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DOCUMENTS "COM"
COM(82)370
Vol.1982/0130

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(82)370 final
Brussels .17June 1982
COMMUNICATION FROM THE COMMISSION TOTHE COUNCIL
Application ofArticle 27(1 toA)oftheSixth Council Directive
of17May1977 onvalue added tax :request foraderogation sub­
mitted bytheNetherlands Government
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C0M(82 )370 final

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-..CommunicationfromtheCommissiontothe.Councilconcerningthe
applicationofArticle27(1to4)oftheSixthCouncilDirective
of17May1977onvalueaddedtax^:requestforaderogation
submittedbytheNetherlands Government
1.Initsrequestof22March1982theNetherlands Government-acting
A
undertheabovementioned provisions,informedtheCommissionofits
intentiontointroduceintoitsnationallegislation ameasurefor
derogationfromtheSixthDirectivedesignedtocombatcertain
fraudulentactivitiesonthepartofsubcontractors andpersons
providinglabourwhichexist"inthebuilding,structuralsteelworkand
shipbuilding industries, .
2.Theextentofthederogationistorendertheprincipalcontractor
liableforthetaxchargeableontheworkcarriedoutbythe.
subcontractor,whowouldnormallybeliable.TheNetherlands Government'
commentsontheproposalareattachedtothiscommunication.'
3.TheCommission,initsletterof18april,1982informedtheother
MemberStatesoftherequestfromtheNetherlands Government.
4.Inaccordance withArticle27(4)oftheSixthDirectivethe
Council'sdecisionwillbedeemedtohavebeenadoptedifwithintwo
monthsofreceiptoftheinformation mentionedat3above,neitherthe
CommissionnoranyMemberStatehasrequestedthatthematterbe
raisedbyCouncil.
5.InsofarasthederogatorymeasureenvisagedbytheNetherlands
Governmentislimitedtothescopeoutlinedat1and2ofthis
communication theCommissiondoesnotintendtorequestthatthematter
beraisedbytheCouncil. i
Annex1
1OJNoL145,13.6.19774

ûnQ£5
Notcs i-on_{he_t>rpposgd__rulcs_Qn_shiftinq __yftT _;>n__the
building industry ,thestructural steelwork industry and shipbui Iding
Intréduction
InAugust 1979 ,the Dutch Government tabled aBill onjoint *and
several liability forthepayment ofsocial insurance premiums ,wages tax
andvalue added tax inthecase ofsubcontracting and theprovision ofla­
bour .The rules setout intheBill areaimed atpreventing fraud "insuch
cases bymaking thecontractor jointly and severally liable for the social
insurance premiums ,wages taxandVAToned byhissubcontractor (s)orby
those who have provided himwith labour .However ,during theBill 'spassage
(nowcompleted )through theDutch Parliament ,anumber ofprovisions were
added which ,oncloser inspection ,have been found tobeamajor obstacle
 
toproper administrative implementation ofthe rules asfar asVAT iscon­
cerned .Consequently ,itisnowproposed that the system ofjoint and seve­
ralliability should notapply toVATandthat instead ,kyanalogy with the
rules applying inBelgium toconstruction firms ,provision should bemade
forthelevying ofVATtobeshifted from thesubcontractor ,orfrom the
person providing labour ,tothecontractor .These arrangements are toenter
intoforce simultaneously withtherules onjoint andsevlral liability
(which will then apply only tosocial security premiums andwages tax)on
1July 1982 .
S£2B£.2i -ibS-EE2B° s©d£ules onshifting the liability
Thestatutory rules onjoint andseveral liability apply toall
cases ofsubcontracting andprovision oflabour ,irrespective ofthesector
» *

concerned .Forpractical reasons ,ithasbeen decided tiat *forthetime
being application oftherules onshifting VATshould beconfined to
certain sectors .Thesectors concerned arethose inwhi:hsubcontracting
andtheprovision oflabour occur roost frequently andinwhich i^;wasfelt
that there was thegreatest need forrules tocorcbat frauds i.e. thebuild­
ingindustry ,thestructural steelwork industry andshipbuilding .Itis
intended that ,induecourse -after sufficient experience hasbeen acquired
with the rules inthese three sectors -the situoti-on will bereviewed to
seewhether therules onshifting liability should also be .applied inother
sectors oftheeconomy .Ifasaresult itisplanned infuture toextend
these rules ,theCommission oftheEuropean Communities will beinformed in
accordance with Article 27(2 )ofthe Sixth Directive with aview toobtain­
ingthenecessary authorization . * !
.' I
Soastoensure that thetwosets ofrules areplong parallel
lines ,thedefinition of"contracting ","sub-contracting "and "provision of
labour "hasgenerally been modelled onthestatutory provisions onjoint
andseveral liability .Theterm "work ofamaterial nature "used incon­
nection with "contracting "and "subcontracting "should beinterpreted broad­
ly.Inthethree sectors inwhich the rules ontheshifting ofliability
aretoapply ,theterm "work ofamaterial nature "would include such things
asthelaying outofroads ,civil engineering works ,pavenents ,thelaying
ofmains ,tillage ,cleaning activities ,themaintenance ofhouses andbuild­
ings ,thelaying offloors ,roofing ,thedemolition andbreaking upof
buildings andships ,repair activities ofallkinds ,insulation activities ,
plumbing ,plastering ,andtheconstruction ofrefinery columns anddrilling
platforms .
Thenew rules aretobeincorporated into the1968 Turnover Tax
Implementing Decree *Thetext oftherules is*given below initspresent

■3 -
draft from .Itispossible that thetext mayundergo a {number ofasrtdments
onminor points .
«
/ ■
Article X.1 .Forthepurposes ofthis Article :^
m
(a>"employer ","employment "and "party responsible fordeduction "mean the .
same asforthepurposes oftheWages Tax Act 1964 (Stb .521);
(b)"contractor "means aperson whoundertakes toanother .person ,theprin­
cipal ,onthebasis ofarelationship that isnotoneofemployment ,to
carry out for aprice tobepaid work ofamaterial nature relating to
immovable property orships within themeaning ofChapter 89ofthe Im­
port Duty Tariff ,with theexception ofpleasure crafty
<c)"subcontractor "means aperson whoundertakes toacontractor ,onthe
basis ofarelationship that isnotone ofemployment ,tocarry out in
whole orinpart ,for •price tobepaid ,thework referred tainsub­
paragraph (b).
2. Forthepurposes ofthis Article ,thesubcontractor isdeemed to
beacontractor inrelation tohis subcontractor .
3. Forthepurposes ofthis Article ,anyperson who,without having
been soinstructed byaprincipal ,carried out,inthenormal exercise of
hisbusiness ,onthebasis ofarelationship that isnotone ofemployment ,
work within themeaning ofparagraph Kb)shall also rank asacontractor .
A. Forthepurposes ofthis Article ,theseller ofanobject yetto
beconstructed shall ,insofar asthepurchase andsale results from oris
connected with work referred toinparagraph Kb),bedeemed tobeasub­
contractor inrelation tothe contractor .
.
5. Byway ofderogation from Article 12oftheAct,thetaxonthe
work carried outbyasubcontractor shall becollected from the contractor .
6. Where anemployee whomaintains his relationship ofemployment
with theparty responsible fordeduction isprovided bysuch party toa*
contractor orsubcontractor inorder towork under thesupervision orma­
nagement ofsuch contractor orsubcontractor,' the ;tax shall ,byway ,ofdero­
gation from Article 12ofthe Act,becollected from thecontractor orsub­
contractor asthecase maybe.

7. Byway ofderogation from Article 15oftheAct,thetaxwhich is
tobededucted bythe contractor orsubcontractor shall bethetaxwhich
hasbecome chargeable during thetaxperiod onthebasis ofparagraphs 5
and 6.
-^ •
8. Bywayofderogation from Article 35(T)(g >oftheAct,theinvoice
tobeissued should ,where paragraph 5or6isapplicable ,-bear thestate­
ment "turnover taxshifted ". .
' • ■
I,. "•
. . *
9. TheMinister may laydown ,further provisions concerning theimple -
• *
«tentation ofthis Article .