Joint Industry Call to Sustain Protections Against VAT Fraud in Energy, Emissions and Energy Certificates Trading
Read the full joint statement here.
Missing Trader Intra-Community (MTIC) fraud continues to pose a significant threat to the integrity, transparency and proper functioning of European wholesale markets for electricity, gas, emission allowances and related environmental and energy attributes, including the transfer of gas and electricity certificates, such as Guarantees of Origin.
To address this risk, the EU VAT Directive provides a targeted derogation under Article 199a, authorising the application of the Domestic Reverse Charge Mechanism (DRCM) to wholesale business-to-business transactions involving these products.
Since its introduction for emission allowance trading in 2011 and for electricity and gas trading and energy certificate transfers in 2013, the DRCM has proven to be a highly effective and proportionate anti-fraud tool. It prevented a recurrence of the large-scale carousel fraud that caused significant disruption to the carbon market in 2009-2010, when fraudsters exploited VAT gaps to extract billions of euros in illicit tax refunds. By shifting the tax collection
obligation from the supplier to the buyer, the DRCM removes the primary incentive for Missing Trader schemes.
Its effectiveness is further reflected in continued Member State implementation. For example, Hungary extended the DRCM to gas supplies as of 1 January 2025, joining other Member States in recognising its importance in safeguarding energy, emissions and certificate markets.
This targeted approach has proven both effective and proportionate, protecting tax revenues while maintaining market liquidity and operational efficiency. Its success demonstrates that well-designed anti-fraud tools can co-exist with competitive and transparent wholesale markets. Conversely, removing such protections would expose European energy markets to
renewed fraud risks and fiscal losses.
However, due to the ongoing reform of the EU VAT system, this derogation remains temporary and is set to expire on 31 December 2026, despite the absence of an equivalent, fully operational alternative at EU level.
We, the undersigned associations representing key stakeholders across the wider European energy sector, therefore call on the European Commission and EU Member States to ensure the continued applicability of the derogation under Article 199a beyond December 2026, to prevent a re-emergence of fraud risks and regulatory fragmentation across the EU Internal Market.
In particular, we call for the following (please download the statement to read recommendations in detail):
1. Permanent Derogation or Extension by at Least Ten Years
2. Comprehensive DRCM Implementation Across All Member States
3. Consistent Application of the DRCM to the Transfer of Gas and Electricity
Certificates
Download the full statement below.
