Denmark extends VAT reverse charge

Thu 27th Feb 2014

Denmark has become the latest country to extend its VAT reverse charge to domestic supplies of high value goods.

Denmark acts on VAT fraud

From the 1 July 2014, domestic B2B supplies of mobile phones, games machines, laptops, tablets and computer chips will be exempt from VAT at 25%.  Instead, the customer will become liable to record the VAT sale and purchase as a single transaction in their VAT return.  There will therefore be no cash transaction.

The extension of the reverse charge has been applied to counter a recent increase in VAT fraud on high-value, low-volume goods in Denmark.

The Danes are taking advantage of the EU’s new rapid response VAT fraud mechanism, introduced in 2013 following major frauds across the European Union.  Typically this involves criminals buying up computer chips and mobile phones and claiming to sell them to customers at zero VAT.  This enables them to reclaim the input VAT on the purchases since the sales are exempt as intra-community supplies.  However, they are actually selling the goods locally, charging VAT but then disappearing without paying over the sales VAT.  This is known as missing trader fraud.

Retail sales to individuals will remain subject to Danish VAT.