COMMISSION OF THE EUROPEAN COMMUNITIESBrussels, 29.10.2004
COM(2004) 728 final
2004/0261 (CNS)
2004/0262 (CNS).

Proposal for a
COUNCIL DIRECTIVE
amending Directive 77/388/EEC with a view to simplifying value added tax obligations

Proposal for a
COUNCIL DIRECTIVE
laying down detailed rules for the refund of value added tax, provided for in Directive
77/388/EEC, to taxable persons not established in the territory of the country but
established in another Member State

Proposal for a
COUNCIL REGULATION
amending Regulation (EC) No 1798/2003 as regards the introduction of administrative
cooperation arrangements in the context of the one-stop scheme and the refund
procedure for value added tax.
(presented by the Commission)

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EXPLANATORY MEMORANDUM
1.

INTRODUCTION

In October 2003, the Commission presented a communication reviewing the VAT strategy itlaunched in June 2000 and setting out new initiatives to be taken in the future under thatstrategy1. This strategy provided for an action programme, geared to four main objectives: thesimplification, modernisation and more uniform application of current rules and closer
administrative co-operation arrangements between Member States to combat fraud.
In the communication, the simplification of tax obligations was identified as one of the key
areas for future work. Simplification can notably be achieved through greater use of electronicmeans of communication between taxable persons and tax authorities and between national
tax authorities.
The objective of simplifying business obligations in the field of VAT is in line with therequest of the European Council of 25 and 26 March 2004 to identify areas for simplification.
As a response to this request, the Competitive Council adopted at its meeting on 17 and 18
May 2004 conclusions on better regulation.
Following these conclusions, the Irish and incoming Dutch Presidencies invited in June 2004
other Member States to submit concrete suggestions for simplification, based on their own
national experiences. Several Member States suggested simplification of the Sixth VAT
Directive, but it was decided not to take into account this suggestion within the context of theCompetitiveness Council since it was already part of the Commission's VAT simplification
program.
At the informal ECOFIN meeting of 11 September 2004, the Dutch Presidency also raised theissue of "Fostering growth by reducing administrative burdens". The present proposal fits
perfectly within this objective.
Moreover, the recently published European Tax Survey2 conducted by the Commission in thesecond half of 2003 confirmed that taxable persons who have VAT obligations in a Member
State where they are not established are those for which the burden of compliance is thehighest. A substantial part of those taxable persons even seem to abstain from having VAT
activities in another Member States because of the burden imposed by having to comply with
VAT obligations there. This is confirmed by a document produced by the European
Consumer Center Network in 2003 on e-commerce. This report identifies the current VAT
regime as one of the reasons why operators refuse to sell goods to consumers who are living
in a Member State other than the Member State of establishment of the company. The
simplification of the VAT regime will therefore benefit businesses but also consumers whowill have access to a wider range of goods throughout the Internal Market.

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COM(2003) 614 final
http://europa.eu.int/comm/taxation_customs/publications/official_doc/com/com.htm
SEC(2004) 1128
http://europa.eu.int/comm/taxation_customs/publications/working_doc/working_doc.htm

2ENIn addition, the present refund procedure under the Eighth VAT Directive3 seems to be soburdensome that more than an estimated 53.5% of large companies have not requested
refunds to which they were entitled at some point due to these problems.
The main objective of the present proposal is therefore to introduce simplification measures
aimed at easing the burden of VAT compliance on taxable persons who have no establishment
in the Member State where they are carrying out activities.
The proposal contains six concrete measures to achieve the objective:–

the introduction of the one stop scheme for non-established taxable persons;–the introduction of a one-stop scheme to modernise the Eighth Directive refund
procedure;–a harmonisation of the scope of the goods and services for which Member States may
apply restrictions to the right to deduct;–

an extension of the use of the reverse charge mechanism for certain business-tobusiness (B2B) transactions carried out by non-established taxable persons;–a review of the special scheme for small traders;–a simplification of the distance selling arrangements.

This is done through three different legislative proposals: a modification of the Sixth VAT
Directive4, the replacement of the Eighth VAT Directive and a modification to Council
Regulation (EC) No 1798/2003 on VAT administrative cooperation5.
This initiative has already been extensively discussed with Member States and has been thesubject of a wide consultation process on the Internet.
2.

THE INTRODUCTION OF THE ONE-STOP SCHEME

Under the current rules, a taxable person having taxable transactions for which he is liable to
pay the tax in more than one Member State, will have to fulfil VAT obligations

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Eighth Council Directive 79/1072/EEC of 6 December 1979 on the harmonization of the laws of theMember States relating to turnover taxes – Arrangements for the refund of value added tax to taxable
persons not established in the territory of the country OJ L 331, 27.12.1979, p.11.Directive as last
amended by the Act concerning the conditions of accession of the Czech Republic, the Republic ofEstonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of
Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak
Republic and the adjustments to the Treaties on which the European Union is founded - Annex II: Listreferred to in Article 20 of the Act of Accession - 9. Taxation.
Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member
States relating to turnover taxes – Common system of value added tax: uniform basis of assessment(OJ L 145, 13.6.1977, p. 1). Directive as last amended by Directive 2004/66/EC(OJ L 168, 1.5.2004, p. 35).
Council Regulation (EC) No 1798/2003 of 7 October 2003 on administrative cooperation in the field ofvalue added tax and repealing Regulation (EEC) No 218/92(OJ L 246, 15.10.2003, p. 1). Regulation aslast amended by Council Regulation (EC) No 885/2004(OJ L 168, 1.5.2004, p. 1).

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(identification, returns, payment) in each of these Member States. Since Member States haveconsiderable discretion in defining VAT obligations (the content of the return and its
frequency), a taxable person may be faced with a raft of different obligations to be discharged
in several Member States.
The special scheme for non-established persons supplying electronic services to non-taxable
persons provided for under Article 26c of the Sixth VAT Directive constitutes at this stage theonly exception to this principle. In its proposal on services supplied by electronic means (ecommerce)6, the Commission considered that compliance for non-EU e-commerce operators
should be made as easy and simple as possible. To this end, the Commission proposed that nonEU e-commerce operators should be required to register only in a single Member State. They
would then charge VAT at the rate applicable in that Member State and would only have todeal with a single tax administration within the EU.
During the negotiations in the Council, this proposal was amended in order to ensure that
VAT would be charged at the rate applicable in the Member State where the customer isresident. However, Council Directive 2002/38/EC7 adopted in June 2002 maintained theprinciple according to which non-EU e-commerce operators only had to deal with one VAT
authority in the Member State of their choice (a one-stop scheme).
The Commission is convinced that the one-stop model could simplify tax obligations for aconsiderable larger number of traders than it does today. On the basis of information received
from Member States, the Commission estimates that there are currently in the region of
250,000 VAT registrations in the European Union which relate to traders established in otherMember States. In particular, EU businesses carrying out cross-border activities for which
they become liable to pay VAT in Member States where they have no physical presence could
benefit from the more extensive use of such a system. Taxable persons covered by the
distance selling arrangements are certainly one of the main categories of businesses
concerned. However it could also be used for other transactions, in particular supplies
involving installation or assembly, work on immovable property, removals, sales at
exhibitions, fairs or markets, etc.
Given the proposed extension of the use of the reverse charge to supplies involving
installation or assembly, work on immovable property and 9(2)(c) services, the one-stop
scheme would, for these types of transactions, only cover B2C transactions. On the other
hand, B2B transactions for which the reverse charge is not applicable, would be covered by
the one stop scheme.
As a result, when an EU trader carries out taxable transactions in a Member State where he is
not established:–either the customer accounts for the VAT under the reverse charge mechanism andthe non-established trader has no declarative obligations in the Member State oftaxation;6

COM(2000) 349 final.
Council Directive 2002/38/EC of 7 May 2002 amending and amending temporarily Directive
77/388/EEC as regards the value added tax arrangements applicable to radio and television broadcasting
services and certain electronically supplied services (OJ L 128, 15.5.2002, p. 41).

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–

or the non-established trader is the person liable to pay the tax, and he could comply
with his declarative obligations under the one stop scheme.

Consequently, this trader would, if he opts for the use of the one-stop scheme, only need to be
identified for VAT purposes in his Member State of establishment.
This one-stop scheme should be an option for taxable persons as it may be the case that somebusinesses who are already directly identified in another Member State than their own will
wish to maintain this situation. For example, a trader having to submit an annual return in asingle Member State where he is not established might not be interested in the use of the onestop scheme. On the other hand, a trader opting for the special scheme would have to comply
with a single and harmonised set of obligations covering all its supplies taxable in theMember States where he is not established. These obligations would be fulfilled throughelectronic means, in order for the information to be easily transmitted to each Member Stateof consumption.
Responsibility for the assessment and control of the tax would remain in the hands of theMember State of consumption, whose own VAT legislation (particularly in respect of rates)
would continue to apply. However, the non-established taxable person would benefit from theability to contact (for registration and returns) only his national administration and to apply aharmonised set of compliance rules (covering registration form, content and frequency of the
tax return, and payment and refund rules).
It should however be noted that:–transfers of money will have to be done directly between the taxable person and each
Member State of consumption. Experience with the existing electronic commerce
special scheme has shown that dealing with the re-distribution of money received
from taxable is very burdensome for the Member State of identification. Developing
the kind of major treasury function needed to handle the volume of money flows
which would be inherent to a much wider application would not be a realistic option.
It is however probable that financial intermediaries or other trusted third party
service providers might offer a payment handling function to operators under thisscheme which would relieve them from the burden of multiple payments. Such acommercial service would be particularly attractive to smaller operators but would
have to be based on commercial realities.

–

national obligations would not be part of the special scheme and the domestic
compliance rules (such as declaration periods, payment and refund rules) would
continue to apply. Those Member States that wish to do so may include theseobligations into the one-stop scheme. The reason for this exclusion is that the onestop scheme is not intended to lead to a complete harmonisation of national
obligations, which the Commission considers to be neither realistic nor necessary at
this stage.

Discussions with the Member States made it clear that since the number of potential traders
under an intra-Community one-stop system will be far greater than the number today coveredby the electronic commerce special scheme (potentially over 200,000 traders as compared towell under 1,000 identified under the e-services arrangements), a mere duplication of thissystem is not a realistic approach.

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Under the current arrangements, businesses which have obligations in Member States inwhich they are not established are obliged to make direct payment to the Members States
where the transactions are subject to VAT. This situation applies both for traders establishedwithin the EU and traders established outside the EU. Similarly, as regards repayments of tax,
Member States may either make a refund or carry forward the excess to the following tax
period. The Commission believes that the current arrangements for the payment andrepayment of the tax should be continued for traders availing of the one-stop scheme.
The supplies of electronic services by non-established taxable persons to non-taxable persons
constitute an exception to the normal principle regarding payments and repayments. Nonestablished traders making use of the special scheme for electronically supplied services makea single payment to the Member State of identification, which then re-distributes theappropriate amount to the Member States of consumption. There are special arrangements forthe recovery of input tax incurred by non-established taxable persons providing electronic
services. The Commission is of the opinion that, at this stage, that special scheme should not
be affected by the current proposal.
Under Article 5 of Council Directive 2002/38/EC, the Council on the basis of a report fromthe Commission shall review before 30 June 2006 the current special scheme for electronic
supplied services. The relation between the proposed one-stop scheme and the e-commerce
arrangements, and the possibility to subsume the latter into the one-stop scheme will be
examined within that context.
3.

REVIEW OF THE EIGHTH VAT DIRECTIVE

The malfunctioning of the Eighth Directive refund procedure has posed considerable
problems for many years to both traders and the national administrations of theMember States. Complaints have been received from traders and their representative
organisations deploring the length of time taken to receive refunds due.
Therefore, the Commission put forward in June 19988 a proposal for a Directive with theobjective of replacing the VAT refund procedure laid down in the Eighth VAT Directive witha new system for recovering VAT paid in another Member State. Under the proposed system,
taxable persons would recover VAT directly through VAT declarations they submitted in theMember State where they were established (the so-called cross-border deduction). Thissystem would substantially simplify matters for traders since they would be able to recover
VAT charged to them in any other Member State in the same way as their national VAT.
This proposal obtained large support from traders and a favourable opinion from theParliament and the Economic and Social Committee. However, the Council has not yet
managed to agree on the proposal.
One of the key issues which has prevented the Council from agreeing was the fact that under
the proposed system, the trader would recover the VAT in accordance with the deduction
rules (in particular the tax blocking rules) of the Member State of establishment, while under
the current procedure VAT is recovered in accordance with the deduction rules of theMember State where the expenses are incurred. This would have had a negative impact on

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COM(1998) 377 final.

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ENVAT receipts for those Member States where VAT has been paid where they currently have amore restrictive deduction regime.
The Commission remains convinced that the proposal from 1998 is conceptually the best wayof reforming the current refund procedure. However, it also has to acknowledge that after 6
years the Council has been unable to agree on the proposal, despite the considerable effort ofsome Council Presidencies to look for a compromise. As a result, traders remain confronted
with the current unsatisfactory situation.
The Commission therefore proposes an alternative way of modernising the current refund
procedure laid down in the Eighth Directive, but without changing its fundamental principles.
Under the proposed procedure, requests for refunds would continue to be dealt with by theMember State where the VAT was paid, the amount refundable would be determined under
the deduction rules of the Member State where the expenses are incurred, and the repayments
made directly by that Member State to the requesting taxable person.
The proposed changes firstly concern the use of modern technology for presenting therequests for a refund. In a similar way to the envisaged one-stop scheme, a taxable person
would present his requests for a refund by electronic means via a portal website managed by
the fiscal administration where the taxable person is established. Originals of invoices orimport documents would no longer have to be submitted; only the relevant information
concerning these documents would be submitted electronically.
This portal would then ensure that the request is directed to the Member State where theexpenses were incurred. The Member State of establishment would carry out an initial
verification of its database of taxable persons. This initial verification would in fact replace
the current certificate by which the Member State of establishment confirms the status of thetaxable person. The transmission of the data from the Member State of establishment to theMember State of refund would be the confirmation that the request is made by an active
taxable person.
Transforming the current procedure into an electronic one would mean less work by therefunding Member States and accordingly, the Commission believes that the processing time
for requests should be reduced from 6 to 3 months. Within this interval, the Member State
where the expenses were incurred should take a decision on the application. In some cases,
this decision could be a request for additional information. In that case, a final decision on theapplication should be taken within three months from the date the requested information isprovided.
In order to improve the legal position of the taxable persons under the procedure, it is foreseenin addition, that once the deadline is exceeded, the application can no longer be refused.
Moreover, interest of 1% a month, calculated on the amount refunded, would be due on
unpaid refunds. This interest would run from the day on which the refund was due to the day
it was actually made to the taxable person.
4.

EXCLUSIONS FROM THE RIGHT TO DEDUCTThe abovementioned proposal presented by the Commission in 1998 contains, beside thesection on the replacement of the Eighth VAT Directive refund procedure, a section on
expenditure not eligible for a full deduction of VAT. The objective was to approximate the

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national rules that are currently very divergent in this area. This was an essential prerequisite
to enable deductions to be made under the rules prevalent in the Member State ofestablishment.
The Commission proposed an alignment of the rules in respect of passenger cars,
accommodation, food and beverages, luxury goods, amusements and entertainment.
The budgetary impact for some Member States of the Commission's proposal was, however, amajor issue in the discussion. Member States insisted in the Council for a more flexible
approach. As indicated above, the Council has not managed to agree on this proposal.
Such approximation of the rules on the right to deduct would not be necessary under therevised approach which the Commission is now putting forward. However, in order tofacilitate the functioning of the proposed refund procedure, it would be desirable to harmoniseat least the scope of the expenses for which exclusions of the right to deduct may apply.
By doing so, traders presenting requests for a refund under the procedure set out above would
know exactly for which goods and services there might be some specific rules in each
Member State. The normal deduction rules would apply to all goods and services not
specifically referred to in the Sixth VAT Directive.
Under this approach, Member States could only apply exclusions from the right to deduct to:–

motorised road vehicles, boats and aircraft;–

travel, accommodation, food and drink;–

luxuries, amusements and entertainment;

Under the standstill provision of Article 17(6), there is no definition of goods and services towhich Member State can apply tax blockings. The current proposal would oblige Member
States to abolish the tax blockings applied to goods and services not identified within the
proposed Article 17a. On the other hand, for the goods and services identified within Article
17a, it provides Member States full flexibility of reviewing their national restrictions which
they do not have under the current rules.
5.

AN EXTENSION OF THE USE OF THE REVERSE CHARGE MECHANISMFor B2B transactions subject to VAT in the Member State where the customer is established,making the business customer the person liable to pay the tax (reverse charge mechanism)
implies that taxation occurs in the place of consumption without the supplier being subject to
tax obligations in the Member State of consumption.
For certain transactions, this mechanism is already obligatory. Moreover, where the taxable
supply of goods or services is effected by a non-established taxable person, Member States
have the option to lay down in their national legislation the transactions for which thismechanism should be used for the payment of the VAT.
The Commission is now proposing to broaden the scope of the obligatory reverse charge
mechanism in cases where a non-established taxable person is making supplies of goods
which are installed or assembled by or on behalf of the supplier, supplies of services

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connected with immovable property and services covered by Article 9(2)(c) of the Sixth VAT
Directive and the customer is a taxable person identified for VAT purposes.
The use of the reverse charge discharges the non-established trader from certain VAT
obligations, such as submitting VAT returns. Consequently, when that trader has been
charged VAT on expenses incurred in the Member State where the transaction takes place, hewill have to claim this VAT back via the refund procedure, since he cannot deduct the input
VAT via a VAT return. This is why this part of the proposal is clearly connected to thatconcerning the introduction of a one-stop scheme for the refund procedure.
In cases where it is clear that the non-established trader will be regularly charged substantial
amounts of input VAT in order to carry out his activities, however, the use of the reverse
charge mechanism results in an additional administrative burden for the reclaim of input
VAT. This is for instance the case when non-established taxable persons intervene in a chainof domestic supplies of goods on the national territory of a Member State. These types oftransactions are therefore not covered by the Commission's proposed extension of the reverse
charge.
Article 21 of the Sixth VAT Directive needs to be amended accordingly.
6.

SIMPLIFICATION

OF

VAT

OBLIGATIONS

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SMALL

AND

MEDIUM SIZEDENTERPRISESAt present, the Sixth VAT Directive lays down some fairly strict arrangements under which
Member States may grant small enterprises an exemption to tax. Numerous derogations fromthese provisions have been granted in successive enlargements, creating a situation where
Member States are not at all on an equal footing. Furthermore, Member States which alreadyhad an exemption threshold higher than that provided by the Sixth VAT Directive at the timeof the adoption of that Directive were permitted to maintain these thresholds and evenpermitted to increase them so as to maintain their value in real terms.
The Commission considers that Member States should have more flexibility in determining
the threshold under which taxable persons can be exempt. Therefore, a maximum of 100.000
euro is proposed, which should give Member States the autonomy to set up a regime they
consider the most appropriate in view of the structure of their national economy.
Nevertheless, this new threshold would not have any impact on the current methodology used
for calculating Member States’ contributions to the Community budget as regards VAT own
resources.
Moreover, it should be clarified in the legal text that Member States are able to apply different
thresholds, for instance in order to differentiate between taxable persons making supplies ofgoods and those making supplies of services. This differentiation would be applied on a nondiscriminatory basis taking objective criteria into account.
The threshold of 100.000 euro would apply on the date of entry into force of the present
Directive. This amount could be exceeded at a later stage but only in order to maintain its
value in real terms in the Member States.

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7.

DISTANCE SELLING ARRANGEMENTS

When the Single Market came into being on 1 January 1993, special arrangements wereincorporated into the common system of VAT to provide for taxation at destination in the caseof intra-Community sales of new means of transport, intra-Community sales to exempt
taxable persons or non-taxable legal persons whose purchases exceeded a certain threshold,and distance sales to private consumers. It is clear that the rationale for setting up these
special schemes in 1993 - i.e. the risk of insufficiently harmonised tax rates leading todistortion of competition - still exists. The Commission is therefore not proposing to abolishthese schemes but instead to simplify their application.
The VAT arrangements applicable to distance selling are laid down in Article 28b(B) of the
Sixth VAT Directive which provides for a twofold system of taxation. Distance sales of goods
are normally taxable in the Member State of arrival of goods dispatched by the vendor. Thereis, however, an exception: distance sales remain taxable in the Member State of departure if
two conditions are fulfilled:–

the total value of the supplies of goods to the Member State of arrival in theprevious calendar year did not exceed 100 000 euro, a sum which may be
reduced to 35 000 euro by the Member State of destination where it fears thatthe threshold of 100 000 euro would lead to serious distortions of theconditions of competition;–

the supplies must not involve excise goods. This means that distance sales of
excise goods are always taxed in the country of destination without applying
the above thresholds.

Member States must nevertheless allow the taxable person carrying out distance sales to opt
for taxation in the Member State of destination where the 35 000/100 000 euro threshold is
not reached.
The current arrangements are complicated for taxable persons. Unless they opt for taxation in
the Member State of destination, operators have to monitor their turnover in each Member
State, keeping track of the different thresholds applicable, to know the place of taxation of the
supplies they make. The current system could therefore be simplified by applying a single
threshold, calculated globally for all Member States rather than Member State by Member
State, as is currently the case.
The threshold should be set at a level which excludes businesses which are not involved in
distances sales on a regular basis. On the other hand, the threshold should not be a simple
multiplication of the current thresholds and the number of Member States. The Commission
instead proposes a threshold of 150.000 euro on the basis of the following considerations:A threshold set at 150.000 euro should exclude from the distance selling arrangements those
traders who, on an occasional basis transport goods to their customers in another Member
State. On the other hand, traders involved on a regular basis in distance sales will be liable topay VAT in Member States where they are not established. By making use of the one-stop
system, which constitutes the main part of this proposal, these traders can considerably
simplify the VAT obligations to be fulfilled in each Member State where they have taxable
transactions.

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The Commission further considers that the taxable person should continue to have thepossibility to opt for taxation in the Member State of destination. Indeed, while deleting theoption would simplify the special scheme from a legal point of view, it can put businesses in a
disadvantageous competitive position, especially when trading products subject to a low VAT
rate in the Member State of arrival of the goods.
The Commission considers that the taxable person should be allowed, as it is currently thecase, to make use of the option separately for each Member State. As long as he did not reachthe proposed threshold of 150.000 euro, a taxable person can opt for taxation of his supplies
in Member State A, while his transactions in other Member States are taxed in the Member
State of establishment. Of course, both the distance sales taxed in the Member State of arrival(as a result of the use of the option) as well as the distance sales taxed in the Member State ofestablishment would be taken into account for the calculation of the threshold.
8.

MODIFICATION OF REGULATION (EC) NO 1798/2003 TO SUPPORT THE EXCHANGE
OF INFORMATION WHICH IS NECESSARY TO THE INTRODUCTION OF A ONE-STOPSCHEME MECHANISM AND OF THE REFUND PROCEDURE (REVIEW OF EIGHTH
DIRECTIVE)

In order to make it possible for taxable persons to have a single point of contact for VAT
compliance in their Member State of identification (both for the VAT one-stop scheme andfor the procedure which will replace the Eighth Directive refund procedure), it is necessary tobuild a system of exchange of information between tax administrations.
In the same way as for the special scheme which has been set up for electronic commerce
supplies, such an exchange of information should be built within the legal framework on VAT
administrative cooperation (Council Regulation (EC) No 1798/2003) and should be based
exclusively on electronic communications.
This electronic system to support the exchanges of information required under the one-stop
scheme and the procedure replacing the Eighth Directive is to be integrated within amodernised VIES (VAT Information Exchange System) in order to make it possible to easethe burden on tax administrations. The Commission has, at the beginning of 2004, launched afeasibility study for a new improved VIES (VIES II), which includes the necessary
requirements for the one-stop scheme. In particular, it will be necessary to ensure that
information supplied electronically by taxable persons to their own Member State can be
captured and processed. The information thus captured would have to be passed automaticallyto the relevant Member State where supplies take place or refunds are requested without any
intervention by the Member State of identification.
9.

PROPOSED CHANGES

9.1.

Amendments to the Sixth VAT Directive (simplification of obligations)9.1.1.

Amendment of Article 17(4)Point (a) of the second subparagraph of Article 17(4) is deleted. This provision is now
integrated in Article 1 of the proposed Directive reviewing the refund procedure for taxable
persons who are not established within the territory of the country.

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9.1.2.

Deletion of Article 17(6)Article 17(6) is repealed, thus eliminating the provision under which Member States may
retain all the exclusions provided for under their national law when the Sixth VAT Directive
came into force.
As a result, the normal rules laid down in Article 17(1) to (5) apply to all expenditure that is
not explicitly referred to by the new Article 17a.
9.1.3.

Insertion of Article 17a

This Article gives Member States the flexibility to apply total or partial restrictions (forexample flat rate deductions) to the right to deduct input VAT. This flexibility is however
limited to the expenses which are specifically quoted in the Article.
A definition of "motorised road vehicles" and "expenditure relating to motorised roadvehicles" is provided in order to ensure that the scope of the potential restrictions applied by
the Member States is harmonised.
Moreover, the Article also provides a list of motorised road vehicles for which, given theiruse, Member State may not restrict the right to deduct.
Besides motorised road vehicles, this Article provides also the possibility for Member States
to apply total or partial restrictions to the right to deduct for boats and aircraft, travel,
accommodation, food and drink, luxuries, amusements and entertainment.
9.1.4.

Amendment of Article 21(1)(b)

The amendment makes it compulsory for all Member States to designate the client as the
person liable to pay the tax for supplies of goods which are installed or assembled by or on
behalf of the supplier, supplies of services connected with immovable property, and services
covered by Article 9(2)(c) such as work on movable tangible property, where the supplier is
not established within the territory of the country and where the client is identified for VAT
purposes in the Member State where the supply takes place.
It should be noted that the option provided to Member States under Article 21(1)(a), to requirethat the client is the person liable to pay the tax for the cases not covered by Article 21(1)(b)and (c), is maintained.
9.1.5.

Insertion of Article 22b

This Article lays down all the rules relating to the functioning of the one-stop scheme.
9.1.5.1. Point A
This point defines what is, for the purpose of this Article, a "Member State of identification"
and a "Member State of consumption".

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9.1.5.2. Point B
This point defines the scope of the special scheme, which concerns taxable persons making
supplies of goods or services for which they are liable to pay the tax in one or several Member
State(s) where they have no establishment. However, the special scheme for non establishedtraders supplying electronic services to non-taxable persons provided for under Article 26cremains in place. Therefore, the traders which make use of that special scheme are excluded
from the one-stop scheme.
The scheme is optional for the taxable persons concerned and they can continue to fulfil their
VAT obligations under the normal rules laid down by each Member State if they consider thisto be more appropriate in their situation.
9.1.5.3. Point C
This point deals with the registration procedure under the special scheme. The primary
responsibility for registering taxable persons in the special scheme belongs to the Member
State of identification, on request from the taxable person.
The point also lays down procedures for the communication of any modification of theregistration data, as well as for deregistration. These procedures are entirely electronic.
This point also lays down specific provisions for taxable persons established in more than one
Member State. Its main objective is to specify that each establishment may qualify on a
separate basis for the special scheme for its own supplies.
9.1.5.4. Point D
This point lays down rules according to which the Member States of consumption shall not
identify for VAT purposes, and therefore not give any VAT number in the meaning of Article
22(1)(c), to those taxable persons that are registered in the special scheme.
9.1.5.5. Point E
This point lays down the obligation for taxable persons registered under the special scheme tosubmit a VAT return by electronic means.
This VAT return is a single VAT return with a specific part for each Member State of
consumption.
It also introduces a special rule regarding recapitulative statements whereby a separate VAT
identification number would not be necessary for the purpose of submitting recapitulative
statements where these statements are required in cases such as the transfer by a taxable
person of his own goods to another Member State. The non-established taxable person using
the scheme would use his own VAT identification number issued in his Member State ofestablishment and identify the Member States into which the goods were transferred on therecapitulative statement.
9.1.5.6. Point F
This point lays down the rules for payments and repayments. All transfers of money will bemade directly between the taxable person and the Member State of consumption.

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Where for a tax period the amount of deductible tax exceeds the amount of tax due, theMember State of consumption will deal with the excess, under the same conditions it has laid
down in accordance with Article 18(4) for taxable persons not applying the one stop scheme.
9.1.5.7. Point G
This point lays down specific provisions for taxable persons established outside the European
Union (including the ones currently subject to the electronic commerce special scheme).
9.1.6.

Amendment of Article 24

The amended paragraph 2 defines the framework in which Member States may, if they wish
to, define an exemption regime for small traders.
Paragraphs 3 and 4 are amended in order to clarify which transactions shall be excluded fromthe exemption and which transactions are to be taken into account for the calculation of thetaxable person's turnover. This is largely a presentational rather than a substantive
amendment.
Paragraphs 8 and 9 are deleted because they are no longer up-to-date.
9.1.7.

Deletion of Article 24a

Article 24a which provides for thresholds for the 10 new Member States is deleted, as theprovisions will be superseded by the new drafting of Article 24.
9.1.8.

Amendment of Article 28b (B) (2)Paragraph 2 of Article 28b(B) is amended in order to introduce within the distance sales
arrangements a global threshold applicable to sales to all Member States other than theMember State of establishment, instead of a threshold per Member State.
9.1.9.

Article 2This Article specifies that the Directive will enter into force after 1 July 2006.
9.2.

New Directive replacing the Eighth Directive on VAT refunds

9.2.1.

Article 1

This article defines the scope of the Directive, which is not different from the existing Eighth
Directive.
9.2.2.

Article 2This Article defines the taxable person eligible for refund under this Directive. It also
excludes transactions which are exempted, or which could be exempted, under Articles 15 or
28c(A). This exclusion should ensure that VAT is not recovered twice, once by the supplier asa correction of the VAT initially charged on a supply which could be exempted, and once by
the purchaser via the refund procedure.

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9.2.3.

Article 3This Article defines which transactions are eligible for a refund and is not significantly
different from the current drafting of Article 2 of Directive 79/1072/EEC.
9.2.4.

Article 4This article lays down the rules for determining the amount refundable.
Firstly, a taxable person must carry out taxable transactions in the Member State ofestablishment in order to be eligible for refund. When the taxable person carries out bothtaxable and exempt transactions, he will have a partial right of refund in relation to the former
transactions.
Secondly, the deduction rules, and in particular the exclusions from the right to deduct laid
down by the Member State where the expenses where incurred are to be applied.
This Article sets out in a legal provision the principles already laid down by the European
Court of Justice in Case C-302/93 (Etienne Debouche) and Case C-136/99 (Société Monte dei
Paschi di Siena).
9.2.5.

Article 5

Article 5 lays down the procedure under which a taxable person can introduce a request for arefund. This request is to be introduced electronically in the Member State of establishment of
the taxable person.
The Member State of establishment will ensure transmission of the data to the Member State
where the expenses where incurred.
This Article also lays down which information a taxable person submitting a request has toprovide.
9.2.6.

Article 6This Article stipulates the periodicity under which a refund application can be presented, as
well as the deadlines under which invoices and import documents can be presented for arefund. It also lays down the minimum amount of the refund to be claimed.
9.2.7.

Article 7This Article determines that competent authorities of the Member State where the request forrefund is presented shall inform the applicant of its decision within three months. Refunds
shall be made within the same period.
In specific cases, that Member State could ask for additional information. A decision should
then be taken within 3 months from the date the requested information is provided. Once theinterval of 3 months is exceeded, the refund can no longer be refused.

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9.2.8.

Article 8This Article stipulates that an interest of 1% a month is due when the Member State of refund
fails to respect the deadlines laid down in the previous Article.
9.2.9.

Article 9

The proposed Directive should replace the current Eighth Directive. This Directive is then to
be repealed.
9.3.

Amendments to Regulation 2003/1798 on administrative cooperation in the fieldof value added tax

9.3.1.

Amendment of Article 1(1)This is a technical amendment in order to extend the scope of the Regulation to the exchange
of information which is necessary for the smooth functioning of the VAT One-Stop scheme.
9.3.2.

New Chapter VIa

A new chapter is included to deal specifically with the exchange of information on the OneStop-Scheme, as from 1 July 2006.
9.3.2.1. Article 34a
This Article defines the scope of the exchange of information under Chapter VI. It also lays
down that the definitions relating to the One-Stop-Scheme ("Member State of identification","Member State of consumption"), which are listed in the amendments to the Sixth VAT
Directive, shall also apply to Regulation 1798/2003.
9.3.2.2. Article 34b
This Article lays down the rules for the exchange of information on registration (including
modification of registration data and deregistration) of taxable persons under the special
scheme.
This exchange of information shall take place without delay, which means that a properelectronic system of communication needs to be put in place.
All Member States shall receive this information, even if no supply is or will be made on theirterritory.
In addition, it imposes an obligation on the Member State of establishment to monitor that its
taxable persons are complying with the distance selling thresholds, and to advise the otherMember States where it appears that the distance selling threshold has been exceeded.
All details relating to the definition of the technical messages will be decided according to the
Comitology procedure.

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9.3.2.3. Article 34c
This Article lays down the obligation for each Member State to keep an updated database of
all taxable persons registered within the special scheme.
9.3.2.4. Article 34d
This Article lays down the rules for the exchange of information relating to VAT returns(including their modification).
This exchange of information shall also take place without delay.
The information will be sent only to those Member States for which tax is declared. Each
Member State will therefore only receive the part of the return which deals with the supplies
made under its own jurisdiction.
All details relating to the definition of the technical messages will be decided according to the
Comitology procedure.
9.3.2.5. Article 34eThis Article lays down the obligation for the Member State of identification to keep theinformation relating to the tax returns which have been sent to the other Member States.
This information should be kept during a minimum time period which is necessary for thetechnical functioning of the system (for example to enable the system to detect that a taxable
person has already made a tax return for a specific period and that only a modification of thisdata can subsequently be made). This time period will need to be fixed according to the
Comitology procedure.
Member States will of course be able to store this information during a longer time period,
which may be a very useful source of information for their own future audit controls.
9.3.2.6. Article 34f
This Article deals with the information which will need to be made available to the taxable
persons on the Website of each tax administration in order to help businesses comply with
their obligations.
The information will deal with the rules applying to the One-Stop Scheme as well as with thedifferent national rules applying in each Member State (such as tax rates).
The Commission will be responsible for the coordination of this task, as well as fortranslation. Detailed rules will be fixed according to the Comitology procedure.
9.3.2.7. Article 34g
This Article lays down specific rules on control of the taxable persons registered under the
special scheme. According to these rules, Member States of consumption will be able toparticipate in a control initiated by the Member State of identification. The latter will have an
obligation of information the former with regard to such controls.

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In cases where Member States of consumption choose to participate in such a control, thenormal rules laid down in Article 11 (presence of tax officials on the territory of anotherMember State) would apply.
9.3.3.

New Chapter VIb

A new chapter is also included to deal specifically with the exchange of information which isnecessary to the functioning of the modernised refund scheme.
According to Article 34h, the Member State of identification shall transmit the refund
applications immediately to the Member State of purchase. Again, the technical details will be
fixed according to the Comitology procedure.
Article 34i adds that information will need to be provided to taxable persons concerning the
proposed Directive laying down the refund procedure and on specific national rules relating tothose refunds. This will be done under the procedure laid down in Article 34f.

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2004/0261 (CNS)
Proposal for a
COUNCIL DIRECTIVE
amending Directive 77/388/EEC with a view to simplifying value added tax obligations

THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community, and in particular Article
93 thereof,
Having regard to the proposal from the Commission9,
Having regard to the opinion of the European Parliament10,
Having regard to the opinion of the European Economic and Social Committee11,
Whereas:(1)

Within the context of the common system of value added tax (VAT), it is necessary tosimplify the obligations on businesses, since those obligations are currently
disproportionately burdensome and thus compromise the smooth functioning of theinternal market by unreasonably hindering the possibility for businesses to engage ineconomic activities in other Member States.

(2)

Common definitions of the goods and services for which Member States may apply
total or partial restrictions of the right to deduct should facilitate the use by businessesof the VAT refund procedure in Member States where they are not established.

(3)

For transactions between taxable persons where the supplier is not established in theMember State where the supply takes place, an extension of the cases for which thecustomer is liable to pay the tax should simplify the VAT obligations of the nonestablished supplier without creating an additional administrative burden for thecustomer.

(4)

The obligations for taxable persons liable to pay VAT in Member States where they
are not established should be simplified by making it possible for them to use a “onestop scheme”, that is to say, a scheme enabling them, if they so wish, to have a single
point of electronic contact for value added tax identification and declaration.

9

OJ C […], […], p. […].
OJ C […], […], p. […].
OJ C […], […], p. […].

10
11

EN

19

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(5)

Such a scheme should be open not only to taxable persons established within theCommunity but also to taxable persons who, albeit not established there, out taxable
activities within the Community. However, it should not cover taxable persons
supplying electronic services to non-taxable persons, leaving in place the scheme
introduced in order to facilitate their compliance with fiscal obligations.

(6)

No obligation to appoint a tax representative should be imposed on non-Community
operators who are registered under the one-stop scheme as such an obligation wouldcancel out all the benefits derived from the present simplification.

(7)

Taxable persons registered under the special scheme should comply with the specificobligations laid down in this Directive.

(8)

Transfers of money, by way of payments or refunds, should be made directly between
taxable persons and Member States of consumption.

(9)

Member States should be allowed a greater measure of flexibility in fixing thethreshold below which small businesses may be exempt from VAT obligations. This
flexibility should enable each Member State to determine the exemption taking into
account the structure of its national economy.

(10)

The special distance selling arrangements should be simplified through the provisionof a single threshold for supplies to all Member States other than the Member State ofestablishment, instead of a separate threshold for each Member State of destination.

(11)

Since the objectives of the proposed action cannot be sufficiently achieved by theMember States and can therefore, by reason of the scale of the action, be better
achieved at Community level, the Community may adopt measures, in accordancewith the principle of subsidiarity as set out in Article 5 of the Treaty. In accordancewith the principle of proportionality, as set out in that Article, this Directive does not
go beyond what is necessary in order to achieve those objectives.

(12)

Directive 77/388/EEC should therefore be amended accordingly,

HAS ADOPTED THIS DIRECTIVE:
Article 1
Directive 77/388/EEC is amended as follows:(1)

Article 17, in the version set out in Article 28f, is amended as follows:(a)paragraph 4 is amended as follows:(i)in the first indent of the first subparagraph, the reference to ‘Directive
79/1072/EEC’ is replaced by ‘Council Directive xx/xxx/EC(*)’;(ii)

in the second subparagraph, point (a) is deleted;(iii) in point (c) of the second subparagraph, the reference to ‘Directive
79/1072/EEC’ is replaced by ‘Directive xx/xxx/EC

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20

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(*) OJ L […], […], p. […].’;(b)(2)

Paragraph 6 is deleted.

The following Article 17a is inserted:‘Article 17a
Restrictions on the right of deduction

1.

Member States may, without prejudice to Article 17(5), apply a total or partial
restriction on the right of a taxable person to deduct value added tax charged to him
on the following:(a)expenditure on luxuries, amusements or entertainment;(b)

expenditure in respect of travel, accommodation, food or drink other than that
incurred by the taxable person in the course of his activity in supplying forconsideration travel, accommodation, food or drink;(c)expenditure relating to motorised road vehicles except the taxable person’s
stock-in-trade vehicles and vehicles for sale in the exercise of his activity, used
as taxis, for instruction by driving schools or used for hire or leasing;(d)expenditure relating to boats or aircraft except those exclusively intended foruse for the commercial transport of persons or goods.

2.

Member States may, for the purposes of paragraph 1, set a percentage for minimum
use of motorised road vehicles for business purposes.

3.

Paragraphs 1 and 2 shall apply to all motor vehicles, other than agricultural orforestry tractors, which are normally used for carrying persons or goods by road,with a maximum authorised mass not exceeding 3500 kilograms and having notmore than eight seats in addition to the driver’s seat.
The related expenditure shall cover the purchase of a vehicle, including contracts ofassembly and the like, manufacture, intra-Community acquisition, importation,leasing or hire, modification, repair or maintenance, and expenditure on supplies orservices performed in relation to vehicles and the use thereof.

EN

(3)

In Article 21, in the version set out in Article 28g, point (b) of paragraph 1 is
replaced by the following:‘(b)taxable persons to whom services covered by Article 9(2)(e) are supplied or persons
who are identified for value added tax purposes within the territory of the country towhom goods covered by the arrangements laid down in the second sentence ofArticle 8(1)(a) or services covered by Article 9(2)(a) and (c) or Article 28b(C), (D),(E) and (F) are supplied, if the supply of the goods is made or the services are carriedout by a taxable person not established within the territory of the country;’

21

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(4)

The following Article 22b is inserted:‘Article 22b
One-stop scheme for fulfilling obligations in Member States where the taxable person is notestablishedA.

Definitions

For the purposes of this Article, and without prejudice to other Community provisions, thefollowing definitions shall apply:(1)‘Member State of identification’ means the Member State in which the taxable person
established within the Community has established his business or has a fixedestablishment from which the goods or services are supplied or, if established outside
the Community, the Member State of consumption which the taxable person chooses
to contact to state when his activity as a taxable person within the Community
commences;(2)‘Member State of consumption’ means the Member State in which the supply of thegoods or services is deemed to take place in accordance with Articles 8, 9 and 28b.

B.

Scope

Member States shall permit any taxable person supplying goods or services for which he isliable to pay value added tax in one or several Member States of consumption where he has
not established his business nor has a fixed establishment to fulfil his obligations using thespecial scheme provided for under this Article, except for those non-established taxable
persons supplying electronic services to non-taxable persons who make use of the special
scheme provided for under Article 26c.
C.

Registration

1.

Every taxable person shall state to the Member State of identification when he wants
to start to make use of the one-stop scheme. This statement shall be made byelectronic means.
The taxable person shall provide the information necessary for his registration under
the one-stop scheme. He shall also state whether he is already identified for value
added tax purposes in Member States where he is not established nor has a fixedestablishment and, if so, indicate the identification number under which he isregistered.

2.

The Member State of identification shall register the taxable person referred to inparagraph 1 within a reasonable period of time. For that purpose the Member State
shall use the individual number already allocated to the taxable persons in respect of
his obligations under the internal system.
Taxable persons who have an establishment in more than one Member State may
request that each establishment be registered under the one-stop scheme in respect of
their supplies made in Member States where the taxable person has no establishment.

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22

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3.

Every taxable person shall notify the Member State of identification of any
modification of the registration data provided pursuant to paragraph 1. That
notification shall be made by electronic means

4.

Every taxable person shall state to the Member State of identification when he wants
to cease to make use of the scheme or when his activity changes to the extent that heno longer qualifies for the one-stop scheme. This statement shall be made byelectronic means

5.

The Member State of identification shall without delay strike from the identification
register any taxable person who no longer meets the conditions necessary to qualify
for the one-stop scheme.
In particular, the Member State of identification shall exclude taxable persons fromparticipating in the one-stop scheme in the following cases:

D.

(a)

if the taxable person notifies the Member State of identification that he nolonger supplies goods or services in any Member State or Member States otherthan the Member State of identification;(b)

if it otherwise can be assumed that the taxable activities of the taxable person
have ended;(c)

if the taxable person no longer fulfils the requirements necessary to be allowed
to use the scheme;(d)if the taxable person persistently fails to comply with the rules governing useof the scheme.

Identification

A taxable person who is registered under the one-stop scheme shall not be identified, within
the meaning of Article 22(1)(c), other than in the Member State where he is established.
E.

Returns and recapitulative statements

1.

Every taxable person registered under the one-stop scheme shall submit to theMember State of identification a value added tax return for each calendar quartersetting out all the supplies of goods and services for which he is liable to pay value
added tax in Member States where he has not established his business nor has a fixedestablishment. If the taxable person is not established within the Community, thereturn shall also include the supplies made in the Member State of identification.
The return, which shall be made by electronic means, shall be submitted within 20
days following the end of the period to which it refers.

2.

EN

The return referred to in paragraph 1 shall set out, for each Member State of
consumption where value added tax has become due, all the information needed to
calculate the amount of tax that has become chargeable and the deductions to bemade during the period covered by the return.

23

EN

3.

The return referred to in paragraph 1 shall be made in euro. The Member States ofconsumption which have not adopted the euro may require the part of the returnconcerning supplies of goods and services on their territory to be made in theirnational currency.

4.

Where, pursuant to Article 28a(5)(b), a taxable person is obliged to submit data inaccordance with Article 22(6)(b), the number referred to in the second indent of thethird subparagraph of Article 22(6)(b) shall be the number referred to in the firstindent of that subparagraph. The taxable person shall indicate the Member State inwhich the acquisition was made in a clear way on the recapitulative statement.

F.

Payments and repayments

1.

The taxable person shall pay the value added tax when submitting the value added
tax return. Payment shall be made directly on the bank account and in the currency ofeach Member State of consumption concerned.

2.

When the amount of value added tax to be deducted in a specific calendar quarter isgreater than the amount of tax due, the Member States may either make a refund or
carry the excess forward to the following period in accordance with the conditions
which they have determined pursuant to Article 18(4).

G.

Specific provisions for taxable person established outside the Community
The Member State of identification shall identify, within the meaning of Article
22(1)(c), a taxable person who is not established within the Community at the sametime as it takes the action referred to in Part C(2) of this Article."(5)

Article 24 is amended as follows:
(a)

‘2.

Paragraphs 2, 3 and 4 are replaced by the following:

Member States may exempt taxable persons whose annual turnover does not exceed
a threshold which may be set no higher than EUR 100 000 or the equivalent innational currency at the conversion rate on 1 July 2006. They may apply one orseveral thresholds, which may not in any case exceed EUR 100.000 or the equivalent
in national currency on 1 July 2006.
Member States may revise annually the thresholds they apply . Under that annual
review, the maximum threshold of EUR 100 000, or the equivalent in national
currency applicable on 1 July 2006, may be raised only in order to maintain the value
in real terms of these thresholds.
Member States which have exercised the option under Article 14 of Directive
67/228/EEC to introduce exemptions or graduated tax relief may retain them and thearrangements for applying them if they conform to the VAT system.

3.

The exemption provided for under paragraph 2 shall not apply to the following
transactions:(a)ENtransactions carried out on an occasional basis, as referred to in Article 4(3);

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4.

(b)

supplies of new means of transport carried out in accordance with theconditions specified in Article 28c(A);(c)

supplies of goods and services carried out by a taxable person who is notestablished in the Member State in which the value added tax is due.

The turnover serving as a reference for the purposes of applying the arrangements
provided for in paragraph 2 shall consist of the following amounts, exclusive of
value added tax:(a)the value of goods and services, in so far as they are taxed, includingtransactions which are exempt, with deductibility of the value added tax paid at
the preceding stage, pursuant to Article 28(2);(b)

the value of transactions which are exempt pursuant to Article 15;(c)the value of real estate transactions, financial transactions as referred to in
Article 13(B)(d) and insurance services, unless those transactions are ancillarytransactions.

However, disposals of the tangible or intangible capital assets of an enterprise shallnot be taken into account for the purposes of calculating the turnover.’(b)

Paragraphs 8 and 9 are deleted.

(6)

Article 24a is deleted.

(7)

In Article 28b(B), paragraph 2 is replaced by the following:‘Paragraph 1 shall not apply to supplies of goods dispatched or transported to a
Member State other than that of the supplier, if the following conditions are met:(a)the goods supplied are not products subject to excise duty;(b)

the total value of such supplies, exclusive of value added tax, does not exceed
EUR 150 000 or the equivalent in national currency in one calendar year;(c)the total value, exclusive of value added tax, of the supplies of goods other than
products subject to excise duty, in the previous calendar year, did not exceed
EUR 150 000 or the equivalent in national currency.’
Article 2

1.

Member States shall adopt and publish, by 30 June 2006 at the latest, the laws,
regulations and administrative provisions necessary to comply with this Directive.
They shall forthwith communicate to the Commission the text of those provisions
and a correlation table between those provisions and this Directive.
They shall apply those provisions from 1 July 2006.

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25

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When Member States adopt those provisions, they shall contain a reference to thisDirective or be accompanied by such a reference on the occasion of their official
publication. Member States shall determine how such reference is to be made.
2.

Member States shall communicate to the Commission the text of the main provisionsof national law which they adopt in the field covered by this Directive.
Article 3This Directive shall enter into force on the day following that of its publication in the Official
Journal of the European Union.
Article 4This Directive is addressed to the Member States.
Done at Brussels, […]For the Council
The President

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Proposal for a
COUNCIL DIRECTIVE
laying down detailed rules for the refund of value added tax, provided for in Directive
77/388/EEC, to taxable persons not established in the territory of the country but
established in another Member StateTHE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community,
Having regard to Council Directive 77/388/EEC of 17 May 1977 on the harmonization of thelaws of the Member States relating to turnover taxes – Common system of value added tax:
uniform basis of assessment12, and in particular Article 29a thereof,
Having regard to the proposal from the Commission13,
Whereas:(1)

Considerable problems are posed, both for the administrative authorities of Member
States and for businesses, by the implementing rules for Directive 77/388/EEC laid
down by Council Directive 79/1072/EEC of 6 December 1979 on the harmonization of
the laws of the Member States relating to turnover taxes – Arrangements for the refundof value added tax to taxable persons not established in the territory of the country14.

(2)

The arrangements laid down in that Directive should be amended so that decisions
concerning applications for refund can be announced within three months of the datewhen the applications were submitted and refunds made within the same period. To
that end, the procedure should be simplified and modernised by allowing for the use ofmodern technologies.

(3)

The new procedure shall create more legal certainty for businesses, since the refund
can no longer be refused when the imposed delays are exceeded.

(4)

Directive 77/388/EEC contained a provision which concerned the application of
Directive 79/1072/EEC. For clarity and better reading purposes, this provision is now
integrated in this Directive and deleted in Directive 77/388/EEC.

12

OJ L 145, 13.6.1977, p. 1. Directive as last amended by Directive(OJ L 168, 1.5.2004, p. 35).
OJ C […], […], p. […].
OJ L 331, 27.12.1979, p. 11. Directive as last amended by the 2003 Act of Accession.

13
14

EN

27

2004/66/EC

EN

(5)

Since the objectives of the proposed action cannot be sufficiently achieved by theMember States and can therefore, by reason of the scale of the action, be better
achieved at Community level, the Community may adopt measures, in accordancewith the principle of subsidiarity as set out in Article 5 of the Treaty. In accordancewith the principle of proportionality, as set out in that Article, this Directive does not
go beyond what is necessary in order to achieve those objectives.

(16)

In the interests of clarity, Directive 79/1072/EEC should therefore be replaced.

HAS ADOPTED THIS DIRECTIVE:
Article 1
1.

This Directive lays down the detailed rules for the refund of value added tax,
provided for in Article 17(3) of Directive 77/388/EEC, in the version given in Article
28f thereof, to taxable persons, within the meaning of Article 4(1) of that Directive
and subject to paragraph 2 of this Article, who are not established in the territory of
the country, but who are established in another Member State, hereinafter “nonestablished taxable persons”.

3.

This Directive shall apply to any non-established taxable person, who meets thefollowing conditions:(a)during the refund period, he has not had in the territory of the country,
hereinafter “the Member State of refund”, the seat of his economic activity, ora fixed establishment from which business transactions were effected, or, if nosuch seat or fixed establishment existed, his domicile or normal place ofresidence;(b)

during the refund period, he has not supplied any goods or services deemed tohave been supplied in the Member State of refund, with the exception of thefollowing transactions:(i)transport services and services ancillary thereto, exempted pursuant to
Article 14(1)(i), Article 15 or Article 16(1) B, C and D of Directive
77/388/EEC;(ii)

supplies of goods and services provided in cases where value added tax ispayable solely by the person to whom they are supplied, pursuant to
Article 21(1)(a), (b), (c) and (f) of Directive 77/388/EEC.
Article 2This Directive shall not apply in respect of goods the supply of which is, or may be, exempted
under Article 28c(A) of Directive 77/388/EEC when the goods supplied are dispatched ortransported by the acquirer or for his account. Nor shall it apply to goods the supply of whichis, or may be, exempted under Article 15(2) of Directive 77/388/EEC.

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Article 3
Member States shall refund to any non-established taxable person, any value added tax
charged in respect of goods or services supplied to him by other taxable persons in theirterritory or in respect of the importation of goods into their territory, in so far as such goods
and services give rise to a right of deduction there and are used for the purposes of thefollowing transactions:(a)transactions referred to in Article 17(3)(a) and (b) of Directive 77/388/EEC;(b)transactions for which value added tax is payable solely by the person to whom thegoods or services are supplied, pursuant to Article 21(1) (a), (b), (c) and (f) ofDirective 77/388/EEC.
Article 4

To be eligible for a refund under Article 3, the non-established taxable person must carry outtransactions giving rise to a right of deduction in the Member State in which he is established.
When a non-established taxable person carries out in the Member State in which he isestablished both transactions giving rise to a right of deduction and transactions not giving
rise to a right of deduction, only such proportion of the value added tax may be refunded in
the Member State of deduction as it is attributable to the former transactions.
Article 5EN1.

To obtain a refund under Article 3, the non-established taxable person shall submit
an application for refund, hereinafter “the application” in the Member State in which
he is established. This application shall be made by electronic means.

2.

The refund application shall set out, for each Member State where the taxable person
incurred value added tax, the following details:(a)name and full address of the supplier;(b)

except in the case of importation, the value added tax identification number ofthe supplier or tax reference number, as defined by a Member State inaccordance with Article 22(9)(e) of Directive 77/388/EEC;(c)

except in the case of importation, the ISO code of the Member State ofpurchase in accordance with Article 22(1)(d) of Directive 77/388/EEC;(d)date and number of the invoice or importation document;(e)taxable amount and amount of value added tax expressed in the currency of theMember State where the tax was incurred;(f)the amount of deductible value added tax expressed in the currency of theMember State where the tax was incurred;

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(g)

nature of the goods and services acquired, described by the following code:1.

= fuel;2.

= accommodation;3.

= restaurant services;4.

= travel expenses, such as taxi fares, short-term renting of meansof transport, public transport fares;

5.

= fairs and exhibitions;6.

= leasing of means of transport;

7.

= road tolls and road user charge;

8.

= other.

For the purposes of Code 8 in point (g) of the first subparagraph, a full description of
the goods and services shall be requested.
Article 6
1.

The application shall relate to purchases of goods or services invoiced or imports
made during a period of not less than three months and not more than one calendar
year. The application may, however, relate to a period of less than three months
where the period represents the remainder of a calendar year.
The application may also relate to invoices or import documents not covered byprevious applications and concerning transactions completed during the calendar
year in question.
The application shall be submitted within six months of the end of the calendar year
in which the tax became chargeable.

2.

If the application relates to a period of less than one calendar year but not less than
three months, the amount of the refund requested may not be less than EUR 200 or
the equivalent in national currency.
If the application relates to a period of a calendar year or the remainder of a calendar
year, the amount of the refund requested may not be less than EUR 25 or theequivalent in national currency.
Article 7

1.

EN

The Member State where the Value added tax was incurred shall make its decision
concerning the application for refund known to the applicant within three months ofthe date on which the application was submitted.

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EN

2.

Refunds shall be made before the end of the three month period referred to inparagraph 1.
The refund shall be made in the Member State of refund or, at the applicant's request,
in the Member State in which the applicant is established. In the latter case, any bankcharges for the transfer shall be deducted by the Member State of refund from theamount to be repaid to the applicant.

3.

If the application is refused, the grounds for refusal shall be notified to the nonestablished taxable person by the competent authorities of the Member State where
the tax was incurred.
Appeals against such refusals may be made to the competent authorities of theMember State where the tax was incurred, subject to the same conditions as to form
and time limits as those governing claims for refunds made by taxable persons
established in the same Member State.

4.

In specific cases, a Member State where value added tax has been incurred may
request additional information within three months of the date on which theapplication is submitted. After that period has elapsed, no additional information may
be requested.
In such cases, the decision concerning the application shall be made known to theapplicant within three months of the date on which the additional information was
submitted. The refund shall be made within the same period.

5.

In the absence of an express refusal within the appropriate time-limit, as laid down inparagraph 2 or 4, the application shall be deemed to have been granted.
Article 8

Where an application for refund has not been expressly refused, but payment of the refund has
not been made before the end of the three-month period laid down in the first subparagraph of
Article 7(1), or in the second subparagraph of Article 7(4), as appropriate, interest of 1% permonth, calculated from the date on which the refund should have been made to the date on
which the refund was actually made, shall be due by the Member State on the amount of therefund to be made.
Article 9
Directive 79/1072/EEC is repealed with effect from 1 July 2006.
References to that Directive shall be construed as references to this Directive.

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31

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Article 101.

Member States shall adopt and publish, by 1 July 2006 at the latest, the laws,
regulations and administrative provisions necessary to comply with this Directive.
They shall forthwith communicate to the Commission the text of those provisions
and a correlation table between those provisions and this Directive.
They shall apply those provisions from 1 July 2006.
When Member States adopt those provisions, they shall contain a reference to thisDirective or be accompanied by such a reference on the occasion of their official
publication. Member States shall determine how such reference is to be made.

2.

Member States shall communicate to the Commission the text of the main provisionsof national law which they adopt in the field covered by this Directive.
Article 11This Directive shall enter into force on the day following that of its publication in the Official
Journal of the European Union.
Article 12
This Directive is addressed to the Member States.
Done at Brussels, […]For the Council
The President

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2004/0262 (CNS)
Proposal for a
COUNCIL REGULATION
amending Regulation (EC) No 1798/2003 as regards the introduction of administrative
cooperation arrangements in the context of the one-stop scheme and the refund
procedure for value added tax

THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community, and in particular
Article 93 thereof,
Having regard to the proposal from the Commission15,
Having regard to the opinion of the European Parliament16,
Having regard to the opinion of the European Economic and Social Committee17,
Whereas:(1)

Under Council Directive 200Y/XX/EC of DD/MM/200X amending Directive
77/388/EEC with a view to simplifying value added tax obligations18, a one-stopscheme may be offered to all taxable persons with value added tax (VAT) obligations
in a Member State where they are not established.

(2)

Council Directive 200Y/YY/EC of DD/MM/200Y laying down detailed rules for therefund of value added tax, provided for in Directive 77/388/EEC, to taxable persons
not established in the territory of the country but established in another Member
State19 simplifies the procedure for obtaining a VAT refund in a Member State where
the taxable person concerned does not have any VAT registration.

(3)

However, both these Directives entail the exchange of a considerable volume ofadditional information between the various Member States concerned. It is therefore
necessary to amend Council Regulation (EC) No 1798/2003/ECof 7 October 2003 on
administrative cooperation in the field of value added tax and repealing Regulation(EEC) No 218/9220. The exchange of information required should not have adisproportionate administrative burden on the Member States concerned.

15

OJ C […], […], p. […].
OJ C […], […], p. […]..
OJ C […], […], p. […].
OJ C […], […], p. […].
OJ C […], […], p. […].
OJ L 264, 15.10.2003, p. 1.

16
17
18
19
20

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(4)

The exchange of information should take place by electronic means based on theexisting information exchange systems.

(5)

It is necessary to clarify the respective obligations of the Member States ofidentification and consumption, particularly as regards the deadlines for thetransmission of information and the control of taxable persons.

(6)

Since the objectives of the proposed action cannot be sufficiently achieved by theMember States and can therefore, by reason of the scale of the action, be better
achieved at Community level, the Community may adopt measures, in accordancewith the principle of subsidiarity as set out in Article 5 of the Treaty. In accordancewith the principle of proportionality, as set out in that Article, this Regulation does not
go beyond what is necessary in order to achieve those objectives.

HAS ADOPTED THIS REGULATION:
Article 1
Regulation (EC) No 1798/2003 is amended as follows:(1)

In Article 1(1), the following fifth subparagraph is added:‘This Regulation also lays down rules and procedures for the exchange by electronic means ofvalue added tax information on goods and services supplied by taxable persons who have
opted for the special scheme provided for in Article 22b of Directive 77/388/EEC, or who areusing the VAT refund procedure, provided for in Council Directive 200Y/YY/EC*, fortaxable persons not established in the territory of the country but who are established inanother Member State.
(*) OJ L […], […], p. […].’;(2)

The following Chapters VIa and VIb are inserted:‘CHAPTER VIa

Provisions concerning the exchange and conservation of information in the context ofthe ‘one-stop scheme’ provided for in Article 22b of Directive 77/388/EEC

Article 34a
The definitions contained in point A of Article 22b of Directive 77/388/EEC shallapply for the purpose of this Chapter.
Article 34b
1.

EN

The Member State of identification shall transmit the following information byelectronic means to the competent authorities of the other Member States:

34

EN

2.

(a)

in respect of taxable persons becoming registered under the special scheme
provided for in Article 22b of Directive 77/388/EEC, hereinafter “the one-stop
scheme”, the information referred to in Article 22b(C)(1) of that Directive,
within 10 days of the end of the calendar month during which the registration
has been effected;(b)details of any modification of data, as referred to in Article 22b(C)(3) of
Directive 77/388/EEC, or of withdrawal or change of activity, as referred to in
Article 22b(C)(4) thereof, within 10 days of being so notified;(c)details of any decision taken pursuant to Article 22b(C)(5) of Directive
77/388/EEC to strike a taxable person from the register of those using the onestop scheme, within 10 days of the end of the calendar month during which it
has taken that decision;(d)details of all taxable persons in its territory who have not opted for the one-stop
scheme, but who carry out supplies of goods which, pursuant to Article
28b(B)(2) of Directive 77/388/EEC, are subject to value added tax in a
Member State other than the Member State of establishment.

The technical details relating to the provision of information pursuant to paragraph 1,
in particular as regards the content and format of common electronic messages, shallbe determined in accordance with the procedure referred to in Article 44(2).
Article 34c

1.

Each Member State shall establish and keep updated a database which stores the listof taxable persons supplying goods or services in accordance with the one-stop
scheme.

2.

Article 22 shall apply.
Article 34d

1.

The Member State of identification shall, within five days of the day of receipt andby electronic means, transmit to the competent authorities of the Member Statesconcerned the details, received pursuant to Article 22b(E)(1) of Directive
77/388/EEC, relating to the quarterly returns of each taxable person registered under
the one-stop scheme as well as any information relating to a modification of such areturn.

2.

The technical details relating to the provision of information pursuant to paragraph 1,
in particular as regards the content and format of common electronic messages, shallbe determined in accordance with the procedure referred to in Article 44(2).
Article 34e

The Member State of identification shall, for the minimum period necessary for control
purposes, keep the details received pursuant to Article 22b(E)(1) of Directive 77/388/EEC,

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relating to the quarterly returns of each person registered under the one-stop scheme. That
period shall be determined in accordance with the procedure referred to in Article 44(2).
Article 34f
1.

Each Member State shall make available on a web site detailed information relating
to the following:(a)the functioning of the one-stop scheme;(b)

the rules of national law applying to transactions made in the other Member
States;(c)

the relevant bank account number and accounting details to be submitted withthe payment to be made by the taxable persons using the one-stop scheme.

The electronic address for each Member State’s web site will be notified to taxable
persons at the same time as registration is effected in accordance with Article naccordance with Article 22b(C)(2) of Directive 77/388/EEC.
2.

Each Member State shall transmit to the Commission its rules of national law
applying to the relevant transactions and the Commission shall provide fortranslation of this information into all the official languages of the European
Community.

3.

The details and format of the information referred to in paragraph 1 shall be
determined in accordance with the procedure referred to in Article 44(2).
Article 34g

EN

1.

Control of taxable persons who have opted for the one-stop scheme shall as far as
possible be coordinated by the Member States.

2.

If the Member State of identification decides to carry out an audit of a taxable person
who has registered for the one-stop scheme in its territory, it shall inform in advancethe competent authorities of the other Member States concerned.

3.

If the Member State of consumption decides to carry out an audit of a taxable person
who is registered under the one-stop scheme and has carried out supplies in its
territory, it shall inform in advance the competent authorities of the other Member
States concerned.

4.

Any Member State concerned may participate in an audit carried out by the Member
State of identification or consumption. For this audit, the procedures referred to in
Articles 11 and 12 may be used.

36

ENCHAPTER VIb
Provisions concerning the exchange and conservation of information in the context ofthe procedure provided for in Directive 200Y/YY/EC for the refund of value added tax
to taxable persons not established in the territory of the country but who are establishedin another Member State

Article 34h
1.

Where the competent authority of a Member State receives an application for refundof value added tax under Article 3 of Directive 200Y/YY/EC, it shall, within 10 daysof the end of the calendar month during which the application was received and byelectronic means, inform accordingly the competent authorities of each Member
State of purchase concerned, confirming whether or not the applicant is identified forvalue added tax purposes in its territory.

2.

The technical details relating to the provision of information pursuant to paragraph 1,
in particular as regards the content and format of common electronic messages, shallbe determined in accordance with the procedure referred to in Article 44(2).
Article 34i

Details about the operation of the refund procedure laid down in Directive 200Y/YY/EC andabout the relevant national rules, particularly in respect of the restrictions to the right todeduct applied in accordance with Article 17a of Directive 77/388/EEC, shall be included on
the web site referred to in Article 34f.’
Article 2This Regulation shall enter into force on the twentieth day following that of its publication in
the Official Journal of the European Union.
It shall apply from 1 July 2006.

This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, […]For the Council
The President

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