EU – general reverse charge delayed

The European Commission (EC) has put on hold the proposal for the voluntary introduction of the general reverse charge mechanism to combat VAT fraud. At this week’s ECOFIN meeting of European Union (EU) Finance Ministers legal concerns were raised, thus the delay.

Several issues were highlighted by the EU’s legal team, including:

1. The uncertainty of the EU Council or the EC having the right to decide if a Member State is eligible to deploy the measure.
2. There is some uncertainty as to whether the EC’s of the measure is acceptable to justify its source from the EU VAT Directive.
3. There could be a risk of one EU state introduces the measure, the fraud could move to neighbouring countries, which would then be forced to implement the measure.

Some EU Member States also queried whether the suggested trial period of six months was sufficient to assess the effectiveness of the system. There was also a request from a small number of EU Member States that the measure should be in place longer than the planned 2022.