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European Commission Rejects Italian Request to apply the Reverse-Charge for Supplies of Goods to the Large Retail Sector — Orbitax Tax News & Alerts

On 22 May 2015, the European Commission published a communication to the EU Council objecting to Italy's request for authorization from the Council to implement a special measure applying the VAT reverse-charge mechanism for supplies of goods to hypermarkets, supermarkets and food discounters in order to counter fraud. The measure was included as part of Italy's Stability Law for 2015, which entered into force 1 January 2015.

According to the communication, the Commission objects to the request based on a number of grounds, including:

  • The Commission doubts that such a broad application of the reverse charge mechanism to a high number of products could still be regarded as a special measure within the meaning of Article 395 of the VAT Directive;
  • Neither the nature nor the extent of possible specific fraud in relation to supplies to the large retail sector has been demonstrated, and it is not ascertained that the reverse-charge mechanism would be an appropriate measure or have the positive impact expected by the Italian authorities; and
  • The Italian authorities did not demonstrate that the relevant goods at stake are of a nature that would make auditing through conventional control means impossible

Click the following link for the full Communication to the EU Council