Invoice Without VAT: What Article 194 of the EU VAT Directive Changes

What is the Article 194 reverse charge?

The Article 194 reverse charge is the mechanism that shifts the payment of VAT from the non-established supplier to the customer, when that customer is itself identified for VAT in the country where the transaction is taxable. The seller issues an invoice without VAT; the buyer declares the tax due and deducts it at the same time. You will also see it called a shift of liability, or simply reverse charge.

The legal basis is Article 194 of Directive 2006/112/EC, known as the VAT Directive. It targets transactions carried out inside a Member State by a taxable person who is not established there. The logic is straightforward: rather than force a foreign operator to register in every country where it delivers, the reporting obligation is placed on the local customer, who is already known to the tax authority.

Who becomes liable for the VAT?

It is the customer, and the customer alone, who becomes liable for the VAT. They enter the tax due on their VAT return (output VAT), then deduct it on the same return where they have a full right of deduction. The result is cash-flow neutral: no actual payment leaves the account, just an offsetting entry.

For the non-established supplier, the effect is direct. You invoice VAT-free. You do not collect local VAT, so you have nothing to remit. And, crucially, for that flow you have no VAT return to file in the country of consumption.

Which goods and services are covered

Article 194 mainly covers domestic supplies of goods made locally by a non-established supplier, along with services that are not already caught by another reverse-charge mechanism. This is a critical nuance, and it is often misunderstood.

A large share of intra-EU B2B services already switches automatically to reverse charge in the hands of the recipient, under Article 196 of the Directive (the general place-of-supply rule for services between taxable persons). For those services, Article 194 adds nothing new.

The real contribution of Article 194, and therefore what genuinely changes with ViDA, sits on two fronts:

• Domestic supplies of goods made by a non-established operator (for example, a sale from stock held in the country to a local taxable customer).
• Services that fall outside the Article 196 general rule (certain services connected to immovable property, to an event, and so on) and remain taxable in the country.

What changes on 1 July 2028 with ViDA

Until now, Article 194 has been a simple option: each Member State decides whether to apply it. From 1 July 2028, it becomes mandatory in all 27 States of the Union. Directive (EU) 2025/516 (the ViDA package) rewrites Article 194, replacing "Member States may provide" with a binding wording: Member States shall provide for the reverse charge.

The ViDA package ("VAT in the Digital Age") was adopted on 11 March 2025 and entered into force on 14 April 2025. It rests on three pillars: e-invoicing and real-time digital reporting, the VAT treatment of the platform economy, and single VAT registration. Moving Article 194 to a mandatory regime belongs to that third pillar, whose stated aim is to cut the number of multiple VAT registrations across the Union.

The 3 cumulative conditions

The mandatory Article 194 reverse charge applies only when three conditions are met at the same time. If a single one is missing, the mechanism does not apply and you become, in principle, liable for the local VAT again.

Condition 3 effectively rules out sales to private individuals (B2C): with no identified taxable customer, no reverse charge is possible. For e-commerce sales to consumers, other regimes apply instead (the OSS one-stop shop, imports).

"Do I still have to register for VAT?"

For the flow covered by the mandatory Article 194, no: you do not have to register in the country of sale. That is the whole point of the mechanism. If you sell goods locally to customers who are all taxable and identified, and you are not identified yourself in that country, the VAT is carried by your customers.

Domestic Article 194 versus import VAT reverse charge

Invoicing without VAT under Article 194 (a domestic transaction) and reverse-charging import VAT are two distinct mechanisms, with different legal bases and different persons liable. This is the most frequent confusion, and no competing content clears it up plainly. Here is the comparison.

Keep the dividing line in mind: Article 194 handles a sale inside a country by a foreign operator; the import reverse charge handles the crossing of an external border of the Union. Import VAT is self-assessed in the EU country of importation through postponed accounting, and the exact rules (whether it is automatic, optional, or subject to authorisation) vary from one Member State to the next. Check the regime of the specific country of importation before you assume anything.

Keep or close your local VAT number: the call to prepare from 2027

Keeping a local VAT number in a country can shut you out of the mandatory Article 194 benefit. This is the strategic point of the reform, and it deserves an early decision, ideally during 2027.

Recall the second cumulative condition: the supplier must be non-identified in the State of the sale. If you hold an active VAT number there, you are identified. And the mandatory Article 194 targets the non-identified supplier.

Why keeping a number can lock you out of Article 194

The reverse charge becomes mandatory only where the supplier is not identified in the country; where the supplier is identified, the Member State keeps a simple option to impose the reverse charge or not. In other words, keeping your local number does not automatically flip you back to "a supplier who collects": that depends on how the State transposes the rule. But you lose the guarantee of the mandatory mechanism, and you remain subject to every obligation tied to registration (periodic returns, even nil ones).

That is why the real question for 2027-2028 is not "should I close my number?" but "do I still need this number for other flows?".

Exclusion: the margin scheme

Supplies subject to the margin scheme (second-hand goods, works of art, collectors' items and antiques) are expressly excluded from the mandatory Article 194. If you operate under that scheme, the 2028 reform does not change your position: VAT stays due under the margin rules, with no shift to the customer.

Invoicing without VAT and reporting in practice (Article 194)

When Article 194 applies, you issue an invoice without VAT bearing an explicit reverse-charge mention, and it is your customer who carries the tax on their return. The paperwork is simple, but every step counts in the event of an audit.

Mandatory invoice mention and the customer's return

The invoice must clearly state the absence of VAT and the reference to the reverse-charge mechanism. In practice, you add the wording "Reverse charge" together with a reference to Article 194 of the VAT Directive or to the national transposing provision. The customer's VAT number must appear on the invoice.

On the customer's side, the process comes down to two steps on a single VAT return:

• Declare the VAT due on the purchase (output VAT, on behalf of the treasury).
• Deduct that same VAT within the limits of their right of deduction (input VAT).

Booking the reverse charge (marketplace / Amazon case)

In the accounts, the reverse charge translates into a double entry: an output VAT account and an input VAT account for the same amount, with no cash movement. The result is neutral where the right of deduction is full.

This point is especially sensitive for marketplace sellers. An operator that stores goods across several countries through a logistics programme (a pan-European fulfilment scheme, for example) accumulates mixed flows: stock transfers, B2C sales, local B2B sales. Only some of those sales will fall under Article 194 in 2028.

Reporting obligations: recapitulative statement from 2028, e-reporting in 2030

Beyond the invoice, Article 194 comes with reporting obligations that will tighten with ViDA. Two deadlines are worth watching.

First, the transactions concerned are in principle expected to appear in a recapitulative statement once the mandatory regime takes effect, so that the seller's and buyer's data can be cross-checked. The exact form of this obligation will depend on national transposition.

Then, from 1 July 2030, ViDA introduces real-time digital reporting (Digital Reporting Requirements) tied to intra-EU e-invoicing, which will gradually replace recapitulative statements for cross-border transactions. Convergence of national systems is expected by 2035.

What the mandatory Article 194 does not solve

The mandatory Article 194 removes one reason to register; it does not remove them all. Several situations will still require a local VAT number, even after 1 July 2028.

Here are the cases where registration remains necessary:

• B2C sales: as soon as a final customer is not an identified taxable person, Article 194 does not apply. Depending on the flow, you register locally or use the OSS one-stop shop.
• Imports: the entry of goods from a non-EU country falls under import VAT, not Article 194.
• Transfers of own goods: moving your own stock from one country to another remains a deemed transaction, to be handled separately. On this point, ViDA provides a broadened single-registration mechanism, covered in our article on the transfer of own goods.
• Transactions under the margin scheme, which are excluded from the mechanism.
• Countries where you keep a number for other reasons, the State then retaining the option to let you collect.

Need help preparing for the mandatory Article 194?

Mapping your flows, deciding which VAT numbers to keep or close, securing your invoices and your returns before 1 July 2028: that is exactly the work our team does for non-established businesses across Europe.

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