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principal / Czech Republic calls for an extended reverse charge in the EU
The Czech Finance Minister has proposed a plan to extend the use of domestic reverse charge to almost all domestic supplies.
Reverse charging VAT is an exception to the general VAT rules. Normally, it is the supplier who must account to the tax authorities for any VAT due on the supply. However, for certain goods and services, the obligation to account for the VAT element of the transaction is ´reversed´ and passed to the customer. From an accounting point of view, this system only requires the VAT element to be booked for the same amount in the input VAT account and output VAT account, with the corresponding nil effect in the VAT position.
Extending the reverse charge system to domestic transaction has become the most effective solution to reduce VAT fraud in each Member State. Carousel fraud is the most common form of VAT fraud, triggering tax losses of circa 100 billion Euros every year.