On December 27, 2018, Council Directive (EU) 2018/2057 was published in the Official Journal of the European Union, and it will enter into force on the twentieth day following that date. It amends the EU VAT Directive (2006/112) to provide for temporary application of a generalized reverse charge mechanism (GRCM) relative to supplies of goods and services above a certain threshold. Specifically, a member state may, until June 2022, introduce a GRCM on non-cross-border supplies where the person liable for payment of VAT is the taxable person to whom all supplies of goods and services are made above a threshold of EUR 17,500 per transaction. Its purpose is to remove the opportunity to engage in carousel fraud by designating the taxable person to whom goods or services are supplied as the person liable for payment of VAT.
A member state wishing to introduce GRCM must meet the following conditions:
- It had in 2014 a VAT gap of at least 5 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
- It establishes that the estimated gains in tax compliance expected as a result of the introduction of the GRCM outweigh the expected additional burden on businesses and tax authorities by at least 25%
- It establishes that the introduction of the GRCM will not result in businesses and tax authorities incurring costs that are higher than those incurred as a result of the application of other control measures
A member state applying the GRCM must also establish appropriate and effective electronic reporting obligations.