Germany extends domestic reverse charge for carbon emission trading on fraud fears

Oct 2024: EC grants Germany VAT Directive emissions trading derogation extension

The Council of the EU has permitted Germany to extend the domestic reverse charge on carbon emission trading to prevent suspected VAT fraud. This includes missing trader fraud where criminals claim to be selling emission certificate cross-border at zero VAT, but actually sell them in German, collecting but not remitting the VAT due. This will be permitted until 31 December 2026 – it had been due to expire at the end of 2024.

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The European Commission and Council backed the request, filed by Germany on 15 February 2024. German wishes to continue to derogate from Article 193 of the VAT Directive for the Fuel Emission Allowance Trading Act (BEHG in Germany). This permits German to switch the VAT obligations from the seller to the buyer. The buyer would report the sale and purchase under the ‘reverse charge’, and would therefore not have to make a cash payment to the seller – thus eliminating the opportunity to commit VAT fraud.

VAT Calc’s single platform tax engine and VAT return application is built on national and EU VAT Directive laws. This means the treatment of the reverse charge rules are already built-in immediately.

Many other EU member states have applied for this measure in carbon emission trading as there have been several multi-million euro frauds.

Read more about German VAT in our national guide.

EU VAT General and Domestic Reverse Charge rule by country