VAT is supposed to be a charge for the end-consumer. However, given the transaction-based calculation, “not having the VAT treatment right” may easily result in penalties that can impact the bottom line or create burning issues which can put business relations under high pressure.
Can minor mistakes result in material exposures?
One may wonder whether penalties expressed as a percentage of VAT for reverse charge errors which do not lead to underpayment of VAT are fair? And would such penalties pass the ultimate test of the European court of justice?
Source VATconsult
