Poland extends anti-VAT fraud energy domestic reverse charge

Risk of missing trader VAT fraud in energy wholesale markets prompts zero-rating until December 2026

Poland is rolling over the application of the domestic reveres charge on wholesale electricity and gas supplies until 31 December 2026. The measure, introduced in 2023 (see below) was due to expire in February 2025.

April 2023: Poland introduces electricity reverse charge

Poland has become the latest country to introduce the VAT reverse charge on domestic energy trading transactions. This removes the VAT cash payment on wholesale deals which are subject to missing trader fraud. Instead of the seller of the trade being responsible for charging Polish VAT, their customer instead takes on the liability to report the VAT. This means the seller does not have to charge or collect VAT.

Whilst ostensibly used to combat VAT fraud, Poland has made clear it is introducing the VAT simplification to help its wholesale trades remain competitive with other countries that have already introduced the domestic reverse charge.

This will apply between 1 April 2023 and 28 February 2025.

The new rules apply to:

• gas system
• electricity in the power system; and
• services for the transfer, including commodity exchanges, of greenhouse gas (CO2) emission allowances.

Many other European countries have introduced this fraud measure, including:

• Czech Republic
• Denmark
• Germany
• Ireland
• Italy
• Portugal
• Romania
• UK

Optional general and domestic reverse charge in EU

The EU’s VAT Directive permits two types of optional reverse charge

1. General Reverse Charge:  Non-resident companies selling goods domestically to other businesses, where countries elect the may provision of Article 194 of the EU VAT Directive, or similar rules outside of the EU (see list below); and
2. Domestic Reverse Charge: resident and non-resident companies selling fraud-sensitive goods where the country has elected under Article 199 of the EU VAT Directive (see below).

EU VAT General and Domestic Reverse Charge rule by country