With the accession of the Republic of Croatia to the European Union, the tax system has been almost completely harmonized with the EU legislative act in the field of value added tax definition. Namely, one of the mechanisms implemented in the tax system of the Republic of Croatia is the transfer of tax liabilities. The paper analyzes how the mechanism is applied in practice, especially in the construction industry. Construction is one of the most prominent industries, which has been followed by an exceptional crisis for almost a decade. The tax liability transfer mechanism has triggered the sinking construction industry. The specificity of such a mechanism is to transfer the obligation to calculate the value added tax from the seller to the buyer. Such a method of calculation proved to be extremely important for the construction industry. The aim of the paper is to show the impact of the tax liability transfer as a specific form of taxation on the construction industry, all in accordance with the legal acts defining the manner and the taxation of the taxpayer's business system. Such a form of taxation is subject to manipulation precisely because of the so-called transfer of tax liability to the recipient of the service. The European Union has laid down a directive defining the mechanism of rapid reaction to fraud and manipulation. This directive encourages Member States to speed up the fight against fraud and manipulation, as well as the controlled collection of taxes