On 21 June 2013, the European Council reached political agreement on a package of measures aimed at increasing member states' effectiveness in combating VAT fraud.
A "quick reaction mechanism" will be put in place allowing member states to apply a "reverse charge" to specific supplies of goods and services for a short period of time, by derogation from the provisions of the VAT Directive.
The measures will be based on two directives. One will introduce the "quick reaction mechanism", enabling governments to take immediate measures in the event of sudden and massive VAT fraud, and the other will allow member states to implement, on an optional and temporary basis, a reverse charge mechanism.
The proposed reverse charge mechanism is effectively a reversal of liability for the payment of VAT on the supply of certain goods and services. It is aimed at closing off certain types of known VAT fraud – in particular carousel schemes – by allowing liability for the payment of VAT to be shifted from the supplier (as normally required by EU rules) to the customer. Member states would have the option of applying it within a pre-determined list of sectors.
The two mechanisms will be temporary, and will expire at the end
of 2018.
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