Accounting, Payroll, Tax & Legal since 1989

General reverse charge in VAT on EU agenda

EU finance ministers are expected to discuss on Friday 27 January the December 2016 proposal from the European Commission to amend the VAT Directive with a temporary generalised reverse charge mechanism for all domestic supplies above an invoice threshold of 10 000 Euro.

The Proposal for a Directive amending Directive 2006/112/EC on the common system of value added tax as regards the temporary application of a generalised reverse charge mechanism in relation to supplies of goods and services above a certain threshold came from the European Commission on 22 December 2016. The proposal would allow EU Member states to derogate from the standard VAT system on a voluntary basis and apply a general reverse charge on all domestic supplies above the invoice threshold of 10.000 Euro, effectively shifting the VAT payment liability from the supplier to the customer.

The amendments come after requests by a number of Member states with significant revenue losses due to VAT fraud. The EU-wide VAT tax gap is estimated at alarming level of EUR 160 billion, according to the Case Study and Reports on the VAT Gap in the EU-28 Member States 2016 Final Report.

The Commission proposes the general reverse charge to be in force until 30 June 2022, until when the ongoing comprehensive reform on the EU VAT system is completed, the cornerstone of which is the ‘’destination’’ principle.


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