Impacts of the application of the reverse charge mechanism of the value added tax

Abstract

Reverse charge mechanism is considered to be a specific mechanism when applying the value added tax. The liability to declare and pay the output tax is transferred to the recipient of the fulfillment within the reverse charge mechanism. Since Apri1 1, 2011 there has been extended the application of the reverse charge mechanism to the domestic (home) fulfillments and since this date the mechanism has been applied to the delivery of slag, waste and metal scrap, defined in the Annex 5 and to the trading with the greenhouse gas emissions allowances. Since January 1, 2012 the reverse charge mechanism has been applied also for construction and assembly works which leads to a significant extension of VAT payers which this provision may affect. The paper will evaluate the impacts of the application of the reverse charge mechanism to the provider and the recipient of the taxable fulfillments, mainly for the construction works. There will be evaluated also the impacts of the administrative burden related to the evidence of the reverse charge mechanism for the tax entity and also for the tax administrator.