The European Commission on Monday 22 June opposed a request from Italy for a derogation which would allow the country to apply the VAT reverse charge mechanism to the atypical supply of staff.
In a communication to the EU Council, the Commission recalls that Italy has already benefited from two specific measures, in 2017 and 2018, and considers that granting an additional measure such as the one requested would further distance the Italian VAT system from the common VAT system.
Italy requested, under Article 395 of the VAT Directive, that the EU Council, acting on a proposal from the Commission, authorise it to apply the reverse charge mechanism to the atypical supply of staff, i.e. the provision of services carried out by means of procurement contracts, subcontracting, entrustment to consortia or other associated companies.
The country explains that it has observed that, in practice, many of these staff suppliers use various schemes to avoid paying VAT to the tax authorities, including artificially increasing their input VAT in order to generate undue tax credits.
In its Communication, the Commission furthermore considers that the reverse charge mechanism would only make it possible to put an end to a very small part of the fraud in the atypical supply of staff.
Rather, it advocates the introduction of measures in the field of direct taxation and compensation of credits, as well as the use of compulsory electronic invoicing and control measures in this sector.
See the communication: https://bit.ly/2YXkX39 (Original version in French by Marion Fontana)