This alternative is intended for suppliers that shall be handled with reversed liability for payment (reverse VAT). The supplier's VAT code shall be VAT code 1, but on purchase orders and supplier invoices the VAT code 4 (exempt from VAT) will be set. In some cases within the construction industry the buyer reports both the input and the output VAT.
If you select the Reversed Liability for Payment box, the purchase order will be managed the same way as a purchase order to an EU supplier, in other words the VAT amount will automatically be set to zero (0) and a fictitious input and output VAT will be coded. You will find special standard accounts for reversed liability for payment in the Chart of Accounts / Standard Accounts procedure in the Global Settings.