The European Commission has released a communication announcing a short term action plan to combat VAT fraud. The main target is so-called “missing trader fraud”. This is where a person subject to VAT makes an intra-community acquisition on which no VAT is charged and subsequently supplies the goods domestically, charges VAT and then disappears without paying the tax authorities the charged VAT.

The Commission’s action plan consists of: (i) amendments to the VAT Directive to tighten the conditions under which VAT exemptions will apply and to extend the liability for the VAT payment to other parties involved in the transaction, and (ii) a number of measures that should increase the information exchange between Member State authorities (through the Eurofisc network) or their ability to recover VAT due from residents of another Member State.