On 3 June 2022, finance ministers adopted a directive amending EU VAT legislation to extend the application period of the optional VAT reverse charge mechanism until 31 December 2026.
The reverse charge mechanism is a measure that aims to reduce the risk of VAT fraud, and particularly Missing Trader Intra-Community fraud, by shifting liability for VAT payment from the vendor to the customer. This type of fraud occurs when a trader acquires goods, transported or dispatched from another Member State, and exempt from VAT, and sells them on including VAT on the invoice to the customer. After having received the VAT amount from the customer, the trader disappears before paying the VAT due to the tax authorities.
The extension will also apply to the Quick Reaction Mechanism (QRM) to combat VAT fraud. The QRM allows Member States to quickly introduce a temporary reverse charge mechanism for the supply of goods and services in particular sectors if sudden, massive fraud occurs.
To find out more, please click here.
- Publication date
- 13 June 2022
- Directorate-General for Taxation and Customs Union