COMMUNICATION FROM THE COMMISSION TO THE COUNCIL in accordance with Article 395 of Council Directive 2006/112/EC
Date: 2026-02-06
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Austria, VAT, derogation from EU law, property development, real property, supply, tax relief, taxpayer

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   EUROPEAN COMMISSION  Brussels, 6.2.2026  COM(2026) 64 final  COMMUNICATION FROM THE COMMISSION TO THE COUNCIL in accordance with Article 395 of Council Directive 2006/112/EC  
 
 
1. 

BACKGROUND 

Pursuant to Article 395 of Council Directive 2006/112/EC of 28 November 2006 on 
the  common  system  of  value  added  tax1  (the  VAT  Directive),  the  Council,  acting 
unanimously on a proposal from the Commission, may authorise any Member State to 
introduce special measures for derogation from the provisions of this Directive, in order 
to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion 
or avoidance. As this procedure provides for derogation from the general principles of 
VAT, in accordance with the case-law of the Court of Justice of the European Union 
(CJEU),  the  national  derogating  measures  referred  to  in  Article  395  of  the  VAT 
Directive which are allowed ‘in order to simplify the procedure for charging the tax or 
to prevent certain types of tax evasion or avoidance’, must be interpreted strictly and 
those  measures  must  also  be  necessary  and  appropriate  for  realising  the  specific 
objective which they pursue and have as little effect as possible on the objectives and 
principles of the VAT Directive2. 

By  letter  registered  at  the  Commission  on  27  May  2024,  the  Republic  of  Austria 
(‘Austria’) requested an authorisation to apply a measure derogating from Article 193 
of  the  VAT  Directive.  The  Commission  sent  a  letter  on  17  July  2024  requesting 
additional information. By letter registered at the Commission on 27 September 2024, 
Austria  provided  further  information.  However,  since  not  enough  information  was 
provided  regarding,  in  particular,  the  fraud  situation  and  the  amounts  involved,  the 
Commission sent an additional letter on 3 December 2024. By letter registered with the 
Commission  on  18  June  2025,  Austria  provided  further  information  in  reply  to  this 
additional request. 

In  accordance  with  the  second  paragraph  of Article  395  of  the  VAT  Directive,  the 
Commission informed the other Member States by letter dated 16 December 2025 of 
the  request  made  by Austria.  By  letter  dated  17  December  2025,  the  Commission 
notified Austria that it had all the information it considered necessary for appraisal of 
the request. 

2. 

REVERSE CHARGE 

The person liable for the payment of VAT pursuant to Article 193 of the VAT Directive 
is the taxable person supplying the goods or services. The purpose of the reverse charge 
mechanism is to shift that liability onto the taxable person to whom the supplies are 
made. 

Missing  trader  fraud  occurs  when  traders  evade  paying  VAT  to  tax  authorities  after 
selling  their  goods  and  collecting  the  VAT  from  the  customer.  Their  customers 
however, in case they are taxable persons, are, as a rule, entitled to tax deduction when 
in  possession  of  a  valid  invoice.  By  designating  the  person  to  whom  the  goods  are 
supplied as the person liable for the payment of VAT in such cases, the reverse charge 

1 OJ L 347, 11.12.2006, p. 1 
2 See judgment of 27 January 2011 in case Vandoorne C-489/09, EU:C:2011:33, paragraph 27. 

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mechanism has been found to eliminate the opportunity to engage in that form of tax 
evasion. 

3. 

THE REQUEST 

Austria requests, under Article 395 of the VAT Directive, that the Council, acting upon 
a proposal  of the  Commission, would authorise the application of a special measure 
derogating  from  Article  193  of  the  VAT  Directive  as  regards  the  application  of  the 
reverse charge mechanism in relation to supplies of immovable property by real estate 
developers,  insofar  not  already  covered  by  Article  199(1)(c)  of  the  VAT  Directive. 
Article 199(1)(c) of the VAT Directive allows Member States to use the reverse charge 
mechanism for supplies of immovable property as referred to in Article 135(1)(j) and 
(k)  of  the  VAT  Directive,  where  the  supplier  has  opted  for  taxation  pursuant  to 
Article 137 of the VAT Directive. This entails that, pursuant to Article 199(1)(c) of the 
VAT Directive (where the supplier has opted for taxation), the supply of immovable 
property  after first  occupation  or the supply of land other than building  land can be 
covered by the reverse charge mechanism. In essence, Austria requests that, on the basis 
of a derogation, supplies of immovable property prior to first occupation and the supply 
of building land can be brought under the reverse charge mechanism. 

The main aim of the requested derogation is to fight against fraud as, according to the 
Austrian request, purchasers of immovable property for business use from real estate 
developers,  claim  the  input  tax  deduction  where,  at  the  same  time,  these  real  estate 
developers fail to pay the VAT received on their supplies to the tax authorities. 

4. 

THE COMMISSION’S VIEW 

When  the  Commission  receives  requests  in  accordance  with Article  395  of  the VAT 
Directive,  these  are  examined  with  a  view  to  ensure  that  the  basic  conditions  for 
granting a derogation are fulfilled, i.e. whether the proposed specific measure simplifies 
procedures for taxable persons and/or the tax administration or whether the proposal 
aims  to  prevent  certain  types  of  tax  evasion  or  avoidance.  In  this  context,  the 
Commission  has  always  taken  a  restrictive,  cautious  approach  to  ensure  that 
derogations do not undermine the operation of the general VAT system, are limited in 
scope,  necessary  and  proportionate. Any  derogation  from  the  system  of  fractioned 
payment can, therefore, not be more than a last resort and an emergency measure and 
must  offer  guarantees  as  to  the  necessity  and  exceptional  nature  of  the  derogation 
granted.  

It is the Commission’s view that the type of supplies in question, namely of immovable 
property,  via  the  intervention  of  notaries  and  lawyers,  should  make  a  follow-up  and 
auditing possible through conventional means, also taking into account that, as stated 
by Austria, the identified fraud cases mainly are linked to real estate developers that are 
undertakings resident in Austria. 

Further, figures on the estimated number or share of transactions under the requested 
measure as well as the perceived fraud exposure remain somewhat unclear. On the basis 
of the information provided by Austria, calculations seem to indicate that the potentially 
fraudulent operations represent around 3,33% of the total turnover of B2B immovable 

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property transactions which are subject to VAT in Austria. Also, an annual estimated 
exposure of €100 million is calculated on the basis of an estimated 50 transactions of 
€10  million  at  a  20%  VAT  rate.  Based  again  on  the  data  provided  by  the Austrian 
authorities, which show a rather limited number of transactions, conventional control 
measures should be sufficient to tackle the specific VAT fraud risk. For instance, the 
national authorities could envisage an obligation for notaries to notify the tax authorities 
immediately/ex  ante  on  the  conclusion  of  such  transactions.  This  could  also  assist 
Austria in addressing the issue of insolvencies as mentioned in their second letter. 

5. 

CONCLUSION 

Given  the  limited  scope  and  the  above-mentioned  arguments, Austria’s  request  does 
not convincingly demonstrate that the measure is necessary and proportionate.  

Therefore, the Commission objects to the request made by Austria. 

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