EU general reverse charge update

Fri 10th Mar 2017

EU member states have continued to debate the proposed introduction of an anti-VAT fraud general reverse charge mechanism.  This would enable countries to remove the cash-element of B2B domestic transactions, and thus reduce VAT fraud.

France has challenged the plan on the basis that it contravenes EU treaties.  However, the Czech Republic, which sponsored the measure, is likely to push for a rapid acceptance.

The decision to introduce the mechanism, and derogate from the EU VAT Directive, will be down to the member states. No permission will be required by the European Commission – unlike the current sector-by-sector VAT reverse charge mechanism.  Under a majority vote by the EU Council, any country may be blocked if the Commission believes the mechanism is severely damaging to the operation of the single market.

Additionally, any countries implementing the general reverse charge would be required to provide neighbouring states with additional data to help them determine if fraud has spread to their countries.

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