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European UnionEUR-Lex

Commission objects to extending Latvia's timber VAT reverse charge

The Commission opposes prolonging Latvia's timber reverse charge past 31 December 2026, finding two decades of derogation enough and no new conventional anti-fraud measures shown.

By Taxxa AI OyPublished 29 September 2026

Tax

The Commission objects to Latvia's request for a further extension of its timber-sector VAT reverse charge.Europa By letter registered on 28 May 2026, Latvia asked the Council to prolong beyond 31 December 2026 the special measure derogating from Article 193 of the VAT DirectiveEuropa (Directive 2006/112/EC), under which liability for VAT on supplies of timber and related services shifts from the supplier to the customer, as a guard against missing-trader fraud.

The derogation dates back to Latvia's accession on 1 May 2004, was extended by Council Decision 2006/42/EC, and has since been prolonged seven times, most recently until 31 December 2026 by Council Implementing Decision (EU) 2024/3207Europa. It has therefore applied continuously for more than two decades. Under Article 395, the Council may authorise such special measures unanimously on a Commission proposal to simplify collection or prevent evasion, but the Commission recalls that derogations from the fractioned-payment system are a last resort, limited in scope and time, strictly interpreted, and must remain necessary, proportionate and exceptional.

The Commission finds a further extension no longer justifiableEuropa. Latvia has had ample time to introduce conventional controls for a sector of high-volume tangible goods suited to auditing and follow-up, and the 2024 extension decision already warned that Latvia should implement conventional anti-fraud measures for the timber market before expiry so that no further extension would be needed. Latvia's request identifies no new conventional measure since Decision (EU) 2024/3207Europa: work to strengthen existing measures is described as under way, a return to the standard regime is promised in a planned manner within an unspecified reasonable timeframe with no measurable results, and beyond the e-invoicing argument Latvia points to a pre-existing corporate rating system run by its tax administration.

Latvia's main argument — the Saeima's postponement of mandatory business-to-business electronic invoicing from 1 January 2026 to 1 January 2028Europa — cannot justify a Union-level derogation, the Commission says, because that postponement reflects Latvia's own choice rather than a constraint imposed by Union law. Comparable timber derogations for Lithuania and Romania were likewise not extended beyond 2021 and 2025 under the same Article 395 conditions.

Legal basis: Communication from the Commission to the Council COM(2026) 511 final of 29 September 2026, under Article 395 of Council Directive 2006/112/EC.

Businesses buying or selling timber and related services in Latvia should prepare for the reverse charge to end on 31 December 2026 and confirm with their adviser who accounts for VAT on 2027 supplies.

Sources

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL in accordance with Article 395 of Council Directive 2006/112/EC