EU VAT general reverse charge delayed

The European Commission’s proposal for the voluntary introduction of the general reverse charge to combat VAT fraud has been put on pause.  The delay is due to legal concerns raised at this week’s ECOFIN meeting of EU Finance Ministers.

The EU’s Legal team has highlighted several issues, including:

• There is uncertainty if the EU Council or the EC should have the right to decide if a member state is eligible to deploy the measure
• There is doubt as to whether the EC’s assessment of the measure is adequate to justify its derivation from the EU VAT Directive
• There is a risk that one state introducing the measure would result in fraud moving to neighbouring countries which would in turn be forced to implement the measure

A number of states also questioned whether the proposed trial period of six months was adequate to evaluate the effectiveness of the regime.  A small minority of states also requested that the measure should be in place beyond the scheduled 2022.

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