Czech electricity VAT fraud

The Czech Republic has extended the use of the VAT reverse charge mechanism to key telecoms services from 1 October 2016. The move will help to reduce VAT missing trader fraud in the wholesale telecoms sector.

The domestic reverse charge removes the cash payment of VAT on B2B sales of goods or services within an EU country. It typically requires special permission from the European Commission (EC) as VAT is harmonized across the EU.

The UK introduced the reverse charge in this area in February 2016. The EC has estimated that VAT fraud costs the EU over €40 billion per annum. Over the past ten years, organized crime has targeted a number of sectors with missing trader fraud, which exploits VAT reliefs on cross border trade. Other sectors affected include: mobile phones; laptops; computer chips; carbon trading; precious metals; and wholesale electricity trading.