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Germany granted domestic reverse charge for carbon emission trading on fraud fears

Germany wins VAT Directive emissions trading derogation

The Council of the EU has permitted Germany to introduce the domestic reverse charge on carbon emission trading to prevent suspected VAT fraud. This includes missing trader fraud where criminals claim to be selling emission certificate cross-border at zero VAT, but actually sell them in German, collecting but not remitting the VAT due. This will be permitted until 31 December 2024.

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The European Commission and Council backed the request, filed by Germany on 15 March 2021. German wishes to derogate from Article 193 of the VAT Directive for the Fuel Emission Allowance Trading Act (BEHG in Germany). This would permit German to switch the VAT obligations from the seller to the buyer. The buyer would report the sale and purchase under the ‘reverse charge’, and would therefore not have to make a cash payment to the seller – thus eliminating the opportunity to commit VAT fraud.

VAT Calc’s single platform tax engine and VAT return application is built on national and EU VAT Directive laws. This means the treatment of the reverse charge rules are already built-in immediately.

Many other EU member states have applied for this measure in carbon emission trading as there have been several multi-million euro frauds.

Read more about German VAT in our national guide.

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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