# EUR-Lex - 52012PC0654 - EN

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# 52012PC0654

**Proposal for a COUNCIL DECISION authorising Belgium to apply a special measure derogating from Article 285 of Directive 2006/112/EC on the common system of value added tax /* COM/2012/0654 final - 2012/0312 (NLE) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

Grounds for and objectives of the
proposal

Pursuant to Article 395(1) of Directive
2006/112/EC of 28 November 2006 on the common system of value added tax[1] (hereafter 'the VAT Directive')
the Council, acting unanimously on a proposal from the Commission, may
authorise any Member State to apply special measures for derogation from the
provisions of that Directive in order to simplify the procedure for collecting
VAT or to prevent certain forms of tax evasion or avoidance.

By letter registered with the Commission on
21 June 2012 Belgium requested an authorisation to introduce a measure to
exempt taxable persons whose annual turnover is no higher than EUR 25 000. In
accordance with Article 395(2) of the VAT Directive, the Commission informed
the other Member States by letter dated 13 September 2012 of the request made
by Belgium. By letter dated 17 September 2012 the Commission notified Belgium that it had all the information necessary to consider the request.

General context

Chapter 1 of Title XII of the VAT Directive
allows for the possibility of Member States to apply special schemes for small
enterprises, including the possibility of exempting taxable persons below a
certain annual turnover. This exemption implies that a taxable person does not
have to charge VAT on his supplies and, consequently, he cannot deduct the VAT
on his inputs.

Under Article 285 of the VAT Directive,
Member States which did not make use of Article 14 of Council Directive 67/228/EEC[2], can exempt taxable persons
whose threshold is no higher than EUR 5 000.

In the current economic and political
climate, the Belgian Government would like to raise this threshold to EUR 25
000, with the possibility to increase it in order to maintain its value in real
terms. The introduction of such a threshold will simplify the VAT system for
small enterprises and significantly reduce the burdens on those businesses
eligible for the scheme by releasing them from many of the VAT obligations
under the normal VAT arrangements. The system would be optional for taxable
persons. According to the Belgian authorities, some 1% of taxable persons will
make use of the scheme, with a corresponding minimal effect on the budget
(around 0.2%).

Existing provisions in the area of the
proposal

In 2004, the Commission made a proposal to
increase the annual turnover threshold available to Member States (COM(2004)
728 final) for the exemption from VAT of taxable persons to EUR 100 000.

Consistency with other policies and
objectives of the Union

Not applicable.

2.           RESULTS OF CONSULTATIONS WITH THE
INTERESTED PARTIES AND IMPACT ASSESSMENTS

Consultation of interested parties

Not relevant

Collection and use of external expertise

There was no need of external expertise

Impact assessment

The proposal for a Council Decision aims at
introducing a simplification measure which removes many of the VAT obligations
for businesses operating with an annual turnover no higher than EUR 25 000 and
therefore has a potential positive impact.

Because of the narrow scope of the
derogation, and its limited application in time, the scope will in any case be
limited.

3.           LEGAL ELEMENTS OF THE PROPOSAL

Summary of the proposed action

Authorisation for Belgium to introduce a
measure derogating from the VAT Directive as regards a simplification measure
for businesses with an annual turnover no higher than EUR 25 000.

Legal basis

Article 395 of the VAT Directive

Subsidiarity principle

The proposal falls under the exclusive
competence of the European Union. The subsidiarity principle therefore does not
apply.

Proportionality principle

The proposal complies with the
proportionality principle for the following reasons.

The Decision concerns an authorisation
granted to a Member State upon its own request and does not constitute any
obligation.

Given the limited scope of the derogation,
the special measure is proportionate to the aim pursued.

Choice of instruments:

Proposed instrument: Council Decision.

Under Article 395 of the VAT Directive, a derogation
from the common rules is only possible with the authorisation of the Council
acting unanimously on a proposal from the Commission. Moreover, a Council
Decision is the most suitable instrument since it can be addressed to
individual Member States.

4.           BUDGETARY IMPLICATION

The proposal has no implication for the EU
budget because Belgium will carry out a compensation calculation in accordance
with Article 6 of Council Regulation (ECC, EURATOM) 1553/89.

5.           OPTIONAL ELEMENTS

Review/revision/sunset clause

The proposal includes a sunset clause.

2012/0312 (NLE)

Proposal for a

COUNCIL DECISION

authorising Belgium to apply a special
measure derogating from Article 285 of Directive 2006/112/EC on the common
system of value added tax

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union,

Having regard to Council Directive
2006/112/EC of 28 November 2006 on the common system of value added tax[3], and in particular Article
395(1) thereof,

Having regard to the proposal from the
European Commission,

Whereas:

(1)       In a letter registered
with the Commission on 21 June 2012, Belgium requested authorisation for a
measure derogating from Article 285 of Directive 2006/112/EC in order to
introduce a special measure exempting from value added tax (VAT) taxable
persons whose annual turnover is no higher than EUR 25 000. Through that
measure, those taxable persons would be exempted from all or some of the
obligations in relation to VAT referred to in chapters 2 to 6 of Title XI of
Directive 2006/112/EC.

(2)       The Commission informed
the other Member States by letter dated 13 September 2012 of the request made
by Belgium. By letter dated 17 September 2012 the Commission notified Belgium that it had all the information necessary to consider the request.

(3)       Under Article 285 of
Directive 2006/112/EC, Member States, who have not made use of Article 14 of Council
Directive 67/228/EEC[4],
can exempt taxable persons whose turnover is no higher than EUR 5 000. Belgium has requested that this threshold be increased to EUR 25 000.

(4)       A higher threshold for the
special scheme for small enterprises is a simplification measure in that it may
significantly reduce the VAT obligations of the smallest businesses. The
special scheme is optional for taxable persons.

(5)       In its proposal for a
Directive simplifying valued added tax obligations of 29 October 2004[5], the Commission included
provisions aimed at allowing Member States to set the annual turnover ceiling
for the VAT exemption scheme at up to EUR 100 000 or the equivalent in national
currency, with the possibility of updating this amount each year. The request
submitted by Belgium is in line with that proposal.

(6)       The derogation has no
impact on the Union's own resources accruing from VAT and only a negligible
effect on the overall amount of the tax revenue of the Member State collected
at the stage of final consumption,

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Article 285 of
Directive 2006/112/EC, Belgium is authorised to exempt from VAT taxable persons
whose annual turnover is no higher than EUR 25 000.

Belgium may raise
that ceiling in order to maintain the value of the exemption in real terms.

Article 2

This Decision shall apply until the date of
entry into force of a Directive amending the amounts of the annual turnover
ceilings below which taxable persons may qualify for VAT exemption or until 31
December 2015, whichever date is earlier.

This Decision shall enter into force on the
day following that of its publication in the Official Journal of the
European Union.

Article 3

This Decision is addressed to the Kingdom of Belgium.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 347, 11.12.2006, p.1

[2]               OJ 71, 14.4.1967, p. 1303–1312

[3]               OJ L 347, 11.12.2006, p.1

[4]               OJ 71, 14.4.1967, p. 1303–1312

[5]               COM(2004) 728 final.