COMMISSION OF THE EUROPEAN COMMUNITIES 
C0MC94) 334 final 
Brussels, 22.07.1994 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 
Request by the Irish Government for authorization to introduce a measure derogating 
from the Sixth VAT Directive (77/388/EEC), based on Article 27(1) and (2) of that 
Directive, in respect of the charging of tax on sales of immovable property or rights 
treated as such. 
Request by the Irish Government for authorization to introduce a measure derogating 
from the Sixth VAT Directive (77/388/EEC), based on Article 27(1) and (2) of that 
Directive, in respect of the charging of tax on sales of immovable property or rights 
treated as such. 
(Communication from the Commission to the Council) 
1 Introduction 
(a) In accordance with Council Directive 77/388/EEC,1 Member States are required 
to apply the common system of value added tax. Under Article 27(1) of that 
Directive, the Council may authorize any Member State to introduce special 
measures for derogation from the Directive in order to simplify the procedure for 
charging the tax or to prevent certain types of tax evasion or avoidance. 
(b) In a letter from the Office of the Irish Permanent Representative, received by the 
Commission's Secretariat-General on 2 June 1994, the Commission was informed 
of a measure aimed at simplifying the charging of tax on supplies of immovable 
property or rights treated as such. 
(c) In a letter from the Commission's Secretariat-General dated 28 June 1994, the 
other Member States were informed, in accordance with Article 27(3) of the 
above Directive, of the measure proposed by the Irish Government. Under 
paragraph 4 of the same Article, the Commission or any Member State may 
request that the matter be raised by the Council. 
2. Description of the measure 
The Irish Government is proposing to incorporate into its legislation an arrangement 
whereby the recipient of a supply of immovable property or certain property rights and 
interests as referred to in Article 5(3) of the same Council Directive 77/388/EEC could be 
designated as the person liable to pay the tax to the Treasury. 
This measure, which derogates from the principles laid down in Article (21) of the above 
Directive, would apply only where the recipient is entitled to full deduction of the VAT 
chargeable. 
The Irish authorities justify this measure by the need to simplify the charging of VAT on 
supplies of immovable property. They further argue that it would have the advantage of 
avoiding any prefinancing of tax, which can be burdensome for firms in this sector, 
particularly in start-up situations. 
OJ No L 145 of 13.6.1977, p. 1. The Directive was last amended by Directive 94/5/EC 
(OJ No L 60 of 3.3.1994, p. 16). 
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3. Commission's Opinion 
The procedure provided for in Article 27 of the Sixth Directive permits Member States to 
introduce special measures for derogation from that Directive in order to simplify the 
arrangements for charging the tax or to prevent certain types of tax evasion or avoidance. 
The Irish authorities justify their request by the need to simplify the charging of VAT on 
supplies of immovable property. 
Article 21 of the Sixth Directive establishes the principle that it is the taxable person 
carrying out the taxable transaction who is liable to pay the tax. Responsibility for meeting 
the accounting, declaration and payment obligations lies in principle with the person liable 
to pay the tax (Article 22 of the Sixth Directive). 
Article 21 provides for derogations from the principle that the taxable person carrying out 
the transaction is himself liable for payment of the tax only where that taxable person is 
not established in the country. 
Traders not established in a given Member State would encounter practical difficulties in 
completing the formalities associated with carrying out taxable transactions in that 
Member State. 
Article 21 accordingly provides for a tax representative or the recipient of a transaction to 
be designated as the person liable to pay the tax, which relieves the non-established 
taxable person of the need to meet the obligations laid down in Article 22 in the 
Member State in which the taxable transaction is effected. This provision is justified by its 
benefit for traders. 
However, the designation of a person other than the taxable person carrying out the 
taxable transaction, and in particular of the recipient of a supply of goods, as the person 
liable to pay the VAT must be limited to exceptional cases because it undermines the very 
principles of VAT (fractioned payments, invoicing of the VAT by the supplier and 
deduction by the purchaser). 
It should also be pointed out that the proposed measure does not even aim to relieve the 
supplier of the immovable property or rights treated as such of the obligations laid down 
in Article 22, with the exception of the payment of the tax, since he will have to justify 
and declare the fact that he is carrying out a transaction for which the tax is payable by the 
recipient. 
Furthermore, as the measure proposed would apply only where the recipient is entitled to 
full deduction of VAT, the supplier of the property would be required to check the 
recipient's status. The authorities would also have to check whether the arrangement was 
being legitimately applied. 
It does not therefore seem that the proposed measure would really simplify the charging 
of VAT on supplies of immovable property or rights treated as such as compared with the 
application of the rules of the common VAT system. 
Z. 
The real aim of the measure would seem instead to be to enable firms operating in this 
sector to avoid the cost of prefinancing the tax. 
It should be pointed out that the real cost to traders of prefinancing the tax depends on a 
number of factors, notably the frequency with which returns have to be submitted, the 
deadlines for refunding a tax credit and the payment periods applied in business dealings 
between traders. In the Commission's view, the problem of prefinancing the tax can be 
solved without it necessitating any derogation from the principles of the Sixth Directive. 
The Commission is accordingly of the opinion that a derogation from Article 21, based on 
Article 27, cannot be justified since the real aim pursued (to avoid prefinancing the tax) is 
neither to simplify charging of the tax nor to combat tax evasion or avoidance. 
4. Conclusion 
Since the arrangements in question give rise to fundamental objections, the Commission 
requests that the matter be raised by the Council in accordance with Article 27(4) of the 
abovementioned Directive. 
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