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EU Commission Extends Reverse Charge For Latvian Timber

by Ulrika Lomas, Tax-News.com, Brussels

13 November 2015


The European Commission has authorized Latvia to continue applying a measure derogating from Article 193 of the VAT Directive, enabling it to continue applying the reverse charge mechanism on supplies of timber.

The application of a reverse charge is intended to tackle missing trader intra-Community fraud, which manipulates EU place of supply rules on intra-community trade. Exports between member states are zero-rated while domestic transactions are standard rated. Fraudsters often import small, high-value goods into a member state and resell the goods at a discount to the domestic market, collecting the VAT and disappearing before remitting the sum to local authorities.

The reverse charge is intended to ensure that another trader's VAT is never passed up the supply chain, removing the requirement for the supplier to collect and remit VAT, and thereby eliminating the potential for missing trader fraud and other permutations of the scheme.

Latvia had first been allowed to apply the reverse charge on timber temporarily, by a decision of January 24, 2006. It was subsequently extended twice, in 2009 and 2013.

Latvia will now be allowed to apply the reverse charge until December 31, 2018. If the country wishes to seek a further extension, Latvia will be required to request an extension by no later than April 1, 2018.

TAGS: compliance | VAT special schemes | tax | European Commission | value added tax (VAT) | VAT legislation | Latvia | legislation | VAT compliance matters | Europe

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