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European Union

11 May 2022

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European Parliament Approves Proposed Extension of VAT Reverse Charge and Quick Reaction Mechanisms

The European Parliament has published the Legislative Resolution of 3 May 2022, which approves the European Commission's proposal for a Council Directive amending Directive 2006/112/EC as regards the extension of the application period of the optional reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud and of the Quick Reaction Mechanism against VAT fraud. In particular, the proposal prolongs:

  • the possibility for Member States to apply the reverse charge mechanism to combat existing fraud in supplies of goods and services included in Article 199a of the VAT Directive; and
  • the possibility to use the Quick Reaction Mechanism (QRM), as set out in Article 199b of the VAT Directive, to combat fraud via the application of the reverse charge mechanism in very specific cases.

The optional reverse charge mechanism is used to address "carousel" or "missing trader fraud". The QRM allows Member States to quickly introduce a temporary reverse charge mechanism for supplies of goods and services in sectors where sudden and massive fraud occurred, and which are not listed in Article 199a of the VAT Directive. The application period of both Articles 199a and 199b is currently scheduled to expire on 30 June 2022.

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