Disbursements vs. Recharges : Understanding VAT Implications across the EU

octobre 10, 2025 Mise à jour sur la TVA dans l'UE, Perspectives

Situation actuelle

In the world of VAT compliance, few topics cause more confusion than the distinction between disbursements and recharges.

While both involve passing costs to clients, their VAT treatment is fundamentally different. Misclassifying these expenses, setting them incorrectly in SAP can lead to incorrect VAT reporting, as well as penalties.

What’s the Difference?

Disbursements

A disbursement is a payment made on behalf of a client, where the client is the actual recipient of the goods or services.

Key characteristics:

  • You pay a third-party supplier in the name and on behalf of your client.
  • The client is responsible for the cost.
  • You do not mark up the amount.
  • You do not charge VAT on the disbursement.
  • You cannot reclaim VAT on the original expense.

VAT implications: Disbursements are outside the scope of VAT.

Recharges

A recharge is a cost incurred by your business as part of delivering a service, which you then pass on to the client. You are the recipient of the supply and the cost forms part of your own service.

Key characteristics:

  • You choose the supplier and pay in your own name.
  • The cost is part of your business expense.
  • You can reclaim VAT on the original expense.
  • You must charge VAT when recharging the client

VAT implications: Recharges are subject to VAT, based on the nature of the underlying service.

Practical tips for Businesses

While the principles are harmonized across the EU, national interpretations may vary slightly.

Understanding the difference between disbursements and recharges is essential for accurate VAT compliance across the EU. While disbursements may seem simpler, they require strict conditions to be met. Recharges, on the other hand, are more common and must be treated as part of your taxable supply.

Getting it right means avoiding costly mistakes—and staying on the right side of the tax authorities.

If you need our help to review the practical tips to make sure you are accurately treating these correctly from a VAT perspective, please feel free to contact us.

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