EU states seek wider VAT Reverse Charge as ViDA fraud controls approach

• EU Commission proposes extending Article 199a reverse charge until 30 June 2030
• Austria, Czechia and Germany want its scope widened to further fraud-prone transactions
• Proposed additions include certain property, motor vehicle, carbon allowance and cryptoasset transactions
• The request raises questions over how quickly ViDA’s digital reporting can replace existing anti-fraud controls

Reverse charge gets another lease of life

The European Commission has proposed extending the optional VAT Directive Article 199a domestic reverse charge mechanism from the end of 2026 until 30 June 2030.

Article 199a allows Member States to shift responsibility for VAT from the supplier to the business customer for specified transactions considered particularly vulnerable to fraud. The extension is intended largely as a bridge to ViDA’s Digital Reporting Requirements (DRR), which start for intra-EU transactions from 1 July 2030.

But Austria, Czechia and Germany want to go further.

In an October non-paper, the three countries requested that Article 199a should also cover:

• certain real estate transactions
• motor vehicles
• national greenhouse gas emission allowances
• certain transactions paid for with cryptoassets

If agreed, Member States could apply domestic reverse charge to these transactions without seeking individual VAT derogations.

Why expand reverse charge just before ViDA?

That is the interesting part. ViDA is designed to give tax authorities much faster transaction-level information, backed by upgraded VIES controls. In theory, this should make VAT fraud easier to identify and disrupt.

Reverse charge takes a more direct approach. If the supplier does not collect the VAT, there is no VAT for a fraudulent supplier to disappear with.

The request from Austria, Czechia and Germany therefore suggests that Member States are not yet ready to rely solely on better data and faster fraud detection.

Cryptoassets are particularly notable. Their inclusion would extend an anti-fraud mechanism previously associated with highly tradeable products such as emissions allowances, mobile phones and computer chips into a newer class of potentially mobile transactions.

ViDA will change fraud controls, not necessarily replace them

The Commission envisages Article 199a continuing until ViDA DRR starts in July 2030. The latest request raises a bigger question: will Member States actually want to surrender reverse charge once ViDA is live?

Digital reporting helps tax authorities see suspicious transactions sooner. Reverse charge can remove the VAT fraud opportunity before it arises.

As 2030 approaches, governments may decide they want both.

EU VAT General and Domestic Reverse Charge rule by country