Domestic reverse charge mechanism to combat MTIC fraud
The derogation to allow the optional application of the domestic reverse charge mechanism (DRCM) was permitted by Council Directive 2010/23/EU (insertion of Article 199a on emission allowances), and its subsequent extension by Council Directive 2013/43/EU. Both of these Council Directives amended the general VAT Directive 2006/112/EC (consolidated version documentary value only).
Council Directive (EU) 2018/1695 (entering into force on 2 December 2018) actively extends the amendments to Article 199a of the VAT Directive, meaning Member States can continue to apply the domestic reverse charge mechanism (DRCM) to transactions in electricity, gas and emission allowances until 30 June 2022.
The measure enables Member States to apply the reverse charge to specific goods and services, including:
- emission allowances;
- other units for compliance with the EU ETS Directive;
- supplies of gas and electricity to a taxable dealer;
- supplies of gas and electricity certificates.
Successive amendments were incorporated into this Regulation. In 2018, Council Regulation (EU) 2018/1541 amending Regulations (EU) No 904/2010 and (EU) 2017/2454 as regards measures to strengthen administrative cooperation in the field of value added tax, was adopted to provide Member States with further tools to better combat missing trader fraud (MTIC), such as joint risk analysis and improved information exchange between tax administrations.
Move to a definitive VAT regime
In October 2017, the Commission proposed to change the VAT system for cross-border B2B goods, by removing the current VAT exemption for intra-community supplies, and moving to taxation in the country of destination. See Communication COM(2017) 566 final and Q&A.
More detailed technical proposals were released by the Commission on 25 May 2018.