Proposal for a Council Directive amending Directive 2006/112/EC of VAT as regards the temporary application of a generalised reverse charge mechanism in the supply of goods and services
In line with the measures set out in the VAT Action Plan submitted by the European Commission, the purpose of which is to seek a VAT system based on the principle of taxation in the country of destination of goods and services, the Commission, as an urgent and temporary measure to combat VAT fraud and upon request of certain Member States, has submitted a proposal for a Directive amending the VAT Directive by introducing a generalized system of reverse charge mechanism for the supply of goods and services.
The main feature of the anti-fraud measure is to establish a generalised reverse charge mechanism (GRCM in English) under which all supplies of goods and services over a threshold of EUR 10,000 per invoice will be subject to the reverse charge rule for the taxable person, that is, the person liable for VAT will be the taxable person to whom the transactions are addressed.
This will be a temporary measure in any case, until June 30th 2022, but not all Member States will be able to implement it. In fact, this mechanism is optional and each Member State can decide if request for it, as long as it fulfils the requirements for application. These requirements are related to the level of fraud in the country and are the following:
– It has a VAT gap of at least five percentage points above the Community median VAT gap.
– It has a carousel fraud level within its total VAT gap of more than 25%.
– It establishes that other control measures are not sufficient to combat carousel fraud on its territory.
In addition, this measure may also be applicable by those Member States which are border with another Member State implementing it, when it is considered that there is a serious risk of shift of fraud towards its territory and that other control measures are not sufficient to combat fraud in his territory.
In summary, according to this proposal for a Directive, those Member States which are willing to apply for this mechanism and meet the requirements for this, would be entitled to implement a generalised reverse charge mechanism for all supplies of goods and services exceeding EUR 10,000 per invoice, as a temporary measure of VAT fraud control until June 30th 2022. When this measure is established, obligations will be set for the taxable person concerned (especially those who carry out the supply of goods and services subject to this mechanism) for which they must electronically supply adequate and effective information.
A copy of the proposal for a Council Directive is attached.