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EU to extend VAT fraud reverse charge measure

Rollover of reverse charge to fight fraud until December 2025

The European Commission is proposing to allow member states to continue to use optional VAT reverse charge measure to fight fraud. It intends to rollover the existing measures until 31 December 2025. This includes application against risk-prone goods and the Quick Reaction Mechanism (QRM)

How Reverse Charge fights fraud

Cross-border B2B transactions are susceptible to VAT fraud as there should be no VAT charge as zero-rated intra-community supplies. However, criminal gangs whilst declaring zero-rating transactions actually sell goods domestically instead, charge and pocket the VAT.

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.

EU VAT General and Domestic Reverse Charge rule by country

Country General RC (art 194) Domestic Reverse Charge (art 199)
Domestic goods * Immoveable Property Installation Construction Scrap metal Mobile Phones Gas & electrcity Carbon Trading
Austria Yes Yes Yes Yes Yes Yes Yes Yes
Belgium Yes Yes Yes Yes - - Yes Yes
Bulgaria - - Yes - Yes - Yes -
Croatia Yes Yes Yes Yes Yes - Yes Yes
Cyprus - - Yes Yes Yes Yes Yes -
Czech Republic Yes - Yes Yes Yes Yes Yes Yes
Denmark - - Yes - Yes Yes Yes Yes
Estonia Yes Yes Yes - Yes - Yes -
Finland Yes - Yes Yes Yes - Yes Yes
France Yes - Yes Yes Yes - Yes Yes
Germany - Yes Yes Yes Yes Yes Yes Yes
Greece Yes - - - Yes Yes Yes Yes
Hungary  - Yes Yes Yes Yes - Yes Yes
Ireland - Yes Yes Yes Yes - Yes Yes
Italy Yes Yes Yes Yes Yes Yes Yes Yes
Latvia - - Yes Yes Yes Yes Yes -
Lithuania Yes - Yes Yes Yes - Yes -
Luxembourg - - - - - - Yes Yes
Malta Yes - Yes Yes - - Yes -
Netherlands Yes Yes Yes Yes Yes Yes Yes Yes
Poland Yes - Yes Yes - - Yes -
Portugal Yes Yes Yes Yes Yes - Yes Yes
Romania Yes Yes Yes - Yes Yes Yes Yes
Slovakia Yes Yes Yes Yes Yes Yes Yes Yes
Slovenia Yes Yes Yes Yes Yes - Yes Yes
Spain Yes Yes Yes Yes Yes Yes Yes Yes
Sweden  Yes - Yes Yes Yes Yes Yes Yes
Non-EU
Norway - - - - - - - -
Switzerland Yes - Yes - - - Yes -
UK - - Yes - - Yes Yes Yes
* Further local rules on the VAT status of the supplier and their customer need to be considered to determine if RC applies

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