational or financial services, with the reason stated.
• Z: zero-rated, a genuine 0 percent rate, rare in Germany.
• G: export outside the EU, exempt.

Validators enforce consistency: a line coded AE must have a 0 percent rate and the invoice must include an exemption reason text or code, an invoice mixing S and AE lines needs a correct VAT breakdown per category, and a K invoice without the buyer's VAT ID fails. The category code, the rate, the breakdown and the reason text all have to agree.

What this means when you write the invoice

Practically: identify the case first, then let the codes follow. Domestic business customer, normal supply: category S with 19 or 7 percent. EU business customer receiving services: usually reverse charge, category AE, net amounts, prescribed wording, both VAT IDs, and the transaction goes into your Zusammenfassende Meldung. Goods shipped to an EU business: category K with the exemption conditions met. If none of these clearly fits, that is the moment to call your Steuerberater rather than guess a code.

The E-Rechnung app has reverse charge and intra-community supply built in: pick the case, and the correct VAT category, zero rate and VAT breakdown land in the exported XRechnung or ZUGFeRD file. For everything else your invoice must contain, see the required fields checklist.

Not tax advice

VAT treatment depends on the specifics of each transaction, and the rules in sections 4, 13b and 14a UStG have many conditions and exceptions this overview cannot cover. This article is general information, not tax or legal advice. Always confirm the correct treatment of your transactions with your Steuerberater.