# EUR-Lex - 52003PC0078(02) - EN

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# 52003PC0078(02)

**Proposal for a Council Regulation amending Regulation (EEC) No 218/92 on administrative co-operation in the field of indirect taxation (VAT) as regards additional measures regarding supplies of travel services /* COM/2003/0078 final - CNS 2003/0040 */ **

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Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 218/92 on administrative co-operation in the field of indirect taxation (VAT) as regards additional measures regarding supplies of travel services

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. BACKGROUND

On 8 February 2002 the Commission published a proposal for a Council Directive amending Directive 77/388/EEC as regards the special scheme for travel services [1].

[1] Proposal COM(2002)64 final

In the meantime the Council adopted 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 [2] and Council Regulation (EC) N° 792/2002 of 7 May 2002 amending temporarily Regulation (EEC) N° 218/92 on administrative co-operation in the field of indirect taxation (VAT) as regards additional measures regarding electronic commerce [3].

[2] OJ L 128 of 15/05/2002, p.41

[3] OJ L 128 of 15/05/2002, p.1

The European Economic and Social Committee delivered its opinion on 17 and 18 July 2002 [4].

[4] OJ C 241, 7.10.02, p. 83.

On 24 September 2002 the European Parliament adopted its report on this proposal for a Council Directive [5] and it proposed two amendments, one of which the Commission could accept and in respect of which it undertook to modify its proposal.

[5] Report on the Proposal for a Council Directive amending Directive 77/388/EEC as regards the special scheme for travel agents (COM(2002) 64 - C5-0112/2002 - 2002/0041(CNS)), PE 307.532, A5-0274/2002.

Consequently, the Commission is submitting the present amended proposal.

2. EXPLANATION OF THE AMENDMENTS

2.1. Introducing the "one stop shop" principle

The objective of this amendment is to ensure that the proposed rules on the place of supply for travel services, when supplied by non-EU established travel agents to EU established customers can be easily applied in practice. While calling for third country suppliers to be taxable in the EU when supplying customers in the EU, the Commission did not propose any simplified measures to achieve that.

In the meantime a simplification scheme was adopted in Council Directive 2002/38/EC amending Directive 77/388/EEC as regards the value added tax arrangements applicable to certain electronically supplied services and radio and television broadcasting services, for cases where a supplier who is not established in the EU supplies these services to non taxable customers in the EU. This "one stop shop" scheme will be applicable for a trial period of 3 years from 1 July 2003.

The European Parliament has proposed to extend the scope of this special scheme provided for in the e-commerce Directive 2002/38/EC, as well as the bilateral clearing mechanism between tax authorities provided for under Title III.A of Council Regulation (EC) N°792/2002 of 7 May 2002 amending temporarily Regulation (EEC) N° 218/92 on administrative co-operation in the field of indirect taxation (VAT) as regards additional measures regarding electronic commerce, to the supplies by non-EU established suppliers of travel services to EU established clients.

The Commission accepted this amendment and promised to modify its proposal accordingly.

2.2. Introducing an exemption for supplies to third country established clients.

The Commission cannot accept this amendment as it is contrary to one of the basic principles of the Community VAT system whereby supplies of goods and services are taxed there where the consumption takes place. Therefore, the profit margin generated in the Community, should be taxable in the Community, where it is realised and it should not be exempted when the customer is established outside the EU.

3. PROPOSED CHANGES TO THE COMMISSION PROPOSAL COM(2002) 64 FINAL

3.1. Introduction of a new subparagraph under Article 26(2)

The first modification is to extend the scope of the special scheme for electronically supplied services to cover also travel services supplied by non-EU established travel agents to EU established customers, insofar as the travel service takes place in the EU. These supplies are covered by Article 26(2) of the Commission Proposal COM(2002) 64 final. A new subparagraph is inserted in this Article, which proposes to allow these third country suppliers, mentioned in Article 26(2)(b) (new) to apply a special scheme, similar to the one applicable for electronically supplied services in order to comply with their VAT obligations in the EU.

3.2. A new Article 26(3)

This new Article 26(3)(a) first introduces some definitions necessary for determining the scope and functioning of the special scheme.

The second paragraph of Article 26(3) then introduces the special scheme which will be applicable to the supplies of travel services by non EU established travel agents, when supplying travel services, that take place in the EU to EU established customers.

3.3. Modification of Article 3 of the Proposal COM(2002) 64 final

The special scheme for the supplies covered by Article 26(3) (new) is similar to the special scheme for electronically supplied services mentioned in Article 26c (B) of the 6th VAT Directive, which is applicable for a trial period of 3 years, starting on 1st July 2003. Therefore, it is advisable to update the original target date of 1 January 2003 to the same date of 1 July 2003.

4. AIM AND CONTENTS OF THE PROPOSAL AMENDING REGULATION (EEC) NO 218/92

The proposed modifications to the special scheme for travel agents, set out in Article 26 of the 6th VAT Directive aim to ensure that VAT is allocated to the Member State where the actual consumption takes place.

Under the proposed new scheme it is the Member State of consumption that, in the first place, is responsible for ensuring that the suppliers fulfil their tax obligations and account for the VAT due on their supplies. For the supplies of travel services by operators that are not established, nor identified for VAT purposes in the Community, to customers established in the Community, it is necessary for the Member State of consumption and the Member State of establishment of the supplier to exchange all information necessary to operate the special scheme provided for under Article 26 (3) (new) of the 6th VAT Directive. Similarly it is necessary for the Member State of consumption that the amount of VAT due on the supplies for which the place of taxation is located on its territory, actually is transferred to its State budget.

A similar system has already been introduced for electronically supplied services [6] and the proposed amendments to Regulation (EEC) No 218/92 are intended to extend the system to the supplies made by travel agents under the special scheme introduced under Article 26(3) of the 6th VAT Directive.

[6] Council Regulation (European Commission) No 792/2002 of 7 May 2002

2003/0040 (CNS)

Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 218/92 on administrative co-operation in the field of indirect taxation (VAT) as regards additional measures regarding supplies of travel services

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 95 thereof,

Having regard to the proposal from the Commission [7];

[7] OJ C [...], [...], p. [...]

Having regard to the opinion of the European Parliament [8];

[8] OJ C [...], [...], p. [...]

Having regard to the opinion of the European Economic and Social Committee [9];

[9] OJ C [...], [...], p. [...]

Whereas:

(1) Council Directive 2003/xxx/EC of [...................... 2003] amending Directive 77/388/EEC as regards the special scheme for travel agents [10] provides a framework for taxing supplies of travel services in the Community effected by taxable persons who are neither established nor required to be identified for tax purposes within the Community.

[10] OJ L ...

(2) Since the Member State of consumption has primary responsibility for ensuring that non-established suppliers comply with their obligations, the information necessary to operate the special scheme for travel services supplied by operators not established in the Community, as provided for in Article 26(3) of Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment [11] should be transmitted to those Member States.

[11] OJ L 145 of 13/6/1977, p. 1 as last modified by Council Directive 2002/92/EC of 3 December 2002 OJ L 331 of 7/12/2002, p 27

(3) It is necessary to provide that the value-added tax due in respect of such supplies is to be transferred to the accounts designated by the Member States of consumption,

(4) Regulation (EEC) No 218/92 should therefore be amended accordingly,

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EEC) No 218/92 is amended as follows:

(1) The following Title III B is inserted: "Title III B Provisions concerning the special scheme provided for in Article 26(3) of Directive 77/388/EEC Article 9g The following provisions shall apply to the special scheme provided for in Article 26(3) in Directive 77/388/EEC. The definitions set out in Article 26(3) shall also apply for the purposes of this Title. Article 9h

1. The information from the non-established taxable person to the Member State of identification when his activities commence set out in the first subparagraph of Article 26(3)(b)(1) of Directive 77/388/EEC is to be submitted in an electronic manner. The technical details, including a common electronic message, shall be determined in accordance with the procedure provided for in Article 10.

2. The Member State of identification shall transmit the information referred to in paragraph 1 by electronic means to the competent authorities of the other Member States within ten days from the end of the month during which the information was received from the non-established taxable person. In the same manner the competent authorities of the other Member States shall be informed of the allocated identification number. The technical details, including a common electronic message, by which the information is to be transmitted shall be determined in accordance with the procedure provided for in Article 10.

3. The Member State of identification shall without delay inform by electronic means the competent authorities of the other Member States if a non-established taxable person is excluded from the identification register.

Article 9i

1. The return with the details set out in the second subparagraph of Article 26(3)(b)(4) of Directive 77/388/EEC shall be submitted in an electronic manner. The technical details, including a common electronic message shall be determined in accordance with the procedure provided for in Article 10.

2. The Member State of identification shall transmit the information referred to in paragraph 1 by electronic means to the competent authority of the Member State concerned at the latest ten days after the end of the month in which the return was received. Member States, which have required the tax return to be made in a currency other than euro, shall convert the amounts into euro using the exchange rate valid for the last date of the reporting period. The exchange shall be done following the exchange rates published by the European Central Bank for that day, or, if there is no publication on that day, on the next day of publication. The technical details, by which this information is to be transmitted shall be determined in accordance with the procedure provided for in Article 10.

3. The Member State of identification shall transmit by electronic means to the Member State of consumption the information needed to link each payment with a relevant quarterly tax return.

Article 9j The provisions in Article 4(1) shall also apply to information collected by the Member State of identification in accordance with Article 26(3)(b)(1) and (4) of Directive 77/388/EEC. Article 9k

1. The Member State of identification shall ensure that the amount the non-established taxable person has paid is transferred to the bank account denominated in euro, which has been designated by the Member State of consumption to which the payment is due. Member States, which have required the payments in a currency other than euro shall convert the amounts into euro using the exchange rate valid for the last date of the reporting period. The exchange shall be done following the exchange rates published by the European Central Bank for that day, or, if there is no publication on that day, on the next day of publication. The transfer shall take place at the latest ten days after the end of the month in which the payment was received.

2. If the non-established taxable person does not pay the total tax due, the Member State of identification shall ensure that the payment is transferred to the Member States of consumption in proportion to the tax due in each Member State. The Member State of identification shall inform by electronic means the competent authorities of the Member States of consumption thereof.

Article 9l

1. Member States shall notify by electronic means the competent authorities of the other Member States of the relevant bank account numbers for receiving payments in accordance with Article 9k.

2. Member States shall without delay notify by electronic means the competent authorities of the other Member States and the Commission of changes in the standard tax rate.";

(2) In Article 13(1), the first sentence shall be replaced by the following: " The Commission and the Member States shall ensure that such existing or new communication and information exchange systems as are necessary to provide for the exchanges of information described in Article 9b and 9c and in Articles 9h and 9i are operational by the dates specified in Article 3(1) of Directive 2002/38/EC and in Article 3 of Directive 2003/xx/EC, respectively."

Article 2

This Regulation shall enter into force on the seventh day following its publication in the Official Journal of the European Communities.

It shall apply from 1 July 2003.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, [...]

For the Council

The President

[...]