EU Conncil: VAT fraud: Council agrees to allow generalised, temporary reversal of liability

Politik & Recht

n 2 October, the Council agreed a proposal that will allow temporary derogations from normal VAT rules in order to better prevent VAT fraud. The proposed directive will allow member states that are most severely affected by VAT fraud to temporarily apply a generalised reversal of VAT liability.


This so-called generalised ‘reverse charge’ mechanism involves shifting liability for VAT payments from the supplier to the customer. The Commission issued the proposal in December 2016 at the request of member states particularly affected by VAT fraud.

"This directive will provide a solution for member states that face endemic carousel fraud", said Hartwig Löger, minister for finance of Austria, which currently holds the Council presidency. "It is an exceptional measure, limited in time, that could prove to be an efficient way to fight VAT fraud."

Member states will be able to use the generalised reverse charge mechanism (GRCM), only for domestic supplies of goods and services above a threshold of €17 500 per transaction, only up until 30 June 2022, and under very strict technical conditions. In particular, in a member state that wishes to apply such measure, 25% of the VAT gap has to be due to carousel fraud. Among other requirements, this member state will have to establish appropriate and effective electronic reporting obligations on all taxable persons, in particular those to which the mechanism would apply.

The generalised reverse charge mechanism may only be used by a member state once it meets the eligibility criteria and its request has been authorised by the Council. The application of this measure is also subject to strict EU safeguards.




© 2019 BvDP. Nutzungsbedingungen Alle Rechte vorbehalten.