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External Reverse Charge

Inversione Contabile / Autofattura: TD17, TD18, TD19

What is reverse charge:

The reverse charge is a VAT mechanism where the liability to account for VAT shifts from the supplier to the customer. Instead of paying VAT to the supplier, the buyer self-accounts for it in their VAT return. In Italy, this is common for cross-border services, intra-EU acquisitions, or high-risk sectors.

The autofattura (self-invoice) is the tool the buyer uses to declare VAT when the supplier has not charged it, often because they are non-resident. Through autofattura or invoice integration, the buyer records both output and input VAT, ensuring neutrality of the vat.

This system prevents tax evasion and secures VAT collection, while allowing businesses to deduct VAT normally.

The article here focuses on the external reverse charge, meaning cases where the supplier is abroad and the Italian recipient must handle VAT obligations locally.

We will see how to generate an Auto fattura in Odoo and how the Reverse charge mechanism works automatically.

1. Set up:

1. Make sure the taxes are configured

In standard, you have the following taxes already available and correctly configured for to be used for the Reverse Charge:

Basically, as default for external reverse charge, you will have 2 types of taxes:

% S IC: To use when you purchase services from EU or exEU (TD17)

% G IC: To use when you purchase goods from EU (TD18)

You can create a new tax for the TD19.

% Deposit IC: To use when you buy goods from a foreign vendors but the goods are already in italy.

Odoo recognize a Reverse Charge Tax based on the following default configurations:

A. Distribution of the invoice and tax grid:

+ 100% debit on IVA ns/credito

- 100% credit on Iva ns/debito

B. Tax Grids:

The tax grids are configured out of the box and based on those Odoo will define the type of the document of the electronic invoice "TipoDocumento". (see in the below section for more info) and register the tax amount under the right section of the tax report. (Liquidazione IVA).

For taxes: we will find the usual journal entry in the “Debit” section of the account “160100 VAT Credit” this means that we have paid taxes on this transaction and, in fact, we will have a credit to the Italian government. But in this case, this amount will be offset in the “Debit” section of the account “260100 VAT Debit” because we have not actually paid the taxes to the supplier because the supplier is not in Italian law.

These amounts will go to the right section of the VAT settlement thanks to the “+5v” / “-4v” tax grid that indicates the VAT settlement line where this amount will go

Tipo Documento:

There are different type of documents based on what products you are purchasing and from where:
IC

TD17 - Buying services from EU and non-EU countries;
TD18 - Buying goods from EU;
TD19 - Buying goods from a foreign vendor, but the goods are already in Italy in a VAT deposit.

Odoo recognizes the TipoDocumento based on some conditions. The Official documentation explains it very precisely.

2. FLOW:

1. Create a Vendor Bill

2. Set a reverse charge tax (choose from one in the list above) and confirm:

3. A new button will appear named "Invia Integrazione Tasse" that will allow you to create the auto-invoice useful to send the bill to the Tax Authority in order to pay taxes on the purchase since the vendor is not italian:

4. At this point there are two possible scenario:

A. The invoice is accepted:

If everything was correct and no error is found on the Invoice XML, Odoo automatically send the e-invoice to the public admnistration:

B. The invoice is refused:

If some errors are present on the electronic invoice, the banner will become red and an error message will pop-up describing the related error. Most of the time the errors are related to misconfigurations. In this case, manual operation should be done to fix the eventual error on the invoice or in other model in Odoo.

Once the error is fixed, you can click on retry to send the invoice again.

*Odoo might take few days to process the firsts invoices sent by the SDI. So in this case, the electronic invoice can remain as "To Send" for a while.