How does the "reverse charge" mechanism function in VAT?

The reverse charge mechanism in VAT is a crucial aspect of the indirect tax system that shifts the responsibility for accounting for VAT from the seller to the buyer. This approach is typically used in specific situations, such as transactions involving cross-border services or in certain domestic circumstances, to simplify tax collection and to combat tax fraud.

When the buyer accounts for VAT instead of the seller, it means that the buyer must consider the VAT liability and report it in their VAT return. This is particularly beneficial in scenarios where the seller may not be established in the same country as the buyer, as it removes the need for the seller to register for VAT in that jurisdiction. As a result, it streamlines the process and reduces compliance burdens for sellers who operate internationally.

In the context of this question, the option stating that the buyer accounts for VAT rather than the seller accurately reflects the function of the reverse charge mechanism, making it the correct answer. This shift aligns the tax responsibility with the party most capable of fulfilling it, thus enhancing efficiency in VAT reporting and collection.