Definition

Recharges refer to costs a business passes on to another entity, usually with VAT applied when the business acts as principal rather than agent.

Key points

• Common in shared office expenses or intercompany transactions.
• Subject to VAT if the original cost related to taxable business activities.
• Must issue a proper VAT invoice when recharging.

Practical example

A holding company recharges rent and utilities to its subsidiaries, including 5% VAT on the total.

Why it matters

Correctly distinguishing between recharges and disbursements prevents VAT misreporting.