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Reverse charges are fees normally paid by the provider but incurred by the recipient, such as VAT and collect phone calls. They can be declined, and must be disclosed upfront. Recipients can decline collect calls, and with VAT, the buyer pays the tax, not the seller.
Reverse charges are charges normally paid by the provider but incurred by the recipients of goods and services, the two most common examples being certain forms of value added tax (VAT) and collect phone calls. In these situations, the party who would normally be responsible for the charges does not pay them, and the charge passes to the other party in the transaction. Reverse charges can be declined or avoided as they are disclosed up front in the transaction to give parties the opportunity to decline.
With telephone billing, usually the party making a call also pays for it. On collect calls, the callers reverse the charges to the recipient. Typically, when the recipient answers the phone, a recorded message is played to inform them that it is a collect call. The message provides fee information and asks if the recipient accepts the charges. Recipients can decline the charges and hang up if they don’t want to pay.
Reverse charges with phone billing are commonly seen in emergency situations when callers don’t have money or access to a mobile phone, but need to call a lawyer, friend or family member for help. An operator will help the caller place the call and get authorization to reverse the charges. Charges will appear on a bill issued by the telephone company and forward the collected funds to the agency that placed the call on the caller’s behalf.
With some situations involving VAT, reverse charges can come into play. Sellers are normally required to pay VAT on the goods they sell, and the amount of the tax liability increases as the goods gain value. Sellers determine the overall tax liability, subtract any taxes already paid by sellers further up the supply chain, and remit the rest as VAT. On reverse charges, the buyer must pay the tax, not the seller, and the invoice will clearly state that the buyer is incurring a tax liability with the purchase.
Like other fees and charges, reverse charges must be disclosed at the beginning of the transaction so that all parties are aware of the terms. It is possible to reject the charges by refusing to complete the transaction. In cases where charges are accepted, it is important to take note of the terms and keep a record in case of dispute. With a collect call, for example, the recipient must ensure that they are billed properly; If the call on the bill originates from a different location than the original call, or if the time is clearly down, you should contact the phone company to file a dispute.
Smart Asset.
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