# EUR-Lex - 52012PC0766 - EN

*|*

# 52012PC0766

**Proposal for a COUNCIL DECISION on authorising the Kingdom of the Netherlands to apply a measure derogating from Article 193 of Directive 2006/112/EC on the common system of value added tax /* COM/2012/0766 final - 2012/0355 (NLE) */**

			*

			*

EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

Grounds for and objectives of the
proposal

Pursuant to Article 395(1) of Council
Directive 2006/112/EC of 28 November 2006 on the common system of value added
tax (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 that Directive in order to simplify the procedure
for charging the tax or to prevent certain types of tax evasion or avoidance.

By letter registered with the Commission on
12 July 2012 and on 4 October 2012, the Kingdom of the Netherlands (hereafter 'the Netherlands') requested authorisation to apply a measure derogating from
Article 193 of the VAT Directive. In accordance with Article 395(2) of the VAT
Directive, the Commission informed the other Member States by letter dated 17
October 2012 of the request made by the Netherlands. By letter dated 19 October
2012, the Commission notified the Netherlands that it had all the information
it considered necessary for appraisal of the request.

General context

As a general rule, the person liable for
the payment of value added tax to the tax authorities under Article 193 of the
VAT Directive, is the taxable person supplying the goods. The purpose of the
derogation requested by the Netherlands is to place that liability on the
taxable person to whom the supplies are made, but only under certain conditions
and exclusively in the case of particular products, notably mobile telephones and
integrated circuit devices, game consoles and personal computers for mobile
use.

According to the Netherlands, a number of
businesses within these trade sectors engage in tax evasion by not paying VAT
to the tax authorities after selling the products. However, their customers,
insofar as they are taxable persons with a right of deduction, being in receipt
of a valid invoice, remain entitled to a tax deduction. In the most aggressive
forms of this tax evasion, the same goods are, via a 'carousel scheme', supplied
several times without payment of the VAT to the tax authorities. By designating
in those cases the person to whom the goods are supplied as the person liable
for the VAT, the derogation would remove the opportunity to engage in that form
of tax evasion.

The derogation request, as regards the part
on mobile telephones and integrated circuit devices, is very similar to that
which was granted to Austria, Germany, Italy and the UK via Council Implementing
Decision 2010/710/EU of 22 November 2010. On the basis of inspections of the Dutch
Fiscal Information and Investigation Service (Fiscale Inlichtingen- en
Opsporingsdienst (FIOD)), the Netherlands also noted a shift of fraud towards
game consoles, laptops and tablet PC's and they requested that these products
be added to the derogation authorisation. A sufficiently high threshold of EUR
10 000 should exclude a shifting of fraud towards the retail sector.

At the same time, however, the Netherlands recognises that individual derogations, with an ever increasing scope, cannot
form a satisfactory long-term reply to EU-wide fraud phenomena. Therefore, the Netherlands have accepted that the derogation would only be applicable for a short period
and would end at the same time as the above-mentioned derogation, namely on 31
December 2013, so as to enable an alternative and more harmonised VAT fraud
policy in the future.

In this context, reference should be made
to the Commission's proposal (COM(2009) 511) to amend the VAT Directive to
allow all interested Member States to apply a targeted reverse charge in
relation to certain fraud-sensitive goods and services without the need to
apply for a derogation. This proposal was partially adopted through Council
Directive 2010/23/EU of 16 March 2010, which is however limited to allowing a
reverse charge to greenhouse gas emission allowances. Via a Council minute
statement, the Council committed itself to continue discussions on the other
parts of the proposal.

It is the view of the Commission that the
only measure which can be efficient at EU level in this field is the adoption
of that proposal rather than a piecemeal approach based on individual
derogations and whose impact on other Member States may not be negligible. The
Commission therefore calls on the Council to quickly resume these negotiations.

In combination with the Quick Reaction
Mechanism proposal (COM(2012) 428), missing trader fraud in VAT would then be
tackled both in the short and longer term.

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

Consultation of interested parties

Not applicable.

Impact assessment

The Decision proposal aims at combating VAT
evasion and will therefore have a potential positive impact on VAT receipts.

Nevertheless, the measures will have an
impact on the business insofar as the arrangements will be different from those
applying to normal supplies of goods. This will introduce a complexity in
accounting for businesses which do not deal exclusively with the goods which
are the subject of the derogation. The control mechanisms envisaged will also
impose additional obligations on the business sector concerned. It is therefore
clear that this derogation fails the simplification test provided by Article
395, and only falls within the scope of preventing evasion.

3.           LEGAL ELEMENTS OF THE PROPOSAL

Summary of the proposed action

Authorisation for the Netherlands to apply
a measure derogating from Article 193 of the VAT Directive as regards the use
of a reverse charge mechanism for domestic supplies of certain goods.

4.           BUDGETARY IMPLICATION

The proposal has no negative impact on the EU
budget.

5.           OPTIONAL ELEMENTS

The proposal includes a sunset clause.

2012/0355 (NLE)

Proposal for a

COUNCIL DECISION

on authorising the Kingdom of the Netherlands to apply a measure derogating from Article 193 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[1], and in particular Article
395(1) thereof,

Having regard to the proposal from the
European Commission,

Whereas:

(1)       By letters registered with
the Commission on 12 July 2012 and on 4 October 2012, the Netherlands requested authorisation to introduce a special measure for derogating from
Article 193 of Directive 2006/112/EC as regards the person liable for payment
of value added tax (VAT).

(2)       In accordance with Article
395(2) of Directive 2006/112/EC, the Commission informed the other Member
States by letter dated 17 October 2012 of the request made by the Netherlands. By letter dated 19 October 2012, the Commission notified the Netherlands that it had all the information it considered necessary to consider the request.

(3)       Article 193 of Directive
2006/112/EC provides that the taxable person supplying the goods or services
is, as a general rule, liable for the payment of the VAT to the tax
authorities. The purpose of the derogation requested by the Netherlands is to make, under certain circumstances, the recipient of supplies of certain goods
liable for the payment of VAT in relation to particular products, notably
mobile phones, integrated circuit devices, game consoles and personal computers
for mobile use.

(4)       According to the Netherlands, a number of traders in these sectors engage in fraudulent activities by
selling these products without paying the VAT over to the tax authorities.
Their customers, however, are entitled to a tax deduction as they are in possession
of a valid invoice. In its most aggressive form, the goods are, via a
'carousel' scheme, supplied several times without payment of VAT. In this
context, the Dutch investigation service has noted a shift of fraud from mobile
phones and integrated circuit devices towards game consoles and personal
computers for mobile use. By designating the person to whom the goods are
supplied as the person liable for the payment of VAT in such cases, the
derogation would eliminate the opportunity to engage in that form of tax
evasion.

(5)       In order to ensure the
effective operation of the derogation and preventing tax evasion from being
shifted towards the retail stage or to other products, the Netherlands will introduce appropriate control and reporting obligations. In addition, a
minimum threshold should reduce the risk of the fraud shifting to the retail
trade.

(6)       The authorisation shall be
valid for only a very short period as questions remain on, in particular, the possible
impact of the reverse charge mechanism on the functioning of the VAT systems
within Member States who apply it or in other Member States. The end date
coincides with the end of similar derogations granted in relation to mobile
phones and integrated circuit devices so as to enable the development of a more
elaborated and more harmonised anti-fraud policy in the future.

(7)       The derogation will not
have an adverse effect on the Union's own resources accruing from VAT,

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Article 193 of
Directive 2006/112/EC, the Netherlands are authorised to designate the taxable
person to whom supplies of the following goods are made as the person liable
for the payment of the tax:

(a)......... mobile phones, being devices
made or adapted for use in connection with a licensed network and operated on
specified frequencies, whether or not they have any other use;

(b)......... integrated circuit devices such
as microprocessors and central processing units in a state prior to integration
into end-user products;

(c)......... game consoles, which by virtue
of their objective characteristics and principal functions, are intended for
playing video and other computer games, whether or not they have any other use;

(d)......... laptops and tablet PC's.

The derogation shall apply in respect of
supplies of goods for which the taxable amount is equal to or higher than EUR
10 000.

Article 2

The derogation provided for in Article 1 is
subject to the Netherlands introducing appropriate and effective control and
reporting obligations on taxable persons who supply goods to which the reverse
charge applies in accordance with this Decision.

Article 3

This Decision shall take effect on the day
of its notification.

This Decision shall expire on the date of
the entry into force of the Union rules allowing all Member States to adopt
such measures derogating from Article 193 of Directive 2006/112/EC, but on 31
December 2013 at the latest.

Article 4

This Decision is addressed to the Kingdom
of the Netherlands.

Done at Brussels,

For
the Council

The
President

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