EU Parliament votes VAT reverse charge extension to Dec 2025

Legislator endorses continuation of anti-VAT fraud measure and Quick Reaction Mechanism until 31 December 2025

The European Union Parliament has voted to retain the VAT reverse charge mechanism to help reduce the VAT Gap – amount of uncollected EU VAT.  The reverse charge is an optional variation on the EU VAT rules that offers member states the choice to remove cash payments of VAT in certain high-risk sectors where criminal gangs have targeted.

The reverse charge effectively takes the VAT cash payment out of susceptible transactions. This includes:

1. the optional VAT reverse charge mechanism in relation to supplies of specific goods and services susceptible to fraud – computer chips; and
2. use of the Quick Reaction Mechanism (QRM) against VAT fraud. [European Union, European Commission, 02/10/22]

Supplies suspectable to VAT fraud include:

• Goods: mobile phones, computer chips, microprocessors, hi-fi equipment, new and used vehicles and precious metals.
• Services: carbon credits, gas and electricity, cloud computing and VoIP, and green energy certificates.

The European Commission Taxud is launching a EU VAT Gap Initiative in 2022 to help exchange ideas between EU member states’ tax administrations to help close the gap.

EU VAT General and Domestic Reverse Charge rule by country