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"B COUNCIL DECISION
of 24 July 1997
authorizing Ireland to apply a measure derogating from Article 21 of the Sixth Directive (77/388/EEC) on
the harmonization of the laws of the Member States relating to turnover taxes
(97/510/EC)
(OJ L 214, 6.8.1997, p. 37)
Amended by:
Official Journal
No page date
"M1 Council Decision 2000/435/EC of 29 June 2000 L 172 24 12.7.20001997D0510 — EN — 12.07.2000 — 001.001 — 1
COUNCIL DECISION
of 24 July 1997
authorizing Ireland to apply a measure derogating from Article 21 of the
Sixth Directive (77/388/EEC) on the harmonization of the laws of the
Member States relating to turnover taxes
(97/510/EC)
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community,
Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977
on the harmonization of the laws of the Member States relating to turnovertaxes — Common system of value added tax: uniform basis of assessment (
1),
and in particular Article 27 thereof,
Having regard to the proposal from the Commission,
Whereas, under the terms of Article 27 (1) of Directive 77/388/EEC, the
Council, acting unanimously on a proposal from the Commission, may
authorize any Member State to introduce special measures for derogation
from the provisions of that Directive in order to simplify the procedure forcharging the tax or to prevent certain types of tax evasion or avoidance;
Whereas, by registered letter to the Commission dated 5 February 1997,
Ireland requested authorization to introduce a measure derogating from
Article 21 (1) of Directive 77/388/EEC;
Whereas, in accordance with Article 27 (3) of Directive 77/388/EEC, the
other Member States were informed on 4 March 1997 of the request made by
Ireland;
Whereas Ireland operates a specific system of applying V AT to property
based, on the one hand, on the option under Article 5 (3) of Directive77/388/EEC to treat the supply of certain interests (i.e. a lease of 10 years or
more) in immovable property as a supply of goods and, on the other hand, on a
derogation authorized under Article 27 (5) to treat the granting of such aninterest by a lessor as a disposal of the lessor’ s entire interest in the property;
Whereas Community law gives Member States a great deal of discretion in
determining the V AT treatment to be applied to immovable goods, and its
transposition has led to considerable variations in the national laws applied inthis field;
Whereas avoidance schemes have been set up, based on the use of surrender,
including by way of abandonment of a leasehold interest or assignment of aleasehold interest, which result in the avoidance of the V ATwhere the ultimateacquirer of the property is not entitled to a full deduction of V AT;
Whereas it is also necessary to extend the derogation to the surrender or
assignment of a leasehold interest to a taxable person having full right ofdeduction, as the surrender or the assignment of a leasehold interest will oftenarise due to financial difficulties of the lessee;
Whereas the measure envisaged is a derogation from Article 21 (1) (a) of
Directive 77/388/EEC, whereby the person liable for the tax is the taxableperson who carries out the taxable transaction;
Whereas the derogation provides that, where a surrender or assignment of a
lease-hold interest is a taxable supply of goods, the person acquiring the
interest is liable for the payment of the tax if that person is a taxable person ora non-taxable legal person;
Whereas this derogation should ensure a better functioning of the current V AT
regime applied by Ireland on immovable goods;
Whereas, given the limited scope of the derogation, the special measure is
proportionate to the aim pursued;!B
(1) OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC,
OJ No L 338, 28. 12. 1996, p. 89.1997D0510 — EN — 12.07.2000 — 001.001 — 2
Whereas there exists a serious risk that use of the said V AT avoidance scheme
will increase in the period between the request for a derogation and theauthorization thereof; whereas at the latest since the publication on 26 March1997 of the draft legislation which is the subject of the present request for a
derogation, suppliers, lessors and lessees of property have no longer had a
legitimate expectation of the continuation of the Irish legislation in forcebefore that date; whereas it is therefore appropriate to authorize thederogation to take effect from 26 March 1997;
Whereas the Commission adopted on 10 July 1996 a work programme based
on a step-by-step approach for progressing towards a new common system of
VAT ;
Whereas the tax treatment of immovable goods is an important issue to be
reviewed in this programme;
Whereas the last package of proposals is to be put forward by mid-1999 and,
in order to permit an evaluation of the coherence of the derogation with theglobal approach of the new common V AT system, the authorization is granteduntil 31 December 1999;
Whereas the derogation does not have a negative impact on the own resources
of the European Communities accruing from V AT,
HAS ADOPTED THIS DECISION:
Article 1
By way of derogation from Article 21 (1) (a) of Directive 77/388/EEC, Ireland
is hereby authorized, from 26 March 1997 until
"M131 December 2003 3,
to designate the person to whom the supply is made as the person liable to pay
the tax where the two following conditions are met:
— a surrender or assignment of a leasehold interest is treated as a supply of
goods made by a lessee,
— the person acquiring the leasehold interest is a taxable person or a
non-taxable legal person.
Article 2
This Decision is addressed to Ireland.!B1997D0510 — EN — 12.07.2000 — 001.001 — 3