Reverse charge VAT: how to enter these invoices correctly

A subcontractor's invoice arrives with every line in place and a VAT rate printed on it — but the amount payable contains no VAT. To an accountant seeing that document for the first time, it simply looks wrong. It is not: this is a reverse charge, where the obligation to account for VAT sits with the buyer rather than the seller. This article covers how to recognise those invoices, why they are so often entered incorrectly, and what Ezura handles for you.

When the buyer accounts for the VAT

Article 96 of the Lithuanian VAT law sets out the cases where the buyer must withhold and pay the VAT. For most Lithuanian companies that means construction work: when one VAT payer carries out construction work for another VAT payer, the customer declares the VAT, not the contractor. The same mechanism applies to ferrous and non-ferrous scrap metal.

In practice, the invoice has to land in your books under its own VAT code — not the one you use for an ordinary domestic purchase. The seller states the VAT but does not pay it. You both account for it and deduct it.

Why the invoice looks broken

The usual sanity check — do the lines add up to the header? — stops working here. The lines carry VAT, the payable amount does not, and the document appears not to balance. When a person sees that warning they stop and check. When software sees it, it either blocks a perfectly correct invoice or, worse, tries to reconcile it and destroys VAT that was calculated correctly.

One invoice, two lawful ways to print the total

Here is the detail you only learn after several hundred real invoices: sellers print the total on a reverse charge invoice in two different ways, and both are defensible. Some print the net amount as the total, because that is what you actually pay. Others print net plus VAT, because that is the value of the document — the tax authority's own published worked example does exactly that.

So "does this invoice add up?" is not one question. The answer depends on which supplier sent it. Ezura accepts both conventions, so a correctly issued invoice does not end up in an error list purely because this supplier writes its totals differently from the last one.

What the invoice is required to say

If you have ever tried to filter these invoices by their text, you know the problem: one supplier writes "reverse charge", another adds a reference to Article 96, a third does both, and a Lithuanian-language invoice carries the Lithuanian wording only. The law is specific here: the invoice must carry the marking "Atvirkštinis apmokestinimas" (Article 80(1)(17) of the VAT law). That does not make every invoice look alike, though — so filtering reliably is not a matter of searching for one phrase, but of accepting every lawful way of marking it.

The VAT code belongs to the line, not the document

A reverse charge is a property of a line, not of an invoice. The same document can carry a construction line whose VAT you declare and a materials or delivery line with ordinary VAT the seller has already charged. Ezura assigns the VAT code line by line, so a mixed invoice is not forced wholesale into either treatment.

The same holds when the seller prints the rate only once, in the summary below the lines — a common layout where the line itself shows just a description, a quantity and a net amount. The line still gets its code rather than being left without one.

Why this error costs more than an hour

If a reverse charge line is entered as an ordinary domestic purchase, VAT the seller never charged enters your books as deductible input VAT. The return is then wrong in both directions: you have not declared the VAT you were supposed to account for, and you have deducted VAT nobody paid. The error surfaces at the VAT register stage or during an inspection — the point at which it is most expensive to unwind.

What you see in review

In the invoice review screen the reverse charge appears as its own line, with the amount and a note that the buyer declares it — not as a red mismatch. That distinction is not cosmetic: a warning that fires on every correct invoice stops being noticed within a few weeks, and a real mismatch stops being noticed along with it.

• •Reverse charge lines are recognised from the marking the invoice is required to carry, not one supplier’s phrasing
• •The VAT code is assigned line by line, from your own classifiers
• •Mixed invoices are split: some lines reverse charge, some with the seller's VAT
• •Both lawful ways of printing the total are accepted without raising an error
• •Review shows how much VAT you will have to declare yourself

Foreign suppliers are a separate matter

Worth saying plainly: a domestic reverse charge and a foreign supplier's invoice are not the same thing. Services and goods acquired abroad fall under different provisions, and the right VAT code depends on whether it is goods or services and whether the supplier is inside the EU. The marking on the invoice alone cannot decide that, so those cases stay your call while Ezura prepares everything around them — currency conversion, registry checks and the lines themselves.

Frequently asked questions

Does the reverse charge apply to every construction invoice? No. The mechanism operates between two VAT payers and only for construction work as the Construction Law defines it. If either side is not VAT registered, the invoice is issued in the ordinary way.

Do we need to change our VAT classifiers? No. The codes already in your accounting system are the ones used. If a suitable reverse charge code does not exist yet, that is visible immediately rather than after the export.

What if the supplier did not mark the invoice? Then it looks ordinary and you have to judge it yourself. The cleanest route is to ask the supplier to correct the document — the "Atvirkštinis apmokestinimas" marking is a mandatory invoice detail, not an optional one.