EU Commission approved the request of Czech Republic for possibility to use generalized reverse charge mechanism. If adopted, reverse charge application would be related to all domestic transactions above 17,500 euros, or equivalent 450,000 CZK. Until now the local reverse charge mechanism was permitted as a derogation from EU VAT Directive in sectors vulnerable to tax fraud, i.e. in IT sphere – laptops, computer chips, mobile phones or carbon credits; then precious metals, cereals, specific delivery of gas or electricity etc. The main reason for generalized reverse charge is obviously to fight with tax fraud and solve the VAT Gap.
Currently the request is pushed forward to EU Council where approval by common consent is needed. Based on current information the proposal should be discussed on a working level during this summer holiday season. Once finished and after elimination of any possible reservations of other Member States the request will be discussed on ministry level.
Czech Ministry of Finance expects that generalized reverse charge could be used as from 1st July 2020 if the proposal will be approved on all levels without any major delays. Using of generalized reverse charge is however limited by time as it should be terminated until 22 June 2022 due to planned definitive system of VAT within EU. The timelines for approvals of definitive system are not however sure, so some prolongations also for generalized reverse charge are possible.
