EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 29.10.2004 
COM(2004) 728 final 
2004/0261 (CNS) 
2004/0262 (CNS) 
 . 
Proposal for a 
COUNCIL DIRECTIVE 
amending Directive 77/388/EEC with a view to  simplifying value added tax obligations 
Proposal for a 
COUNCIL DIRECTIVE 
laying down detailed rules for the refund of value added tax, provided for in Directive 
77/388/EEC, to taxable persons not establishe d in the territory of the country but 
established in another Member State 
Proposal for a 
COUNCIL REGULATION 
amending Regulation (EC) No 1798/2003 as regar ds the introduction of administrative 
cooperation arrangements in the context of the one-stop scheme and the refund 
procedure for value added tax 
. 
(presented by the Commission) 
 
EN 2   EN EXPLANATORY MEMORANDUM  
1. I NTRODUCTION  
In October 2003, the Commission presented a communication revi ewing the VAT strategy it 
launched in June 2000 and setting out new initiatives to be take n in the future under that 
strategy1. This strategy provided for an action progra mme, geared to four  main objectives: the 
simplification, modernisation and more uniform  application of current rules and closer 
administrative co-operation arrangements be tween Member States to combat fraud. 
In the communication, the simplifi cation of tax obligations was identified as one of the key 
areas for future work. Simplification can notabl y be achieved through greater use of electronic 
means of communication between taxable persons  and tax authorities and between national 
tax authorities. 
The objective of simplifying busin ess obligations in the field of VAT is in line with the 
request of the European Council of 25 and 26 Ma rch 2004 to identify areas for simplification. 
As a response to this request, the Competitiv e Council adopted at its meeting on 17 and 18 
May 2004 conclusions on better regulation.  
Following these conclusions, the Irish and incomi ng Dutch Presidencies invited in June 2004 
other Member States to submit concrete sugge stions for simplifica tion, based on their own 
national experiences. Several Member States suggested simplification of the Sixth VAT 
Directive, but it was decided not to take into account this suggestion within the context of the 
Competitiveness Council since it was already pa rt of the Commission's VAT simplification 
program. 
At the informal ECOFIN meeti ng of 11 September 2004, the Dutch Presidency also raised the 
issue of "Fostering growth by reducing administ rative burdens". The present proposal fits 
perfectly within this objective.  
Moreover, the recently published European Tax Survey2 conducted by the Commission in the 
second half of 2003 confirmed that taxable pers ons who have VAT obligations in a Member 
State where they are not established are those for which the burden of compliance is the highest. A substantial part of those taxable persons even seem to abstain from having VAT 
activities in another Member States because of  the burden imposed by having to comply with 
VAT obligations there. This is confirmed by a document produced by the European Consumer Center Network in 2003 on e-commer ce. This report identif ies the current VAT 
regime as one of the reasons why operators re fuse to sell goods to consumers who are living 
in a Member State other than the Member State of establishment of the company. The simplification of the VAT regime will therefore benefit businesses but also consumers who will have access to a wider range of goods throughout the Internal Market. 
                                                
 
1 COM(2003) 614 final 
http://europa.eu.int/comm/taxation_customs/p ublications/officia l_doc/com/com.htm  
2 SEC(2004) 1128  
http://europa.eu.int/comm/taxation_customs/p ublications/working_doc/working_doc.htm  
 
EN 3   EN In addition, the present refund pro cedure under the Eigh th VAT Directive3 seems to be so 
burdensome that more than an estimated 53.5 % of large companies have not requested 
refunds to which they were entitled at some point due to these problems. 
The main objective of the present proposal is therefore to introduce si mplification measures 
aimed at easing the burden of VAT compliance on  taxable persons who have no establishment 
in the Member State where they are carrying out activities. 
The proposal contains six concrete measures to achieve the objective: 
– the introduction of the one stop scheme for non-established taxable persons; 
– the introduction of a one-stop scheme to  modernise the Eighth Directive refund 
procedure; 
– a harmonisation of the scope of the goods a nd services for which Member States may 
apply restrictions to the right to deduct; 
– an extension of the use of the reverse charge mechanism for certain business-to-
business (B2B) transactions  carried out by non-establ ished taxable persons; 
– a review of the special sc heme for small traders; 
–  a simplification of the di stance selling arrangements. 
This is done through three diffe rent legislative proposals: a modification of the Sixth VAT 
Directive4, the replacement of the Eighth VAT Di rective and a modification to Council 
Regulation (EC) No 1798/2003 on VAT  administrative cooperation5. 
This initiative has already been extensively di scussed with Member States and has been the 
subject of a wide consulta tion process on the Internet. 
2. T HE INTRODUCTION OF THE ONE -STOP SCHEME  
Under the current rules, a taxable person having taxable transactions for which he is liable to 
pay the tax in more than one Member Stat e, will have to fulfil VAT obligations 
                                                 
3 Eighth Council Directive 79/1072/EEC  of 6 December 1979 on the harm onization of the laws of the 
Member States relating to turnover taxes – Arrangements for the refund of value added tax to taxable 
persons not established in the territory of the count ry OJ L 331, 27.12.1979, p.11.Directive as last 
amended by the Act concerning the conditions of accession of the Czech Republic, the Republic of 
Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of 
Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak 
Republic and the adjustments to the Treaties on which the European Union is founded - Annex II: List 
referred to in Article 20 of the Act of Accession - 9. Taxation. 
4 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  
(OJ L 145, 13.6.1977, p. 1). Directive as last amended by Directive 2004/66/EC 
(OJ L 168, 1.5.2004, p. 35). 
5 Council Regulation (EC) No 1798/2003  of 7 October 2003 on administrative cooperation in the field of 
value added tax and repealing Regulation (EEC) No 218/92(OJ L 246, 15.10.2003, p. 1). Regulation as 
last amended by Council Regulation (EC) No 885/2004(OJ L 168, 1.5.2004, p. 1). 
 
EN 4   EN (identification, returns, payment) in each of th ese Member States. Since Member States have 
considerable discretion in defining VAT obliga tions (the content of the return and its 
frequency), a taxable person may be faced with a ra ft of different obligati ons to be discharged 
in several Member States. 
The special scheme for non-established persons supplying electronic services to non-taxable 
persons provided for under Article 26c of the Si xth VAT Directive constitutes at this stage the 
only exception to this principle.  In its proposal on services supplied by electronic means (e-
commerce)6, the Commission considered that compliance for non-EU e-commerce operators 
should be made as easy and simple as possible. To this end, the Commission proposed that non-
EU e-commerce operators should be required to register only in a single Member State. They 
would then charge VAT at the ra te applicable in that Member  State and would only have to 
deal with a single tax admi nistration within the EU.  
During the negotiations in the C ouncil, this proposal was amended in order to ensure that 
VAT would be charged at the ra te applicable in the Member State where the customer is 
resident. However, Council Directive 2002/38/EC7 adopted in June 2002 maintained the 
principle according to which non-EU e-commer ce operators only had to deal with one VAT 
authority in the Member State of their choice (a one-stop scheme). 
The Commission is convinced that the one-sto p model could simplify tax obligations for a 
considerable larger number of traders than it does today. On the basis of  information received 
from Member States, the Comm ission estimates that there ar e currently in the region of 
250,000 VAT registrations in the European Union wh ich relate to traders established in other 
Member States. In particular, EU businesses carrying out cross-border activities for which 
they become liable to pay VAT in Member States where they have no physical presence could benefit from the more extensive use of su ch a system. Taxable persons covered by the 
distance selling arrangements are certainly one of the main categories of businesses 
concerned. However it could also be used fo r other transactions, in particular supplies 
involving installation or asse mbly, work on immovable property, removals, sales at 
exhibitions, fairs or markets, etc. 
Given the proposed extension of the use of the reverse charge to supplies involving 
installation or assembly, work on immovable property and 9(2)(c) se rvices, the one-stop 
scheme would, for these types of transactions , only cover B2C transa ctions. On the other 
hand, B2B transactions for which the reverse ch arge is not applicable, would be covered by 
the one stop scheme. 
As a result, when an EU trader carries out taxable transactions in a Member State where he is 
not established: 
– either the customer accounts for the VAT under the reverse charge mechanism and 
the non-established trader ha s no declarative obligations  in the Member State of 
taxation; 
                                                
 
6 COM(2000) 349 final. 
7 Council Directive 2002/38/EC of 7 May 2002 amending and amending temporarily Directive 
77/388/EEC as regards the value added tax arrangements applicable to radio and television broadcasting 
services and certain electronically supplied services (O J L 128, 15.5.2002, p. 41). 
 
EN 5   EN – or the non-established trader is the person li able to pay the tax, and he could comply 
with his declarative obligations under th e one stop scheme. 
Consequently, this trader would, if he opts for the use of the one-stop scheme, only need to be 
identified for VAT purposes in his Member State of establishment. 
This one-stop scheme should be an option for taxa ble persons as it may be the case that some 
businesses who are already direc tly identified in another Member  State than their own will 
wish to maintain this situati on. For example, a trader having to submit an annual return in a 
single Member State where he is not established might not be interested in the use of the one-
stop scheme. On the other hand, a trader opting for the special sc heme would have to comply 
with a single and harmonised set of obligati ons covering all its supplies taxable in the 
Member States where he is not established. These obligations would be fulfilled through 
electronic means, in order for the information to be easily transmitted to each Member State 
of consumption. 
Responsibility for the assessment and control of the tax would remain in the hands of the 
Member State of consumption, whose own VAT legi slation (particularly in  respect of rates) 
would continue to apply. However, the non-esta blished taxable person would benefit from the 
ability to contact (for registra tion and returns) only his nation al administration and to apply a 
harmonised set of compliance rules (covering regi stration form, content and frequency of the 
tax return, and payment and refund rules).  
It should however be noted that: – transfers of money will have to be done directly between the taxable person and each 
Member State of consumption. Experience with the existing el ectronic commerce 
special scheme has shown that dealing with the re-distribution of money received from taxable is very burdensome for the Member State of identification. Developing 
the kind of major treasury function needed  to handle the volume of money flows 
which would be inherent to a much wider application would not be a realistic option. 
It is however probable that financial inte rmediaries or other trusted third party 
service providers might offer a payment handling function to operators under this 
scheme which would relieve them from th e burden of multiple payments. Such a 
commercial service would be particularly attractive to smaller operators but would 
have to be based on commercial realities. 
– national obligations would not  be part of the special  scheme and the domestic 
compliance rules (such as declaration pe riods, payment and refund rules) would 
continue to apply. Those Member States that wish to do so may include these 
obligations into the one-stop scheme. The reason for this exclusion is that the one-stop scheme is not intended to lead to  a complete harmonisation of national 
obligations, which the Commission considers to  be neither realistic nor necessary at 
this stage. 
Discussions with the Member States made it cl ear that since the number of potential traders 
under an intra-Community one-stop system will be far greater than the number today covered by the electronic commerce special scheme ( potentially over 200,000 traders as compared to 
well under 1,000 identified under the e-services a rrangements), a mere duplication of this 
system is not a realistic approach. 
 
EN 6   EN Under the current arrangements,  businesses which have obliga tions in Member States in 
which they are not established are obliged to make direct payment to the Members States 
where the transactions are subject to VAT. This  situation applies both for traders established 
within the EU and traders established outside th e EU. Similarly, as regards repayments of tax, 
Member States may either make a refund or carry forward the exce ss to the following tax 
period. The Commission believes that the cu rrent arrangements for the payment and 
repayment of the tax should be continued for traders availing of the one-stop scheme. 
The supplies of electronic services by non-esta blished taxable persons to non-taxable persons 
constitute an exception to the normal princi ple regarding payments and repayments. Non-
established traders making use of the special sc heme for electronically supplied services make 
a single payment to the Member State of identification, which then re-distributes the appropriate amount to the Member States of consumption. There are special arrangements for 
the recovery of input tax in curred by non-established taxable persons providing electronic 
services. The Commission is of the opinion that, at  this stage, that special scheme should not 
be affected by the current proposal. 
Under Article 5 of Council Dire ctive 2002/38/EC, the Council on th e basis of a report from 
the Commission shall review before 30 June 20 06 the current special scheme for electronic 
supplied services. The relation between the pr oposed one-stop scheme and the e-commerce 
arrangements, and the possibility to subsume the latter into the one-stop scheme will be 
examined within that context.  
3. R
EVIEW OF THE EIGHTH VAT  DIRECTIVE  
The malfunctioning of the Eighth Directive refund procedure has posed considerable 
problems for many years to both traders and the national administrations of the 
Member States. Complaints have been rece ived from traders and their representative 
organisations deploring the length of  time taken to receive refunds due. 
Therefore, the Commission put forward in June 19988 a proposal for a Directive with the 
objective of replacing the VAT refund procedure laid down in the Eighth VAT Directive with 
a new system for recovering VAT paid in anot her Member State. Under the proposed system, 
taxable persons would recover VAT directly th rough VAT declarations they submitted in the 
Member State where they were established (t he so-called cross-bo rder deduction). This 
system would substantially simplify matters for traders since they would be able to recover 
VAT charged to them in any other Member State in the same way as their national VAT. 
This proposal obtained large support from traders and a favourable opinion from the 
Parliament and the Economic and Social Co mmittee. However, the Council has not yet 
managed to agree on the proposal. 
One of the key issues which has prevented the Council from agreeing was the fact that under 
the proposed system, the trader would recove r the VAT in accordance with the deduction 
rules (in particular the tax blocking rules) of  the Member State of establishment, while under 
the current procedure VAT is recovered in accordance with  the deduction rules of the 
Member State where the expenses are incurred . This would have had a negative impact on 
                                                 
8 COM(1998) 377 final. 
 
EN 7   EN VAT receipts for those Member St ates where VAT has been paid where they currently have a 
more restrictive deduction regime. 
The Commission remains convinced that the propos al from 1998 is conceptually the best way 
of reforming the current refund procedure. However, it also ha s to acknowledge that after 6 
years the Council has been unable to agree on the proposal, despite the considerable effort of 
some Council Presidencies to look for a compromi se. As a result, traders remain confronted 
with the current unsa tisfactory situation. 
The Commission therefore proposes an alterna tive way of modernising the current refund 
procedure laid down in the Eighth Directive, bu t without changing its fundamental principles. 
Under the proposed procedure, requests for refu nds would continue to be dealt with by the 
Member State where the VAT was paid, the amount refundable would be determined under 
the deduction rules of the Member State where th e expenses are incurred, and the repayments 
made directly by that Member Stat e to the requesting taxable person.  
The proposed changes firstly concern the us e of modern technology for presenting the 
requests for a refund. In a similar way to the envisaged one-stop scheme, a taxable person would present his requests for a refund by elect ronic means via a portal website managed by 
the fiscal administration where the taxable person is established. Originals of invoices or import documents would no longer have to be  submitted; only the relevant information 
concerning these documents would be submitted electronically. 
This portal would then ensure that the request  is directed to the Member State where the 
expenses were incurred. The Member State of  establishment would carry out an initial 
verification of its database of taxable persons. This initial veri fication would in fact replace 
the current certificate by which the Member Stat e of establishment confirms the status of the 
taxable person. The transmission of the data from  the Member State of establishment to the 
Member State of refund would be the confirma tion that the request is made by an active 
taxable person. 
Transforming the current procedure into an  electronic one would mean less work by the 
refunding Member States and accordingly, the Commission believes that the processing time 
for requests should be reduced fr om 6 to 3 months. Within this interval, the Member State 
where the expenses were incurred should take a decision on the application. In some cases, 
this decision could be a request for additional in formation. In that case, a final decision on the 
application should be taken within three months  from the date the requested information is 
provided.  
In order to improve the legal position of the taxa ble persons under the procedure, it is foreseen 
in addition, that once the deadline is exceede d, the application can no longer be refused. 
Moreover, interest of 1% a month, calcula ted on the amount refunded, would be due on 
unpaid refunds. This interest would run from the day on which the refund was due to the day it was actually made to the taxable person. 
4. E
XCLUSIONS FROM THE RIGHT TO DEDUCT  
The abovementioned proposal presented by the Commission in 1998 contains, beside the 
section on the replacement of the Eighth VAT Directive refund procedure, a section on 
expenditure not eligible for a full deduction of VAT. The objective was to approximate the 
 
EN 8   EN national rules that are currently very divergent in this area. This was an essential prerequisite 
to enable deductions to be made under the rules prevalent in the Member State of 
establishment. 
The Commission proposed an alignment of the rules in respect of passenger cars, 
accommodation, food and beverages, luxury goods, amusements and entertainment.  
The budgetary impact for some Member States of the Commission's proposal was, however, a 
major issue in the discussion. Member States in sisted in the Council for a more flexible 
approach. As indicated above, the Council ha s not managed to agree on this proposal. 
Such approximation of the rules on the right to deduct would not be necessary under the 
revised approach which the Commission is now putting forward. However, in order to 
facilitate the functioning of th e proposed refund procedure, it would be desirable to harmonise 
at least the scope of the expenses for which exclusions of the right  to deduct may apply. 
By doing so, traders presenting requests for a refund under the procedure set out above would 
know exactly for which goods and services ther e might be some specific rules in each 
Member State. The normal deduction rules would apply to all goods and services not 
specifically referred to in the Sixth VAT Directive. 
Under this approach, Member States could only a pply exclusions from the right to deduct to: 
– motorised road vehicles, boats and aircraft; 
– travel, accommodation, food and drink; 
– luxuries, amusements and entertainment; 
Under the standstill provision of Article 17(6), there is no defini tion of goods and services to 
which Member State can apply tax blockings. The current proposal would oblige Member 
States to abolish the tax bloc kings applied to goods and servic es not identified within the 
proposed Article 17a. On the other hand, for the goods and services identified within Article 
17a, it provides Member States full flexibility of  reviewing their national restrictions which 
they do not have under the current rules. 
5. A N EXTENSION OF THE USE OF THE REVERSE CHARGE MECHANISM  
For B2B transactions subject to VAT in the Me mber State where the customer is established, 
making the business customer the person liable to  pay the tax (reverse charge mechanism) 
implies that taxation occurs in the place of c onsumption without the supplier being subject to 
tax obligations in the Memb er State of consumption.  
For certain transactions, this mechanism is already obligatory. Moreover, where the taxable 
supply of goods or services is effected by a non-established taxable person, Member States 
have the option to lay down in their national legislation the transactions for which this 
mechanism should be used fo r the payment of the VAT. 
The Commission is now proposing to broaden th e scope of the obligatory reverse charge 
mechanism in cases where a non-established taxable person is making supplies of goods 
which are installed or assembled by or on beha lf of the supplier, supplies of services 
 
EN 9   EN connected with immovabl e property and services  covered by Article 9(2) (c) of the Sixth VAT 
Directive and the customer is a taxa ble person identified for VAT purposes. 
The use of the reverse charge discharges the non-established trad er from certain VAT 
obligations, such as submitting VAT returns. Consequently, when that trader has been charged VAT on expenses incurred in the Member  State where the transaction takes place, he 
will have to claim this VAT back via the refu nd procedure, since he cannot deduct the input 
VAT via a VAT return. This is why this part of the proposal is clearly connected to that 
concerning the introduction of a one-stop scheme for the refund procedure. 
In cases where it is clear that the non-establis hed trader will be regularly charged substantial 
amounts of input VAT in order to carry out hi s activities, however, th e use of the reverse 
charge mechanism results in an additional administrative burden for the reclaim of input VAT. This is for instance the case when non-esta blished taxable persons intervene in a chain 
of domestic supplies of goods on the national territory of a Me mber State. These types of 
transactions are theref ore not covered by the Commission's pr oposed extension of the reverse 
charge. 
Article 21 of the Sixth VAT Directive needs to be amended accordingly. 
6. S
IMPLIFICATION OF VAT  OBLIGATIONS OF SMALL AND MEDIUM SIZED 
ENTERPRISES  
At present, the Sixth VAT Directive lays down some fairly strict arrangements under which 
Member States may grant small enterprises an exemption to tax. Numerous derogations from these provisions have been granted in succes sive enlargements, creating a situation where 
Member States are not at all on an equal footin g. Furthermore, Member States which already 
had an exemption threshold high er than that provide d by the Sixth VAT Directive at the time 
of the adoption of that Directive were permitted to maintain these thresholds and even permitted to increase them so as to maintain their value in real terms. 
The Commission considers that Member States should have more flexibility in determining 
the threshold under which taxable persons can  be exempt. Therefore, a maximum of 100.000 
euro is proposed, which should give Member States the autonomy to set up a regime they 
consider the most appropriat e in view of the structure of their national economy.  
Nevertheless, this new thres hold would not have any impact  on the current methodology used 
for calculating Member States’ contributions to the Community  budget as regards VAT own 
resources. 
Moreover, it should be clar ified in the legal text that Member States are able to apply different 
thresholds, for instance in order to differen tiate between taxable persons making supplies of 
goods and those making supplies of services. Th is differentiation would be applied on a non-
discriminatory basis taking obj ective criteria into account. 
The threshold of 100.000 euro would apply on the date of entry into force of the present 
Directive. This amount could be exceeded at a later stage but only in order to maintain its value in real terms in the Member States. 
 
EN 10   EN 7. D ISTANCE SELLIN G ARRANGEMENTS  
When the Single Market came into being on 1 January 1993, special arrangements were 
incorporated into the common syst em of VAT to provide for taxati on at destination in the case 
of intra-Community sales of new means of tr ansport, intra-Community sales to exempt 
taxable persons or non-taxable legal persons wh ose purchases exceeded a certain threshold, 
and distance sales to private consumers. It is  clear that the rationale for setting up these 
special schemes in 1993 - i.e. the risk of insufficiently harmonised tax rates leading to 
distortion of competition - still exists. The Co mmission is therefore not proposing to abolish 
these schemes but instead to simplify their application. 
The VAT arrangements applicable to distance se lling are laid down in Article 28b(B) of the 
Sixth VAT Directive which provides for a twof old system of taxation. Distance sales of goods 
are normally taxable in the Member State of arrival of goods dispatch ed by the vendor. There 
is, however, an exception: distance sales remain  taxable in the Member State of departure if 
two conditions are fulfilled: 
– the total value of the supplies of goods to  the Member State of arrival in the 
previous calendar year did not exc eed 100 000 euro, a sum which may be 
reduced to 35 000 euro by the Member St ate of destination where it fears that 
the threshold of 100 000 eu ro would lead to seri ous distortions of the 
conditions of competition; 
– the supplies must not involve excise goods . This means that distance sales of 
excise goods are always taxed in the c ountry of destination without applying 
the above thresholds. 
Member States must nevertheless allow the ta xable person carrying out distance sales to opt 
for taxation in the Member State of destin ation where the 35 000/100 000 euro threshold is 
not reached. 
The current arrangements are complicated for ta xable persons. Unless they opt for taxation in 
the Member State of destination, operators have  to monitor their tur nover in each Member 
State, keeping track of the different thresholds  applicable, to know the place of taxation of the 
supplies they make. The current system could therefore be simplified by applying a single 
threshold, calculated globally for all Member St ates rather than Member State by Member 
State, as is currently the case.  
The threshold should be set at a level which excludes businesses which are not involved in 
distances sales on a regular basis. On the ot her hand, the threshold should not be a simple 
multiplication of the current thresholds and th e number of Member States. The Commission 
instead proposes a threshold of 150.000 euro on the basis of the following considerations: 
A threshold set at 150.000 euro should exclude from the distance selling arrangements those 
traders who, on an occasional ba sis transport goods to their customers in another Member 
State. On the other hand, traders involved on a regular basis in distance sales will be liable to pay VAT in Member States where they are no t established. By making use of the one-stop 
system, which constitutes the main part of th is proposal, these traders can considerably 
simplify the VAT obligations to be fulfilled in  each Member State where they have taxable 
transactions. 
 
EN 11   EN The Commission further considers that the ta xable person should continue to have the 
possibility to opt for taxation in the Member State of destination. Indeed, while deleting the 
option would simplify the special scheme from a legal point of view, it can put businesses in a 
disadvantageous competitive position, especially when trading products subject to a low VAT 
rate in the Member State of arrival of the goods. 
The Commission considers that th e taxable person should be allo wed, as it is currently the 
case, to make use of the option separately for e ach Member State. As long as he did not reach 
the proposed threshold of 150.000 euro, a taxable person can opt for taxation of his supplies 
in Member State A, while his transactions in other Member States are taxed in the Member 
State of establishment. Of course, both the distance sales taxed in the Member State of arrival (as a result of the use of the option) as well as the distance sales taxed in the Member State of 
establishment would be take n into account for the cal culation of the threshold. 
8. M
ODIFICATION OF REGULATION (EC)  NO 1798/2003  TO SUPPORT THE EXCHANGE 
OF INFORMATION WHICH IS NECESSARY TO THE INTRODUCTION OF A ONE -STOP 
SCHEME MECHANISM AND OF THE REFUND PROCEDURE (REVIEW OF EIGHTH 
DIRECTIVE ) 
In order to make it possible for taxable person s to have a single point  of contact for VAT 
compliance in their Member St ate of identification (both fo r the VAT one-stop scheme and 
for the procedure which will replace the Eighth Di rective refund procedure), it is necessary to 
build a system of exchange of info rmation between tax administrations. 
In the same way as for the special scheme which has been set up for electronic commerce 
supplies, such an exchange of information should be built wi thin the legal framework on VAT 
administrative cooperation (Council Regulatio n (EC) No 1798/2003) and should be based 
exclusively on electronic communications. 
This electronic system to support the excha nges of information required under the one-stop 
scheme and the procedure replacing the Eighth Directive is to be integrated within a 
modernised VIES (VAT Information Exchange System) in order to make it possible to ease the burden on tax administrations. The Commissi on has, at the beginn ing of 2004, launched a 
feasibility study for a new improved VIES (VIES II), which includes the necessary requirements for the one-stop scheme. In partic ular, it will be necessary to ensure that 
information supplied electronically by taxable persons to their own Member State can be 
captured and processed. The information thus ca ptured would have to be passed automatically 
to the relevant Member State where supplies take place or re funds are requested without any 
intervention by the Member State of identification. 
9. P
ROPOSED CHANGES  
9.1. Amendments to the Sixth VAT Direct ive (simplificatio n of obligations) 
9.1.1. Amendment of Article 17(4) Point (a) of the second subparagraph of Artic le 17(4) is deleted. Th is provision is now 
integrated in Article 1 of the proposed Direct ive reviewing the refund procedure for taxable 
persons who are not established with in the territory of the country. 
 
EN 12   EN 9.1.2. Deletion of Article 17(6) 
Article 17(6) is repealed, thus eliminating the provision under whic h Member States may 
retain all the exclusions provi ded for under their national law when the Sixth VAT Directive 
came into force. 
As a result, the normal rules laid down in Article  17(1) to (5) apply to all expenditure that is 
not explicitly referred to  by the new Article 17a. 
9.1.3. Insertion of Article 17a 
This Article gives Member  States the flexibility to apply to tal or partial restrictions (for 
example flat rate deductions) to the right to  deduct input VAT. This flexibility is however 
limited to the expenses which are specifically quoted in the Article. 
A definition of "motorised road vehicles" and "expenditure relating to motorised road 
vehicles" is provided in order to ensure that th e scope of the potential re strictions applied by 
the Member States is harmonised. 
Moreover, the Article also provides a list of motorised road vehicles for which, given their 
use, Member State may not re strict the right to deduct. 
Besides motorised road vehicles , this Article provides also th e possibility for Member States 
to apply total or partial restrictions to the right to deduct for boats and aircraft, travel, accommodation, food and drink, luxuries, amusements and entertainment. 
9.1.4. Amendment of Article 21(1)(b) 
The amendment makes it compulsory for all Member States to designate the client as the 
person liable to pay the tax for supplies of goo ds which are installed or assembled by or on 
behalf of the supplier,  supplies of services connected w ith immovable property, and services 
covered by Article 9(2)(c) such as work on mo vable tangible property, where the supplier is 
not established within the territ ory of the country and where the client is identified for VAT 
purposes in the Member State where the supply takes place. 
It should be noted that the option provided to Member States under Article 21(1)(a), to require 
that the client is the person liable to pay th e tax for the cases not co vered by Article 21(1)(b) 
and (c), is maintained.  
9.1.5. Insertion of Article 22b 
This Article lays down all th e rules relating to the functi oning of the one-stop scheme.  
9.1.5.1. Point A This point defines what is, for the purpose of th is Article, a "Member State of identification" 
and a "Member State of consumption". 
 
EN 13   EN 9.1.5.2. Point B 
This point defines the scope of the special sc heme, which concerns taxable persons making 
supplies of goods or services for which they are li able to pay the tax in one or several Member 
State(s) where they have no establishment. Ho wever, the special scheme for non established 
traders supplying electronic services to non- taxable persons provided for under Article 26c 
remains in place. Therefore, the traders which make use of that special scheme are excluded 
from the one-stop scheme. 
The scheme is optional for the taxable persons c oncerned and they can c ontinue to fulfil their 
VAT obligations under the normal rules laid down by each Member State if they consider this 
to be more appropriate in their situation. 
9.1.5.3. Point C This point deals with the registration pro cedure under the special scheme. The primary 
responsibility for registering taxable persons in  the special scheme belongs to the Member 
State of identifica tion, on request from the taxable person. 
The point also lays down procedures for the communication of any modification of the 
registration data, as well as for deregistration. These procedur es are entirely electronic. 
This point also lays down specific provisions for taxable persons establis hed in more than one 
Member State. Its main objective is to spec ify that each establ ishment may qualify on a 
separate basis for the special scheme for its own supplies. 
9.1.5.4. Point D This point lays down rules according to which the Member States of consumption shall not 
identify for VAT purposes, and therefore not give  any VAT number in th e meaning of Article 
22(1)(c), to those taxable persons that are registered in the special scheme. 
9.1.5.5. Point E This point lays down the obligation for taxable persons registered under the special scheme to 
submit a VAT return by electronic means. 
This VAT return is a single VAT return with a specific part for each Member State of 
consumption. 
It also introduces a special rule regarding re capitulative statements whereby a separate VAT 
identification number would not be necessary for the purpose of submitting recapitulative statements where these statements are required in cases such as the transfer by a taxable 
person of his own goods to another Member Stat e. The non-established taxable person using 
the scheme would use his own VAT identifica tion number issued in his Member State of 
establishment and identify the Member States  into which the goods were transferred on the 
recapitulative statement. 
9.1.5.6. Point F This point lays down the rules for payments an d repayments. All transfers of money will be 
made directly between the taxable pers on and the Member State of consumption. 
 
EN 14   EN Where for a tax period the amount of deducti ble tax exceeds the amount of tax due, the 
Member State of consumption will deal with the excess, under the same conditions it has laid down in accordance with Article 18(4) for taxa ble persons not applying the one stop scheme. 
9.1.5.7. Point G This point lays down specific provisions for taxa ble persons established outside the European 
Union (including the ones curren tly subject to the electroni c commerce special scheme). 
9.1.6. Amendment of Article 24 
The amended paragraph 2 defines the framework in which Member States may, if they wish 
to, define an exemption regime for small traders. 
Paragraphs 3 and 4 are amended in  order to clarify which trans actions shall be excluded from 
the exemption and which transact ions are to be take n into account for the calculation of the 
taxable person's turnover. This is largely a presentational rather  than a substantive 
amendment. 
Paragraphs 8 and 9 are deleted beca use they are no longer up-to-date. 
9.1.7. Deletion of Article 24a 
Article 24a which provides for thresholds for the 10 new Member States is deleted, as the 
provisions will be superseded by the new drafting of Article 24. 
9.1.8. Amendment of Article 28b (B) (2) 
Paragraph 2 of Article 28b(B) is amended in order to introduce within the distance sales 
arrangements a global threshold applicable to sales to all Member States other than the 
Member State of establishment, instea d of a threshold per Member State. 
9.1.9. Article 2 
This Article specifies that the Directive will enter into force after 1 July 2006.  
9.2. New Directive replacing the Eighth Directive on VAT refunds 
9.2.1. Article 1 
This article defines the scope of the Directive,  which is not different from the existing Eighth 
Directive. 
9.2.2. Article 2 
This Article defines the taxabl e person eligible for refund unde r this Directive. It also 
excludes transactions which are exempted, or which could be ex empted, under Articles 15 or 
28c(A). This exclusion should en sure that VAT is not recovere d twice, once by the supplier as 
a correction of the VAT initially charged on a supply which could be exempted, and once by 
the purchaser via the refund procedure. 
 
EN 15   EN 9.2.3. Article 3 
This Article defines which transactions are eligible for a refund and is not significantly 
different from the current drafting of  Article 2 of Di rective 79/1072/EEC. 
9.2.4. Article 4 
This article lays down the rules for determining the amount refundable. 
Firstly, a taxable person must carry out taxa ble transactions in the Member State of 
establishment in order to be eligible for re fund. When the taxable person carries out both 
taxable and exempt transactions, he will have a partial right of refund in relation to the former 
transactions. 
Secondly, the deduction rules, and in particular the exclusions from the right to deduct laid 
down by the Member State where the expens es where incurred are to be applied. 
This Article sets out in a legal provision the principles already laid down by the European 
Court of Justice in Case C-302/93 (Etienne De bouche) and Case C-136/99 (Société Monte dei 
Paschi di Siena). 
9.2.5. Article 5 
Article 5 lays down the procedure under which a taxable person can introduce a request for a 
refund. This request is to be introduced electroni cally in the Member Stat e of establishment of 
the taxable person. 
The Member State of establishment will ensure transmission of the data to the Member State 
where the expenses where incurred. 
This Article also lays down which information a taxable person submitting a request has to 
provide. 
9.2.6. Article 6 
This Article stipulates the pe riodicity under which a refund a pplication can be presented, as 
well as the deadlines under which invoices and import documents can be presented for a 
refund. It also lays down the minimum amount of the refund to be claimed. 
9.2.7. Article 7 
This Article determines that competent authorit ies of the Member Stat e where the request for 
refund is presented shall inform  the applicant of its decision  within three months. Refunds 
shall be made within the same period. 
In specific cases, that Member State could ask for additional information. A decision should 
then be taken within 3 months from the date the requested information is provided. Once the 
interval of 3 months is exceeded, the refund can no longer be refused. 
 
EN 16   EN 9.2.8. Article 8 
This Article stipulates that an interest of 1% a month is due when the Member State of refund 
fails to respect the deadlines laid down in the previous Article. 
9.2.9. Article 9 
The proposed Directive should replace the current Eighth Directive. This Directive is then to 
be repealed. 
9.3. Amendments to Regulation 2003/1798 on ad ministrative coopera tion in the field 
of value added tax 
9.3.1. Amendment of Article 1(1) This is a technical amendment in order to extend the scope of the Regulation to the exchange 
of information which is necessary for the smooth functioning of the VAT One-Stop scheme. 
9.3.2. New Chapter VIa 
A new chapter is included to deal specifically with the exchange of information on the One-
Stop-Scheme, as from 1 July 2006. 
9.3.2.1. Article 34a This Article defines the scope of the exchange of information under Chapter VI. It also lays 
down that the definitions relati ng to the One-Stop-Scheme ("Member State of identification", 
"Member State of consumption"), which are li sted in the amendments to the Sixth VAT 
Directive, shall also apply to Regulation 1798/2003. 
9.3.2.2. Article 34b This Article lays down the rules for the exch ange of information on registration (including 
modification of registration da ta and deregistration) of ta xable persons under the special 
scheme. 
This exchange of information shall take pl ace without delay, which means that a proper 
electronic system of communicati on needs to be put in place. 
All Member States shall receive this information, even if no suppl y is or will be made on their 
territory. 
In addition, it imposes an obligation on the Member  State of establishmen t to monitor that its 
taxable persons are complying with the distance  selling thresholds, a nd to advise the other 
Member States where it appears that the di stance selling threshol d has been exceeded. 
All details relating to the definition of the tec hnical messages will be decided according to the 
Comitology procedure. 
 
EN 17   EN 9.3.2.3. Article 34c 
This Article lays down the obligation for each Me mber State to keep an updated database of 
all taxable persons registered  within the special scheme. 
9.3.2.4. Article 34d This Article lays down the rules for the exch ange of information relating to VAT returns 
(including their modification). 
This exchange of information sha ll also take place without delay. 
The information will be sent only to those Me mber States for which tax is declared. Each 
Member State will therefore only receive the part  of the return which deals with the supplies 
made under its own jurisdiction. 
All details relating to the definition of the t echnical messages will be decided according to the 
Comitology procedure. 
9.3.2.5. Article 34e This Article lays down the obligation for the Member State of identification to keep the 
information relating to the tax returns which ha ve been sent to the other Member States. 
This information should be kept during a mi nimum time period which is necessary for the 
technical functioning of the system (for example to  enable the system to detect that a taxable 
person has already made a tax return for a specif ic period and that only a modification of this 
data can subsequently be made). This time pe riod will need to be fixed according to the 
Comitology procedure. 
Member States will of course be able to st ore this information during a longer time period, 
which may be a very useful source of inform ation for their own future audit controls. 
9.3.2.6. Article 34f This Article deals with the information which w ill need to be made available to the taxable 
persons on the Website of each tax administration in order to help businesses comply with 
their obligations. 
The information will deal with the rules applyi ng to the One-Stop Scheme as well as with the 
different national rules applying in each  Member State (such as tax rates). 
The Commission will be responsible for the coordination of this task, as well as for 
translation. Detailed rules will be fixe d according to the Comitology procedure. 
9.3.2.7. Article 34g This Article lays down specific rules on control of the taxable persons registered under the 
special scheme. According to these rules, Member States of consumption will be able to participate in a control initiated by the Member State of identification. The latter will have an 
obligation of information the former  with regard to such controls. 
 
EN 18   EN In cases where Member States of consumption choose to participate in  such a control, the 
normal rules laid down in Article 11 (presence of tax officials on the territory of another 
Member State) would apply. 
9.3.3. New Chapter VIb 
A new chapter is also included to deal specifical ly with the exchange of information which is 
necessary to the functioning of the modernised refund scheme. 
According to Article 34h, the Member State of identification shall transmit the refund 
applications immediately to the Member State of  purchase. Again, the technical details will be 
fixed according to the Comitology procedure. 
Article 34i adds that information will need to  be provided to taxable persons concerning the 
proposed Directive laying down the refund proce dure and on specific national rules relating to 
those refunds. This will be done under th e procedure laid down in Article 34f. 
 
EN 19   EN 2004/0261 (CNS) 
Proposal for a 
COUNCIL DIRECTIVE 
amending Directive 77/388/EEC with a view to  simplifying value added tax obligations 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty esta blishing the European Communit y, and in particular Article 
93 thereof, 
Having regard to the proposal from the Commission9, 
Having regard to the opinion of the European Parliament10, 
Having regard to the opinion of the Eu ropean Economic and Social Committee11, 
Whereas: (1) Within the context of the common system of  value added tax (VAT), it is necessary to 
simplify the obligations on businesses, since those obligations are currently disproportionately burdensome  and thus compromise the smooth functioning of the 
internal market by unreasonably hindering th e possibility for businesses to engage in 
economic activities in other Member States. 
(2) Common definitions of th e goods and services for which Member States may apply 
total or partial restrictions of  the right to deduct should f acilitate the use by businesses 
of the VAT refund procedure in Member States where they are not established. 
(3) For transactions between ta xable persons where the supplie r is not established in the 
Member State where the supply takes place, an ex tension of the cas es for which the 
customer is liable to pay the tax shoul d simplify the VAT obligations of the non-
established supplier without creating an additional administrative burden for the 
customer. 
(4) The obligations for taxabl e persons liable to pay VAT in  Member States where they 
are not established should be  simplified by making it possibl e for them to use a “one-
stop scheme”, that is to say, a scheme enabling them, if they so wish, to have a single point of electronic contact for value a dded tax identificati on and declaration. 
                                                
 
9 OJ C […], […], p. […]. 
10 OJ C […], […], p. […]. 
11 OJ C […], […], p. […]. 
 
EN 20   EN (5) Such a scheme should be open not only to  taxable persons esta blished within the 
Community but also to taxabl e persons who, albeit not esta blished there, out taxable 
activities within the Community. However,  it should not cover taxable persons 
supplying electronic services to non-taxable persons, leav ing in place the scheme 
introduced in order to facilitate their compliance with fiscal obligations. 
(6) No obligation to appoint a tax repres entative should be imposed on non-Community 
operators who are registered under the one-s top scheme as such an obligation would 
cancel out all the benefits derive d from the present simplification. 
(7) Taxable persons registered under the speci al scheme should comply with the specific 
obligations laid down in this Directive. 
(8) Transfers of money, by way of payments or  refunds, should be made directly between 
taxable persons and Member States of consumption. 
(9) Member States should be allowed a great er measure of flexibility in fixing the 
threshold below which small businesses may be exempt from VAT obligations. This 
flexibility should enable each Member Stat e to determine the exemption taking into 
account the structure of  its national economy. 
(10) The special distance selling arrangements  should be simplified through the provision 
of a single threshold for supplies to all Memb er States other than the Member State of 
establishment, instead of a separate threshold for each Member State of destination. 
(11) Since the objectives of the proposed action cannot be sufficiently achieved by the 
Member States and can therefore, by reas on of the scale of the action, be better 
achieved at Community level, the Commun ity may adopt measures, in accordance 
with the principle of subsidiarity as set out  in Article 5 of the Treaty. In accordance 
with the principle of proportionality, as set ou t in that Article, th is Directive does not 
go beyond what is necessary in or der to achieve those objectives. 
(12) Directive 77/388/EEC should therefore be amended accordingly, 
HAS ADOPTED THIS DIRECTIVE: 
Article 1 
Directive 77/388/EEC is amended as follows: 
(1) Article 17, in the version set out in  Article 28f, is amended as follows: 
(a) paragraph 4 is amended as follows: 
(i) in the first indent of the first subparagraph, the reference to ‘Directive 
79/1072/EEC’ is replaced by ‘C ouncil Directive xx/xxx/EC(*)’; 
(ii) in the second subparagr aph, point (a) is deleted; 
(iii) in point (c) of the second subpa ragraph, the reference to ‘Directive 
79/1072/EEC’ is replaced by ‘Directive xx/xxx/EC 
 
EN 21   EN (*) OJ L […], […], p. […].’; 
(b) Paragraph 6 is deleted. 
(2) The following Article 17a is inserted: 
‘Article 17a 
Restrictions on the right of deduction 
1. Member States may, without prejudice to Article 17(5), apply a total or partial 
restriction on the right of a taxable person to deduct value added tax charged to him 
on the following: 
(a) expenditure on luxuries, am usements or entertainment; 
(b) expenditure in respect of travel, acco mmodation, food or drink other than that 
incurred by the taxable person in the course of his activity in supplying for consideration travel, accom modation, food or drink; 
(c) expenditure relating to motorised ro ad vehicles except the taxable person’s 
stock-in-trade vehicles and ve hicles for sale in the exercise of his activity, used 
as taxis, for instruction by driving schools or used for hire or leasing; 
(d) expenditure relating to boats or airc raft except those exclusively intended for 
use for the commercial transport of persons or goods. 
2. Member States may, for the purposes of paragraph 1, set a percentage for minimum 
use of motorised road vehicles for business purposes. 
3. Paragraphs 1 and 2 shall a pply to all motor vehicles, other than agricultural or 
forestry tractors, which are normally us ed for carrying persons or goods by road, 
with a maximum authorised mass not exceeding 3500 kilograms and having not 
more than eight seats in addition to the driver’s seat. 
 The related expenditure shall cover the pur chase of a vehicle, including contracts of 
assembly and the like, manufacture, in tra-Community acquisition, importation, 
leasing or hire, modification, repair or maintenance, and expenditure on supplies or 
services performed in relation to  vehicles and the use thereof. 
(3) In Article 21, in the version set out in  Article 28g, point (b) of paragraph 1 is 
replaced by the following: 
‘(b) taxable persons to whom services covere d by Article 9(2)(e) ar e supplied or persons 
who are identified for value added tax purposes  within the territory  of the country to 
whom goods covered by the arrangements laid down in the second sentence of Article 8(1)(a) or services covered by Artic le 9(2)(a) and (c) or Article 28b(C), (D), 
(E) and (F) are supplied, if th e supply of the goods is made or the services are carried 
out by a taxable person not established w ithin the territory of the country;’ 
 
EN 22   EN (4) The following Article 22b is inserted: 
‘Article 22b 
One-stop scheme for fulfilling obl igations in Member States wh ere the taxable person is not 
established 
A. Definitions 
For the purposes of this Artic le, and without prejudice to ot her Community provisions, the 
following definitions shall apply: 
(1) ‘Member State of identification’ means the Member State in which the taxable person 
established within the Community has es tablished his busine ss or has a fixed 
establishment from which the goods or services ar e supplied or, if es tablished outside 
the Community, the Member State of cons umption which the taxable person chooses 
to contact to state when his activity as a taxable person within the Community commences; 
(2) ‘Member State of consumption’ means the Member State in which the supply of the 
goods or services is deemed to take pl ace in accordance with Articles 8, 9 and 28b. 
B. Scope Member States shall permit any taxable person supplying goods or services for which he is 
liable to pay value added tax in one or severa l Member States of consumption where he has 
not established his business nor has a fixed establishment to fu lfil his obligations using the 
special scheme provided for under this Articl e, except for those non-established taxable 
persons supplying electronic services to non-ta xable persons who make use of the special 
scheme provided for under Article 26c. 
C. Registration  1. Every taxable person shall state to the Memb er State of identification when he wants 
to start to make use of the one-stop sc heme. This statement shall be made by 
electronic means. 
The taxable person shall provi de the information necessary for his registration under 
the one-stop scheme. He shall also state wh ether he is already identified for value 
added tax purposes in Member States wher e he is not established nor has a fixed 
establishment and, if so, indicate the identification number under which he is 
registered. 
2. The Member State of identification shall register the taxable person referred to in 
paragraph 1 within a reasonable period of time. For that purpose the Member State 
shall use the individual number  already allocated to the ta xable persons in respect of 
his obligations under th e internal system. 
Taxable persons who have an establishment in more than one Member State may 
request that each establishment be registered  under the one-stop scheme in respect of 
their supplies made in Member States wher e the taxable person has no establishment. 
 
EN 23   EN 3. Every taxable person shall notify the Member State of identification of any 
modification of the registration data provided pursuant to paragraph 1. That 
notification shall be made by electronic means 
4. Every taxable person shall state to the Memb er State of identification when he wants 
to cease to make use of the scheme or when his activity changes to the extent that he no longer qualifies for the one-stop scheme . This statement shall be made by 
electronic means 
5. The Member State of identification shall without delay strike from the identification 
register any taxable person who no longer meets the conditions necessary to qualify 
for the one-stop scheme. 
In particular, the Member State of identif ication shall exclude taxable persons from 
participating in the one-stop scheme in the following cases: 
(a) if the taxable person notifies the Member State of identification that he no 
longer supplies goods or services in any Member State or Member States other 
than the Member State of identification; 
(b) if it otherwise can be assumed that th e taxable activities of  the taxable person 
have ended; 
(c) if the taxable person no longer fulfils the requirements necessary to be allowed 
to use the scheme; 
(d) if the taxable person persistently fail s to comply with th e rules governing use 
of the scheme. 
D. Identification A taxable person who is registered under the on e-stop scheme shall not be identified, within 
the meaning of Article 22(1)(c), other than in  the Member State where he is established. 
E. Returns and recapitulative statements 
1. Every taxable person registered under the one-stop scheme shall submit to the 
Member State of identification a value added tax return for each calendar quarter setting out all the supp lies of goods and services for wh ich he is liable to pay value 
added tax in Member States where he has not established his business nor has a fixed establishment. If the taxable person is not established within the Community, the return shall also include th e supplies made in the Member State of identification.  
The return, which shall be made by elec tronic means, shall be submitted within 20 
days following the end of the period to which it refers. 
2. The return referred to in paragraph 1 shall set out, for each Member State of 
consumption where value added tax has beco me due, all the information needed to 
calculate the amount of tax th at has become chargeable and the deductions to be 
made during the period covered by the return. 
 
EN 24   EN 3. The return referred to in paragraph 1 shall be made in euro. The Member States of 
consumption which have not adopted the euro may require the part of the return concerning supplies of goods and services on  their territory to be made in their 
national currency. 
4. Where, pursuant to Article 28a(5)(b), a ta xable person is obliged to submit data in 
accordance with Article 22(6)(b), the number referred to in the second indent of the 
third subparagraph of Article 22(6)(b) shal l be the number referred to in the first 
indent of that subparagraph. The taxable pe rson shall indicate the Member State in 
which the acquisition was made in a clea r way on the recapitulative statement. 
F. Payments and repayments 1. The taxable person shall pay the value added tax when submitting the value added 
tax return. Payment shall be made directly  on the bank account and in the currency of 
each Member State of consumption concerned. 
2. When the amount of value added tax to be deducted in a specific calendar quarter is 
greater than the amount of tax due, the Memb er States may either make a refund or 
carry the excess forward to the following period in accordance with the conditions 
which they have determined pursuant to Article 18(4). 
G. Specific provisions for taxable pers on established outside the Community 
The Member State of identification shall identify, within the meaning of Article 
22(1)(c), a taxable person who is not established within the Community at the same time as it takes the action referred to in Part C(2) of this Article." 
(5) Article 24 is amended as follows:  (a) Paragraphs 2, 3 and 4 are replaced by the following: ‘2. Member States may exempt taxable pe rsons whose annual tur nover does not exceed 
a threshold which may be set no higher th an EUR 100 000 or the equivalent in 
national currency at the conversion rate  on 1 July 2006. They may apply one or 
several thresholds, which may not in a ny case exceed EUR 100.000 or the equivalent 
in national currency on 1 July 2006. 
 Member States may revise annually the th resholds they apply . Under that annual 
review, the maximum threshold of EUR 100 000, or the equivalent in national 
currency applicable on 1 July 2006, may be rais ed only in order to maintain the value 
in real terms of these thresholds. 
 Member States which have exercised the option under Article  14 of Directive 
67/228/EEC to introduce exemptions or gradua ted tax relief may retain them and the 
arrangements for applying them if they conform to the VAT system. 
3. The exemption provided for under paragr aph 2 shall not apply to the following 
transactions: 
(a) transactions carried out on an occasiona l basis, as referred to in Article 4(3); 
 
EN 25   EN (b) supplies of new means of transpor t carried out in accordance with the 
conditions specified in  Article 28c(A);  
(c) supplies of goods and services carried  out by a taxable person who is not 
established in the Member State in which the value added tax is due. 
4. The turnover serving as a reference for the purposes of applying the arrangements 
provided for in paragraph 2 shall consis t of the following amounts, exclusive of 
value added tax: 
(a) the value of goods and services, in so far as they are taxed, including 
transactions which are exempt, with deduc tibility of the value added tax paid at 
the preceding stage, pur suant to Article 28(2); 
(b) the value of transactions which are exempt pursuant to Article 15; 
(c) the value of real estate transactions, financial transactions as referred to in 
Article 13(B)(d) and insurance services, unless those transac tions are ancillary 
transactions. 
 However, disposals of the tangible or intang ible capital assets of an enterprise shall 
not be taken into account for the purposes of calculating the turnover.’ 
 (b) Paragraphs 8 and 9 are deleted. (6) Article 24a is deleted. (7) In Article 28b(B), paragraph 2 is replaced by the following: 
‘Paragraph 1 shall not apply to supplies of goods dispatched or transported to a 
Member State other than that of the s upplier, if the following conditions are met: 
(a) the goods supplied are not produc ts subject to excise duty; 
(b) the total value of such supplies, ex clusive of value added tax, does not exceed 
EUR 150 000 or the equivalent in na tional currency in one calendar year; 
(c) the total value, exclusive of value a dded tax, of the supplies of goods other than 
products subject to excise duty, in the previous cale ndar year, did not exceed 
EUR 150 000 or the equivale nt in national currency.’ 
Article 2 
1. Member States shall adopt and publish, by 30 June 2006 at th e latest, the laws, 
regulations and administrative provisions necessary to comply with this Directive. 
They shall forthwith communicate to the Commission the text of those provisions and a correlation table between thos e provisions and this Directive. 
 They shall apply those provisions from 1 July 2006. 
 
EN 26   EN  When Member States adopt those provisions,  they shall contain a reference to this 
Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determin e how such reference is to be made. 
2. Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 
Article 3 
This Directive shall enter into force on the day following that of its publication in the Official 
Journal of the European Union . 
Article 4 
This Directive is addressed to the Member States. 
Done at Brussels, […] 
 For the Council 
 The President  
 
EN 27   EN Proposal for a 
COUNCIL DIRECTIVE 
laying down detailed rules for the refund of value added tax, provided for in Directive 
77/388/EEC, to taxable persons not establishe d in the territory of the country but 
established in another Member State 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty esta blishing the European Community, 
Having regard to Council Directive 77/388/ EEC of 17 May 1977 on the harmonization of the 
laws of the Member States relating to turnove r taxes – Common system of value added tax: 
uniform basis of assessment12, and in particular Article 29a thereof, 
Having regard to the proposal from the Commission13, 
Whereas: (1) Considerable problems are posed, both for the administrative authorities of Member 
States and for businesses, by the implemen ting rules for Directive 77/388/EEC laid 
down by Council Directive 79/ 1072/EEC of 6 December 1979 on the harmonization of 
the laws of the Member States relating to turnover taxes – Arrangements for the refund 
of value added tax to taxable persons not established in the territory of the country
14. 
(2) The arrangements laid down in that Dire ctive should be amended so that decisions 
concerning applications for refund can be a nnounced within three months of the date 
when the applications were submitted and refunds made within the same period. To 
that end, the procedure should be simplified and modernised by allowing for the use of 
modern technologies. 
(3) The new procedure shall create more legal certainty for businesses, since the refund 
can no longer be refused when the imposed delays are exceeded. 
(4) Directive 77/388/EEC contained a provi sion which concerned the application of 
Directive 79/1072/EEC. For clar ity and better reading purposes , this provision is now 
integrated in this Directive and deleted in Directive 77/388/EEC.  
                                                 
12 OJ L 145, 13.6.1977, p. 1. Directive as last amended by Directive 2004/66/EC 
(OJ L 168, 1.5.2004, p. 35). 
13 OJ C […], […], p. […]. 
14 OJ L 331, 27.12.1979, p. 11. Directive as last amended by the 2003 Act of Accession. 
 
EN 28   EN (5) Since the objectives of the proposed action cannot be sufficiently achieved by the 
Member States and can therefore, by reas on of the scale of the action, be better 
achieved at Community level, the Commun ity may adopt measures, in accordance 
with the principle of subsidiarity as set out  in Article 5 of the Treaty. In accordance 
with the principle of proportionality, as set ou t in that Article, th is Directive does not 
go beyond what is necessary in or der to achieve those objectives. 
(16) In the interests of clarity, Directive 79/1072/EEC should therefore be replaced. 
HAS ADOPTED THIS DIRECTIVE: 
Article 1 
1. This Directive lays down the detailed rules for the refund of value added tax, 
provided for in Article 17(3) of Directive 77/388/EEC, in the version given in Article 
28f thereof, to taxable persons, within the meaning of Article 4(1)  of that Directive 
and subject to paragraph 2 of this Article, who are not established in the territory of 
the country, but who are established in another Member State, hereinafter “non-
established taxable persons”. 
3. This Directive shall apply to any non- established taxable person, who meets the 
following conditions: 
(a) during the refund period, he has not had in the territory of the country, 
hereinafter “the Member State of refund” , the seat of his economic activity, or 
a fixed establishment from which business transactions were effected, or, if no 
such seat or fixed establishment existed, his domicile or normal place of residence;  
(b) during the refund period, he has not supplied any goods or services deemed to 
have been supplied in the Member Stat e of refund, with th e exception of the 
following transactions:  
(i) transport services and services an cillary thereto, exempted pursuant to 
Article 14(1)(i), Article 15 or Artic le 16(1) B, C and D of Directive 
77/388/EEC; 
(ii) supplies of goods and services provid ed in cases where value added tax is 
payable solely by the person to whom  they are supplied, pursuant to 
Article 21(1)(a), (b), (c) a nd (f) of Directive 77/388/EEC. 
Article 2 
This Directive shall not apply in respect of goods  the supply of which is, or may be, exempted 
under Article 28c(A) of Directive 77/388/EEC when the goods supplied are dispatched or 
transported by the acquirer or fo r his account. Nor shall it appl y to goods the supply of which 
is, or may be, exempted under Arti cle 15(2) of Dire ctive 77/388/EEC. 
 
EN 29   EN Article 3 
Member States shall refund to any non-esta blished taxable person, any value added tax 
charged in respect of goods or  services supplied to him by ot her taxable persons in their 
territory or in respect of the importation of good s into their territory, in so far as such goods 
and services give rise to a right of deducti on there and are used for the purposes of the 
following transactions: 
(a) transactions referred to in Article 17(3)(a) and (b) of Directive 77/388/EEC; 
(b) transactions  for which value added tax is payabl e solely by the person to whom the 
goods or services are supplied, pursuant to Article 21(1) (a), (b), (c) and (f) of 
Directive 77/388/EEC . 
Article 4 
To be eligible for a refund unde r Article 3, the non-established taxable person must carry out 
transactions giving rise to a ri ght of deduction in the Member St ate in which he is established. 
When a non-established taxable person carries out in the Member St ate in which he is 
established both transactions gi ving rise to a right of deduc tion and transactions not giving 
rise to a right of deduction, only such proportio n of the value added tax may be refunded in 
the Member State of deduction as it is at tributable to the former transactions. 
Article 5 
1. To obtain a refund under Article 3, the non-established taxable person shall submit 
an application for refund, here inafter “the applic ation” in the Member State in which 
he is established. This application shall be ma de by electronic means. 
2. The refund application shall set out, for each  Member State where the taxable person 
incurred value added tax, the following details:  
(a) name and full address of the supplier; (b) except in the case of im portation, the value added ta x identification number of 
the supplier or tax reference number,  as defined by a Member State in 
accordance with Article 22(9)(e ) of Directive 77/388/EEC; 
(c) except in the case of importation, th e ISO code of the Member State of 
purchase in accordance with Article 22(1)(d) of Directive 77/388/EEC; 
(d) date and number of the invoice or importation document; (e) taxable amount and amount of value a dded tax expressed in the currency of the 
Member State where the tax was incurred; 
(f) the amount of deductible value added tax expressed in the currency of the 
Member State where the tax was incurred; 
 
EN 30   EN (g) nature of the goods and services acq uired, described by the following code: 
1. = fuel; 2. = accommodation; 3. = restaurant services; 4. = travel expenses, such as taxi fares, short-term renting of means 
of transport, public transport fares; 
5. = fairs and exhibitions; 6. = leasing of m eans of transport; 
7. = road tolls and road user charge; 8. = other. 
For the purposes of Code 8 in point (g) of the first subparagraph, a full description of 
the goods and services shall be requested. 
Article 6 
1. The application shall relate to purchases of goods or services invoiced or imports 
made during a period of not less than thr ee months and not more than one calendar 
year. The application may, however, relate to a period of less than three months 
where the period represents the remainder of a calendar year.  
The application may also relate to invoi ces or import documents not covered by 
previous applications and concerning transactions co mpleted during the calendar 
year in question. 
The application shall be submitted within six months of the end of the calendar year 
in which the tax became chargeable. 
2. If the application relates to  a period of less th an one calendar year  but not less than 
three months, the amount of the refund re quested may not be less than EUR 200 or 
the equivalent in national currency. 
If the application relates to a period of a calendar year or  the remainder of a calendar 
year, the amount of the refund requested  may not be less than EUR 25 or the 
equivalent in national currency. 
Article 7 
1. The Member State where the Value added tax was incurred shall make its decision 
concerning the application for refund known to  the applicant within  three months of 
the date on which the application was submitted.  
 
EN 31   EN 2. Refunds shall be made before the end of the three month period referred to in 
paragraph 1. 
The refund shall be made in the Member Stat e of refund or, at th e applicant's request, 
in the Member State in which the applicant is  established. In the latter case, any bank 
charges for the transfer shall be deducted  by the Member State of refund from the 
amount to be repaid to the applicant. 
3. If the application is refused, the grounds for refusal shall be notified to the non-
established taxable person by the competent authorities of the Member State where 
the tax was incurred. 
Appeals against such refusals may be ma de to the competent authorities of the 
Member State where the tax was incurred, subject to the same conditions as to form and time limits as those governing claims  for refunds made by taxable persons 
established in the same Member State. 
4. In specific cases, a Member State wher e value added tax has been incurred may 
request additional information within th ree months of the date on which the 
application is submitted. After that period has elapsed, no additional information may be requested. 
In such cases, the decision concerning the application shall be made known to the 
applicant within three months of the date on which the additional information was submitted. The refund shall be made within the same period. 
5. In the absence of an express refusal within  the appropriate time-l imit, as laid down in 
paragraph 2 or 4, the app lication shall be deemed to have been granted. 
Article 8 
Where an application for refund has not been expressly refused, but payment of the refund has 
not been made before the end of  the three-month period laid dow n in the first subparagraph of 
Article 7(1), or in the second s ubparagraph of Article 7(4), as a ppropriate, interest of 1% per 
month, calculated from the date on which the re fund should have been ma de to the date on 
which the refund was actually made, shall be due by the Member State on the amount of the 
refund to be made. 
Article 9 
Directive 79/1072/EEC is repealed with effect from 1 July 2006. 
References to that Directive shall be cons trued as references to this Directive. 
 
EN 32   EN Article 10 
1. Member States shall adopt and publish, by 1 July 2006 at the latest, the laws, 
regulations and administrative provisions necessary to comply with this Directive. 
They shall forthwith communicate to the Commission the text of those provisions and a correlation table between thos e provisions and this Directive. 
They shall apply those provisions from 1 July 2006. When Member States adopt those provisions,  they shall contain a reference to this 
Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determin e how such reference is to be made. 
2. Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 
Article 11 
This Directive shall enter into force on the day following that of its publication in the Official 
Journal of the European Union . 
Article 12 
This Directive is addressed to the Member States. 
Done at Brussels, […] 
 For the Council 
 The President 
 
EN 33   EN 2004/0262 (CNS) 
Proposal for a 
COUNCIL REGULATION 
amending Regulation (EC) No 1798/2003 as regar ds the introduction of administrative 
cooperation arrangements in the context of the one-stop scheme and the refund 
procedure for value added tax 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing th e European Community, and in particular 
Article 93 thereof, 
Having regard to the proposal from the Commission15, 
Having regard to the opinion of the European Parliament16, 
Having regard to the opinion of the Eu ropean Economic and Social Committee17, 
Whereas: (1) Under Council Directive 200Y/XX/EC  of DD/MM/200X amending Directive 
77/388/EEC with a view to simplif ying value added tax obligations
18, a one-stop-
scheme may be offered to all taxable pers ons with value added tax (VAT) obligations 
in a Member State where they are not established. 
(2) Council Directive 200Y/YY/EC of DD/MM/ 200Y laying down detailed rules for the 
refund of value added tax, provided for in Directive 77/388/EEC, to taxable persons 
not established in the territory of the c ountry but established in another Member 
State19 simplifies the procedure for obtaining a VAT refund in a Member State where 
the taxable person concerned does not have any VAT registration. 
(3) However, both these Directives entail the exchange of a considerable volume of 
additional information between the various Me mber States concerned. It is therefore 
necessary to amend Council Regulation (EC) No 1798/2003/ECof 7 October 2003 on 
administrative cooperation in the field of value added tax and repealing Regulation 
(EEC) No 218/9220. The exchange of informati on required should not have a 
disproportionate administrative burden  on the Member States concerned. 
                                                 
15 OJ C […], […], p. […]. 
16 OJ C […], […], p. […].. 
17 OJ C […], […], p. […]. 
18 OJ C […], […], p. […]. 
19 OJ C […], […], p. […]. 
20 OJ L 264, 15.10.2003, p. 1. 
 
EN 34   EN (4) The exchange of information should ta ke place by electronic means based on the 
existing information exchange systems. 
(5) It is necessary to clarify the respect ive obligations of the Member States of 
identification and consumption, particular ly as regards the deadlines for the 
transmission of information and the control of taxable persons. 
(6) Since the objectives of the proposed action cannot be sufficiently achieved by the 
Member States and can therefore, by reas on of the scale of the action, be better 
achieved at Community level, the Commun ity may adopt measures, in accordance 
with the principle of subsidiarity as set out  in Article 5 of the Treaty. In accordance 
with the principle of proportiona lity, as set out in that Article, this Regulation does not 
go beyond what is necessary in or der to achieve those objectives. 
HAS ADOPTED THIS REGULATION: 
Article 1 
Regulation (EC) No 1798/2003 is amended as follows: 
(1) In Article 1(1), the followi ng fifth subparagraph is added: 
‘This Regulation also lays down rules and proce dures for the exchange by electronic means of 
value added tax information on goods and se rvices supplied by taxa ble persons who have 
opted for the special scheme provided for in Article 22b of Directive 77/388/EEC, or who are 
using the VAT refund procedure, provided for in Council Directive 200Y/YY/EC*, for 
taxable persons not established in the territory of the country but who are established in 
another Member State. 
(*) OJ L […], […], p. […].’;  (2) The following Chapters VIa and VIb are inserted: 
‘CHAPTER VIa 
Provisions concerning the exchange and conser vation of information in the context of 
the ‘one-stop scheme’ provided for in Article 22b of Directive 77/388/EEC 
Article 34a 
The definitions contained in  point A of Article 22b of Directive 77/388/EEC shall 
apply for the purpose of this Chapter. 
Article 34b 
1. The Member State of identification shall transmit the following information by 
electronic means to the competent aut horities of the other Member States: 
 
EN 35   EN (a) in respect of taxable persons beco ming registered under the special scheme 
provided for in Article 22b of Directiv e 77/388/EEC, hereinaf ter “the one-stop 
scheme”, the information referred to in  Article 22b(C)(1) of that Directive, 
within 10 days of the end of the calendar month during which the registration has been effected; 
(b) details of any modification of data, as  referred to in Article 22b(C)(3) of 
Directive 77/388/EEC, or of withdrawal or change of activity, as referred to in 
Article 22b(C)(4) thereof, within 10 days of being so notified; 
(c) details of any decision taken pursu ant to Article 22b(C)(5) of Directive 
77/388/EEC to strike a taxabl e person from the register of those using the one-
stop scheme, within 10 days of the end of the calendar month during which it 
has taken that decision; 
(d) details of all taxable persons in its te rritory who have not opted for the one-stop 
scheme, but who carry out supplies of goods which, pursuant to Article 
28b(B)(2) of Directive 77/388/EEC, are subject to value added tax in a Member State other than the Member State of establishment. 
2. The technical details relating to the provisi on of information pursuant to paragraph 1, 
in particular as regards the content and format of common electronic messages, shall 
be determined in accordance with the pr ocedure referred to in Article 44(2).  
Article 34c 
1. Each Member State shall establish and keep  updated a database wh ich stores the list 
of taxable persons supplying goods or se rvices in accordan ce with the one-stop 
scheme. 
2. Article 22 shall apply. 
Article 34d 
1. The Member State of identification shall, within five days of the day of receipt and 
by electronic means, transmit to the compet ent authorities of the Member States 
concerned the details, received pursuant to Article 22b(E)(1) of Directive 77/388/EEC, relating to the quarterly returns of each taxable person registered under 
the one-stop scheme as well as any informa tion relating to a modification of such a 
return. 
2. The technical details relating to the provisi on of information pursuant to paragraph 1, 
in particular as regards the content and format of common electronic messages, shall 
be determined in accordance with the pr ocedure referred to in Article 44(2). 
Article 34e 
The Member State of identification shall, for the minimum period necessary for control 
purposes, keep the details received pursuant to Article 22b(E)(1) of  Directive 77/388/EEC, 
 
EN 36   EN relating to the quarterly returns of each pers on registered under the one-stop scheme. That 
period shall be determined in  accordance with the procedure referred to in Article 44(2). 
Article 34f 
1. Each Member State shall make available on a web site detailed information relating 
to the following: 
(a) the functioning of the one-stop scheme; (b) the rules of national law applying to transactions made in the other Member 
States; 
(c) the relevant bank account number and accounting details to be submitted with 
the payment to be made by the taxable persons using the one-stop scheme. 
The electronic address for each Member Stat e’s web site will be notified to taxable 
persons at the same time as registration is  effected in accordance with Article n 
accordance with Article 22b(C)(2 ) of Directive 77/388/EEC. 
2. Each Member State shall transmit to the Commission its rules of national law 
applying to the relevant transactions  and the Commission shall provide for 
translation of this information into all the official languages of the European Community. 
3. The details and format of the informa tion referred to in paragraph 1 shall be 
determined in accordance with the pr ocedure referred to in Article 44(2). 
Article 34g 
1. Control of taxable persons who have opted  for the one-stop scheme shall as far as 
possible be coordinated by the Member States. 
2. If the Member State of iden tification decides to carry out an audit of a taxable person 
who has registered for the one-stop scheme in  its territory, it shall inform in advance 
the competent authorities of the other Member States concerned. 
3. If the Member State of consumption decide s to carry out an aud it of a taxable person 
who is registered under the one-stop sche me and has carried out supplies in its 
territory, it shall inform in advance the competent authorities of the other Member 
States concerned. 
4. Any Member State concerned may participat e in an audit carried out by the Member 
State of identification or consumption. For th is audit, the proce dures referred to in 
Articles 11 and 12 may be used. 
 
EN 37   EN CHAPTER VIb 
Provisions concerning the exchange and conser vation of information in the context of 
the procedure provided for in Directive 200Y /YY/EC for the refund of value added tax 
to taxable persons not established in the terr itory of the country but who are established 
in another Member State 
Article 34h 
1. Where the competent authority of a Member State receives an application for refund 
of value added tax under Article 3 of Direct ive 200Y/YY/EC, it shall, within 10 days 
of the end of the calendar month during wh ich the application was received and by 
electronic means, inform accordingly the competent authorities of each Member 
State of purchase concerned, confirming whethe r or not the applicant is identified for 
value added tax purposes  in its territory.  
2. The technical details relating to the provisi on of information pursuant to paragraph 1, 
in particular as regards the content and format of common electronic messages, shall 
be determined in accordance with the pr ocedure referred to in Article 44(2). 
Article 34i 
Details about the operation of the refund pro cedure laid down in Directive 200Y/YY/EC and 
about the relevant national rules,  particularly in resp ect of the restricti ons to the right to 
deduct applied in accordance with Article 17a of Directive 77/388/EEC, shall be included on the web site referred to in Article 34f.’ 
Article 2 
This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of  the European Union . 
It shall apply from 1 July 2006. 
This Regulation shall be binding in  its entirety and directly applicable in all Member States. 
Done at Brussels, […] 
For the Council 
The President