COUNCIL DIRECTIVE 98/80/EC of 12 October 1998 supplementing the common system of value added tax and amending Directive 77/388/EEC - Special scheme for investment gold

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community and in particular Article 99 thereof,

Having regard to the proposal from the Commission (1),

Having regard to the opinion of the European Parliament (2),

Having regard to the opinion of the Economic and Social Committee (3),

Whereas, under the sixth Council 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 (4) transactions concerning gold are in principle taxable although, on the basis of the transitional derogation provided for in Article 28(3) in conjunction with point 26 of Annex F to the said Directive, Member States may continue to exempt transactions concerning gold other than gold for industrial use; whereas the application by some Member States of that transitional derogation is the cause of a certain distortion of competition;

Whereas gold does not only serve as an input for production but is also acquired for investment purposes; whereas the application of the normal tax rules constitutes a major obstacle to its use for financial investment purposes and therefore justifies the application of a specific tax scheme for investment gold; whereas such a scheme should also enhance the international competitiveness of the Community gold market;

Whereas supplies of gold for investments purposes are similar in nature to other financial investments often exempted from tax under the current rules of the sixth Directive, and therefore exemption from tax appears to be the most appropriate tax treatment for supplies of investment gold;

Whereas the definition of investment gold should only comprise forms and weights of gold of very high purity as traded in the bullion markets and gold coins the value of which primarily reflects its gold price; whereas, in the case of gold coins, for reasons of transparency, a yearly list of qualifying coins should be drawn up providing security for the operators trading in such coins; whereas the legal security of traders demands that coins included in this list be deemed to fulfil the criteria for exemption of this Directive for the whole year for which the list is valid; whereas such list will be without prejudice to the exemption, on a case-by-case basis, of coins, including newly minted coins which are not included in the list but which meet the criteria laid down in this Directive;

Whereas since a tax exemption does, in principle, not allow for the deduction of input tax while tax on the value of the gold may be charged on previous operations, the deduction of such input tax should be allowed in order to guarantee the advantages of the special scheme and to avoid distortions of competition with regard to imported investment gold;

Whereas the possibility of using gold for both industrial and investment purposes requires the possibility for operators to opt for normal taxation where their activity consists either in the producing of investment gold or transformation of any gold into investment gold, or in the wholesale of such gold when they supply in their normal trade gold for industrial purposes;

Whereas the dual use of gold may offer new opportunities for tax fraud and tax evasion that will require effective control measures to be taken by Member States; whereas a common standard of minimum obligations in accounting and documentation to be held by the operators is therefore desirable although, where this information does already exist pursuant to other Community legislation, a Member State may consider these requirements to be met;

Whereas experience has shown that, with regard to most supplies of gold of more than a certain purity the application of a reverse charge mechanism can help to prevent tax fraud while at the same time alleviating the financing charge for the operation; whereas it is justified to allow Member States to use such mechanism; whereas for importation of gold Article 23 of the Sixth Directive allows, in a similar way, that tax is not paid at the moment of importation provided it is mentioned in the declaration pursuant to Article 22(4) of that Directive;

Whereas transactions carried out on a bullion market regulated by a Member State require further simplifications in their tax treatment because of the huge number and the speed of such operations; whereas Member States are allowed to disapply the special scheme, to suspend tax collection and to dispense with recording requirements;

Whereas since the new tax scheme will replace existing provisions under Article 12(3)(e) and point 26 of Annex F of the Sixth Directive, these provisions should be deleted,

HAS ADOPTED THIS DIRECTIVE:

Article 1

The following Article 26b shall be added to Directive 77/388/EEC:

'Article 26b

Special scheme for investment gold

A. Definition

For the purposes of this Directive, and without prejudice to other Community provisions: "investment gold" shall mean:

(i) gold, in the form of a bar or a wafer of weights accepted by the bullion markets, of a purity equal to or greater than 995 thousandths, whether or not represented by securities. Member States may exclude from the scheme small bars or wafers of a weight of 1 g or less;

(ii) gold coins which:

- are of a purity equal to or greater than 900 thousandths,

- are minted after 1800,

- are or have been legal tender in the country of origin, and

- are normally sold at a price which does not exceed the open market value of the gold contained in the coins by more than 80 %.

Such coins are not, for the purpose of this Directive, considered to be sold for numismatic interest.

Each Member State shall inform the Commission before 1 July each year, starting in 1999, of the coins meeting these criteria which are traded in that Member State. The Commission shall publish a comprehensive list of these coins in the "C" series of the Official Journal of the European Communities before 1 December each year. Coins included in the published list shall be deemed to fulfil these criteria for the whole year for which the list is published.

B. Special arrangements applicable to investment gold transactions

Member States shall exempt from value added tax the supply, intra-Community acquisition and importation of investment gold, including investment gold represented by certificates for allocated or unallocated gold or traded on gold accounts and including, in particular, gold loans and swaps, involving a right of ownership or claim in respect of investment gold, as well as transactions concerning investment gold involving futures and forward contracts leading to a transfer of right of ownership or claim in respect of investment gold.

Member States shall also exempt services of agents who act in the name and for the account of another when they intervene in the supply of investment gold for their principal.

C. Option to tax

Member States shall allow taxable persons who produce investment gold or transform any gold into investment gold as defined in A a right of option for taxation of supplies of investment gold to another taxable person which would otherwise be exempt under B.

Member States may allow taxable persons, who in their trade normally supply gold for industrial purposes, a right of option for taxation of supplies of investment gold as defined in A(i) to another taxable person, which would otherwise be exempt under B. Member States may restrict the scope of this option.

Where the supplier has exercised a right of option for taxation pursuant to the first or second paragraph, Member States shall allow a right of option for taxation for the agent in respect of the services mentioned in the second paragraph of B.

Member States shall specify the details of the use of these options, and shall inform the Commission of the rules of application for the exercise of these options in that Member State.

D. Right of deduction

1. Taxable persons shall be entitled to deduct

(a) tax due or paid in respect of investment gold supplied to them by a person who has exercised the right of option under C or supplied to them pursuant to the procedure laid down in G;

(b) tax due or paid in respect of supply to them, or intra-Community acquisition or importation by them, of gold other than investment gold which is subsequently transformed by them or on their behalf into investment gold;

(c) tax due or paid in respect of services supplied to them consisting of change of form, weight or purity of gold including investment gold,

if their subsequent supply of this gold is exempt under this Article.

2. Taxable persons who produce investment gold or transform any gold into investment gold, shall be entitled to deduct tax due or paid by them in respect of supplies, or intra-Community acquisition or importation of goods or services linked to the production or transformation of that gold as if their subsequent supply of the gold exempted under this Article were taxable.

E. Special obligations for traders in investment gold

Member States shall, as a minimum, ensure that traders in investment gold keep account of all substantial transactions in investment gold and keep the documentation to allow identification of the customer in such transactions.

Traders shall keep this information for a period of at least five years.

Member States may accept equivalent obligations under measures adopted pursuant to other Community legislation, such as Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering (*), to meet the requirements of the first paragraph.

Member States may lay down stricter obligations, in particular on special record keeping or special accounting requirements.

F. Reverse charge procedure

By way of derogation from Article 21(1)(a), as amended by Article 28g, in the case of supplies of gold material or semi-manufactured products of a purity of 325 thousandths or greater, or supplies of investment gold where an option referred to in C of this Article has been exercised, Member States may designate the purchaser as the person liable to pay the tax, according to the procedures and conditions which they shall lay down. When they exercise this option, Member States shall take the measures necessary to ensure that the person designated as liable for the tax due fulfils the obligations to submit a statement and to pay the tax in accordance with Article 22.

G. Procedure for transactions on a regulated gold bullion market

1. A Member State may, subject to consultation provided for under Article 29, disapply the exemption for investment gold provided for by this special scheme in respect of specific transactions, other than intra-Community supplies or exports, concerning investment gold taking place in that Member State:

(a) between taxable persons who are members of a bullion market regulated by the Member State concerned, and

(b) where the transaction is between a member of a bullion market regulated by the Member State concerned and another taxable person who is not a member of that market.

Under these circumstances, these transactions shall be taxable and the following shall apply.

2.(a) For transactions under 1(a), for the purpose of simplification, the Member State shall authorise suspension of the tax to be collected as well as dispense with the recording requirements of value added tax.

(b) For transactions under 1(b), the reverse charge procedure under F shall be applicable. Where a non-member of the bullion market would not, other than for these transactions, be liable for registration for VAT in the relevant Member State, the member shall fulfil the fiscal obligations on behalf of the non-member, according to the provisions of that Member State.

(*) OJ L 166, 28.6.1991, p. 77.`

Article 2

Article 12(3)(e) and point 26 of Annex F to Directive 77/388/EEC shall be deleted.

Article 3

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive on 1 January 2000. They shall forthwith inform the Commission thereof.

When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by the Member States.

2. Member States shall communicate to the Commission the text of the provisions of domestic law which they adopt in the field governed by this Directive.

Article 4

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

Article 5

This Directive is addressed to the Member States.

Done at Luxembourg, 12 October 1998.

For the Council

The President

R. EDLINGER

(1) OJ C 302, 19. 11. 1992, p. 9.

(2) OJ C 91, 28. 3. 1994, p. 91.

(3) OJ C 161, 14. 6. 1993, p. 25.

(4) OJ L 145, 13. 5. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ L 338, 28. 12. 1996, p. 89).