COMMISSION OF THE EUROPEAN COMMUNITIES 
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HBB 
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$m C0MC93) 657 final 
Brussels, 13 December 1993 
Proposal for a 
COUNCIL PECtSIQN 
AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY TO APPLY A SPECIAL 
MEASURE DEROGATING FROM ARTICLES 2(1) AND 17 OF THE SIXTH DIRECTIVE 
(77/388/EEC) ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES 
RELATING TO TURNOVER TAXES 
(presented by the Commission) 
,mm warn. 
EXPLANATORY MEMORANDUM 
The present proposal for a Council Decision authorizes the Federal Republic of 
Germany to introduce a special measure in accordance with Article 27 of the Sixth 
VAT Directive 77/388/EEC of 17 May 1977 on the common system of value added 
taxW, as last amended by Council Directive 92/111/EEC of 14 December 1992<2>. 
With the completion of the Single Market, the arrangements for the taxation of 
services supplied within the European Community have been modified. The 
exemptions related to the exportation of goods and to the placing of certain goods 
under a customs procedure have been discontinued, as have the arrangements for 
including the value of services in the taxable amount in the case of imported goods. 
Under these circumstances, the territoriality principle as applied to a number of 
services, with these services being taxed in the place where they are physically carried 
out, has the effect of obliging taxable persons who are not established within the 
Member State of performance of the services to pay VAT in the Member State where 
the services are carried out, and subsequently to apply for refund under the Eighth<3> or 
Thirteenth^4) Directives. This concerns above all services supplied in respect of work 
on movable tangible property and the supply of transport services (and ancillary 
activities thereto) which are of a purely domestic nature but which are directly linked 
to intra-Community goods transport services (the national leg of an intra-Community 
movement of goods). 
The resulting proliferation of cases in which a refund is applied for under the Eighth 
and Thirteenth Directives is hindering the freedom to supply services within the Single 
Market. 
Moreover, prior systematic vetting of applications, coupled with an increase in the 
number of cases, could well cause delay of VAT refunds under the Eighth and 
Thirteenth Directives. 
It is, therefore, most important in this context to consider measures which can rapidly 
simplify matters for traders but which will not undermine the principles of taxation 
associated with the Single Market. 
To that end, the Federal Republic of Germany has submitted a request for 
authorization on the basis of Article 27 of the Sixth VAT Directive, to introduce 
special measures derogating from Articles 2(1) and 17. The purpose of such measures 
would be to exempt the services rendered in the third and fourth indents of 
Article 9(2)(c) and the supply of domestic goods transport services (and ancillary 
activities thereto) directly linked to intra-Community goods transport services, 
provided that those services are supplied to taxable persons not established within the 
Member State of performance of the services and who in any case qualify for a refund 
<'>OJNo. L 145/1, 13.6.1977. 
<2> OJ No. L 384/47, 30.12.1992. 
<3> Council Directive 79/1072/EEC - OJ No. L 331 of 27.12.1979, p. 11. 
W Council Directive 86/560/EEC - OJ No.L 326 of 21.11.1986, p. 40. 
of VAT on those services by means of the procedures laid down in the Eighth and 
Thirteenth Directives. Given this proviso, such a derogation would in no way affect the 
amount of tax payable at the final consumption stage. 
In order to qualify for the exemption, a person to whom these services are supplied, 
but who is not established in the Member State of performance of the services, would 
have to establish his status as a taxable person in the manner laid down in the Eighth 
and Thirteenth Directives. It would also be necessary for the supplier who is liable to 
pay tax within the territory of the country to state the actual grounds for exemption on 
the invoice and the number by which his customer is identified for VAT purposes 
within the Community. 
As a result of this derogation, the growth of intra-Community activity in the service 
sectors concerned would not be hindered by the tax charges resulting from difficulties 
in applying refund procedures, and there would be sufficient time to consider other 
solutions. 
The Commission notes that the special measure proposed shall not alter the 
fundamental principles of the Sixth VAT Directive, in particular concerning the place 
of supply, but simplifies the arrangements for refunding the tax which would in any 
case be refundable under the Eighth and Thirteenth Directives. Consequently, the 
derogation in question does not have a negative effect on the own resources of the 
European Communities accruing from VAT. 
The Commission is convinced that the measure in question is intended to simplify the 
procedures for charging the tax. The Commission, therefore, considers it appropriate 
for the Federal Republic of Germany to be authorized to apply the planned special 
measure, but that such an authorization should be limited in time, lasting no later than 
31 December 1994. 
With the exception of the Member State to which it is addressed, the present proposal 
for a Council Decision is identical to the proposals adopted by the Council on 
25 October 1993 for 9 other Member States (OJ No. L 273, 5.11.1993, p. 33-50). 
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 turnover taxes - 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 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 that Directive, in order to simplify the 
procedure for charging the tax or to prevent certain types of tax evasion or avoidance; 
0) OJ No. L 145, 13.6.1977, p. 1. Directive as last amended by Directive 92/111/EEC (OJ No L 384, 
30.12.1992, p. 47). 
Whereas, by letter dated 27 October 1993 and received by the Commission on 
10 November 1993, the Federal Republic of Germany requested the authorization to 
introduce a measure for derogation from Article 17 of Directive 77/388/EEC, 
Whereas, the other Member States were informed on 22 November 1993 of the 
request made by the Federal Republic of Germany; 
Whereas implementation of the transitional VAT arrangements leads to VAT being 
charged on certain work on movable tangible and certain services relating to the 
transport of goods and ancillary transport activities at the place where these services 
are supplied, irrespective of the place where the taxable person to whom these services 
are supplied is able to exercise his rights of deduction, and whereas this results in 
growing use of the refund procedures provided for by Directives 79/1072/EEO2> and 
86/560/EEC<3>; 
Whereas the increasing use of the refund procedures provided for by Directives 
79/1072/EEC and 86/560/EEC may impede the development of intra-Community trade 
in certain services; 
Whereas the measure for derogation in question aims to introduce a simplification 
consisting in the exemption of certain services supplied to taxable persons not 
established in the territory of the country but identified in the Community, for which 
these taxable persons would in any event be entitled to a refund; 
Whereas certain requirements should be imposed on taxable persons with a view to 
preventing tax evasion or avoidance; 
Whereas, it is desirable for this derogation to be limited to the time necessary to enable 
the Council, acting on a proposal from the Commission, to adopt a definitive solution; 
Whereas the measure for derogation in question has no effect on the European 
Communities' own resources accruing from value added tax, 
HAS ADOPTED THIS DECISION: 
(2> OJ No. L 331, 27.12.1979, p. 11. 
<3> OJ No. L 326, 21.11.1986, p. 40. 
£ 
Article I 
By way of derogation from Article 2(1) of Directive 77/388/EEC, the Federal Republic 
of Germany is hereby authorized to exempt the supply of services referred to in 
Article 2 rendered to taxable persons identified in accordance with Article 22(1 )(c), (d) 
and (e) of Directive 77/388/EEC and in a Member State other than the Federal 
Republic of Germany who would have qualified in accordance with Directives 
79/1072/EEC and 86/560/EEC for a refund of the tax which would have been due had 
these services been taxed. 
Article 2 
In the circumstances provided for in Article 1, the Federal Republic of Germany is 
authorized to exempt: 
1) the supply of services referred to in the third and fourth indents of Article 9(2)(c) 
of Directive 77/388/EEC but excluding the supply of services exempted in 
accordance with Articles 14, 15 and 16 of Directive 77/388/EEC; 
2) the transport services located in the territory of the country in accordance with 
Article 9(2)(b) of Directive 77/388/EEC, directly linked to the intra-Community 
transport of goods as defined in Article 28b(C)(l) of Directive 77/388/EEC; 
3) ancillary transport activities within the meaning of the second indent of 
Article 9(2)(c) of Directive 77/388/EEC effected within the territory of the country 
related to the transport services covered by paragraph 2 above. 
Article 3 
By way of derogation from Article 17 of Directive 77/388/EEC, the services referred 
to in Article'2 and supplied with exemption from tax in the circumstances laid clown in 
Article 1 shall be eligible for deduction of input tax. 
Article 4 
To apply the exemption provided for in Article 1, the supplier of the services shall in 
particular: 
1) in the case of the supplies of services referred to in Article 2(1): 
- be in possession of a certificate establishing that the person to whom the 
services have been supplied is a taxable person and issued, as appropriate, in 
the form laid down by Directives 79/1072/EEC or 86/560/EEC; 
- mention, on his invoice, the grounds for exemption and the identification 
number by which the customer is identified in accordance with Article 22(1 )(c), 
(d) and (e) of Directive 77/388/EEC, and under which the service has been 
rendered to him; 
2) in the case of supplies of services referred to in Article 2(2): 
- satisfy the requirements referred to in the second indent of point 1 and be in 
possession of a declaration in which the person to whom the services have been 
supplied acknowledges that he fulfils the conditions referred to in Article 1 ; 
- provide proof that the transport services are directly linked to an intra-
Community transport within the meaning of Article 28b(C)(l) of Directive 
77/388/EEC; 
3) in the case of supplies referred to in Article 2(3): 
- satisfy the requirements referred to in the second indent of point 1 and be in 
possession of a declaration in which the person to whom the services have been 
supplied acknowledges that he fulfils the conditions referred to in Article 1 ; 
- provide proof that the ancillary transport activities are directly linked to the 
transport services which are referred to in Article 2(2). 
î 
Article 5 
The Council, acting unanimously on a proposal that the Commission will make as soon 
as feasible, shall adopt, after consultation of the European Parliament, before 
31 December 1994, a modification to Directive 77/388/EEC which covers the services 
mentioned in this Decision. 
The derogations provided for in this Decision shall cease to have effect on the date 
which the Council determines when it adopts the modification to Directive 
77/388/EEC but not later than 31 December 1994. 
Article 6 
This Decision is addressed to the Federal Republic of Germany. 
Done at Brussels, 
For the Council 
The President 
7 
ISSN 0254-1475 
COM(93) 657 final 
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