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Reverse charges occur when the recipient of goods or services pays expenses that are normally paid by the supplier, such as VAT or telephone calls. Parties can decline or avoid these charges, and they must be disclosed at the outset of the transaction. Recipients should keep records and dispute any incorrect charges.
Chargebacks are expenses normally paid by the supplier but incurred by the recipients of goods and services, with the two most common examples being some forms of value added tax (VAT) and telephone calls. In these situations, the party that would normally be liable for the charges does not pay them, with the burden passing to the other party to the transaction. You can decline or avoid the reverse charge, as they are disclosed early in the transaction to give the parties an opportunity to decline.
With telephone billing, usually the caller also pays. In collect calls, callers reverse the charges to the recipient. Typically, when the recipient answers the phone, a recorded message plays to inform you that it is a collect call. The message provides information about the rates and asks if the recipient accepts the charges. Recipients can decline the charges and hang up if they don’t want to pay.
Reverse phone billing charges commonly occur in emergency situations when callers don’t have money or access to a cell phone, but need to place a call for assistance to an attorney, friend, or family member. An operator will assist the caller in placing the call and obtaining authorization for reverse charges. The charges will appear on a bill issued by the telephone company, which will forward the collected money to the agency that placed the call on behalf of the caller.
With some situations involving VAT, reverse charges can come into play. Sellers normally have to pay VAT on the goods they sell, with the amount of the tax liability increasing as the goods gain in value. Sellers determine their overall tax burden, subtract the tax already paid by sellers further up the supply chain, and remit the remainder as VAT. In reverse charges, the buyer must pay the tax, not the seller, and the invoice will clearly state that the buyer is liable to tax with the purchase.
Like other fees and charges, reverse charges must be disclosed at the outset of the transaction to make all parties aware of the terms. You can decline the charges by refusing to complete the transaction. In cases where charges are accepted, it is important to note the terms and keep records in the event of a dispute. With a collect call, for example, the recipient should ensure that they are billed appropriately; if the billed call comes from a different location than the original call, or the time is clearly wrong, he should contact the telephone company to open a dispute.
Smart Asset.
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