Tax and Duties
On Re-invoicing and VAT: How to Avoid Mistakes
Understand the differences between re-invoicing, disbursements, and cost-sharing, and how correct buyer and seller responsibility determines VAT treatment.
2 min read · Translated from Norwegian. Read the original
Re-invoicing is often used when one business purchases a good or service that is to be charged, either wholly or partially, to another. The VAT treatment is not solely determined by whether the amount is passed on without a mark-up. The key aspects are what has actually been purchased and supplied, who the contractual party is, and who bears the seller's responsibility.
When does a new supply occur?
If company A purchases in its own name and then delivers the service to company B, a new supply may be deemed to have occurred. In such cases, A should normally issue a sales document and treat the VAT according to the rules applicable to the supply. The fact that A does not add a profit margin does not, on its own, resolve the matter.
Disbursements are different
In the case of a genuine disbursement, the payer acts on behalf of the actual buyer. The supplier's invoice should then identify the end customer as the buyer, while another party merely pays the expense. The reimbursement is not automatically payment for a new supply.
Cost-sharing and joint purchases
When multiple businesses use a joint purchase, specific documentation rules may apply. The assessment is concrete. Agreements, invoice recipient, usage allocation, price risk, credit risk, and liability for defects can all be significant factors.
Invoice addressed to the wrong company
If the supplier's invoice is addressed to the wrong group company, it should not be assumed that the error can be resolved through internal invoicing. The Norwegian Tax Administration (Skatteetaten) states that in such cases, the supplier must be able to issue a credit note to the incorrect recipient and invoice the correct buyer.
On Proffi
Proffi can reduce errors by displaying the correct legal name, organisation number (organisasjonsnummer), group affiliation, and VAT status before an order. The system should not suggest a VAT code without clarifying the user's role and the actual transaction.
Source
Frequently asked questions
- Should VAT always be applied to re-invoicing?
- No. The treatment depends on whether a supply has occurred and the type of service involved.
- Is re-invoicing without a mark-up considered a disbursement?
- Not necessarily. The absence of a mark-up is not the sole determining factor.
- Can a group treat all purchases as internal disbursements?
- No. Group companies are separate legal entities, and each transaction must be assessed individually.