COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(73)950 final
Brussels ,20June1973
Proposal fora
SIXTHCOUNCIL DIRECTIVE
ontheharmonization oflegislation
ofMemberStatesconcerning turnover taxes
Commonsystemofvalueadded
tax:uniform basisofassessment
(submitted totheCouncil bytheCommission )
COM(73)950

COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(73)950
Brussels ,20June1973
Proposal fora
SIXTHCOUNCIL DIRECTIVE
ontheharmonization oflegislation
ofMemberStatesconcerning turnover taxes
Commonsystemofvalueadded
tax:uniform basisofassessment
(submitted totheCouncilbytheCommission )
COM(73)950

-1-
Proposal foraSirthDirective ontheharmonization
ofturnover taxes
COJJTEIITS
Explanatory Note pp.1-39
Recitals pp.40-43
Introductory Provisions Article 1p.44
FieldofApplication Article 2P.45
Territory Article 3p.46
Taxable Persons Article4P.47
TaxableTransactions :
SupplyofGoods Article 5p.49
WorksofConstruction Article 6p.51
SupplyofServices Article 7p.52
Imports Article 8P.52
PlaceofTaxable Transactions :
SupplyofGoods Article 9P.53
SupplyofServices Article 10P*53
Chargeable Eventandthechargetotax Article 11PP.54&55
Taxable Amount Article 12pp.56-58
Rates Article 13p.59
Exemptions :
withintheterritory ofacountry Article 14pp.60-63
onimported goods Article15pp.63-65
onexportsandliketransactions and
international transport Article 16pp.65-68
Deductions :
existence andscopeoftherightto
deduct Article 17pp.69&70
rulesforexercising therightto
deduct Article 18Ρ»71
calculation ofthedeductible
prepaction Article19p.72
adjustments ofdeductions Article 20P.73

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Personsliableforpaymentofthetax Article 21P.74
Assessment oftheamountoftaxtobe
paidandliability forpaymentofthe
tax Article 22P.75
Obligations ofpersonsliablefor
payment i
undertheinternal system Article 23pp.76&77
inrespectofimports Article 24P.77
Specialschemes *
smallundertakings Article 25pp.7°&79
second-hand goods Article 26PP.79&80
agriculture Article 27pp..80-86
Transitional provisions Article 28p.87
VATCommittee Articles 29-
31 pp.88&89
Miscellaneous provisions Articles 32-
36 P.90
AnnexAsListofactivities in
agricultural production P.91
AnnexBiListofagricultural services P.92
AnnexC*Commonmethodofcalculation PP.93-10=

-1-
EXPLAMTORY MEMORANDUM
Scopeandobjectives ofthisproposal foradirective
Thisproposal forasixthdirective onacommonsystemofvalueaddedtax-
uniformbasisofassessment –aimstoachieveanumberofobjectives which
havealreadybeendefinedinvariousCouncilinstruments .
Thetwodirectives of11April19<>7ontheharmonization ofturnover taxes
provided thebasioprinciples forthecommonsystemofvalueaddedtax,but
numerous andsignificant derogations werestillpossible asregards the
scopeofapplication ofthetax.Article 19ofthesecondDirective only
provided thatsuchderogations shouldbeprogressively restricted orabolished .
Thofirststepinthisdirection wastakenon9December 1969»whenthe
Councilpassedaresolution underlining thenecessity fortheretailtrade
tobeincluded withinthescopeofapplication ofvalueaddedtaxfromthe
timeofitsintroduction ineachMemberState,andforkeepingtoaminimum
thenumberofdifferent ratesoftax.
1
Then,on21April1970,theCouncildecidedtoreplacethefinancial con­
tributions ofMemberStatestotheCommunities' budgetbytheCommunities'
ownresources .Article4ofthatdecision provides thatfrom1January1975*
"ownresources "shallinclude ,inaddition tocustomsduties,agricultural
levies,andanyotherrevenuefromtaxesenteredintheCommunities' budget,
resources acoruing fromvalueaddedtaxandobtained "byapplyiiig aratenot
exoeeding 1^onanassessment basisdetermined inauniformmannerfor
MemberStatesaccording toCommunity rules.
Toachieveafairandconsistent apportionment amongMemberStates,ithas
beenagreedthatauniformbasisofassessment shouldbeachieved bylaying
downcommonrulessuchthattheresources accruing fromvalueaddedtax
shouldequaltheamountobtained byapplying the"community "ratetothe
10JNoL94,28April1970,p.19»

-2-
actualtaxableamountatthelaststageatwhichthetaxapplies ,thatis
tosaythesellingprice,lessvalueaddedtax,forsupplies ofgoodsand
services toacustomer whoisnotentitled tomakedeductions ofinputtax
inrespectthereof .
Inotherwords,thecommonrulesmusthearrivedatbydetermining anarea
ofapplication forvalueaddedtaxwhichwillbeidentical 1undereach
national law,particularly asregardswhichpersonsandwhichtransactions
aretaxableorexempt,themethodsofcalculating thetaxableamountand
specialschemes *
»
Inthecontextoftheharmonization ofvalueaddedtax,mentionmustalsobe
madeoftheimportant Resolution oftheCouncilandtheRepresentatives of
theGovernments oftheMemberStates,passedon22March1971^concerning
theachievement bystagesofeconomic andmonetary union,andtheexpedition
ofeffective freemovement ofpersons ,goods,servioes andcapital .
Thetwoobjectives :auniformsystemoftaxandtheinterpretation of
economies ,areinseparable ,aswitnessthewordingofTitleIIIpoint2of
theabovementioned Resolution of22March1971»whereitisstatedthatin
thefieldoftaxation euchinterpenetration mustbeachieved ,inan
appropriate manner,bytheadoption ofCommunity rulesontheuniformbasis
ofassessment withinthemeaningoftheDecision of21April1970.
ItisonthebasisofthesevariousCouncilinstruments thatthisproposal
foradirective hasbeendrawnup.Itshouldbeseenagainstthebackground not
onlyofthecollection cftheCommunity 'sownresources accruing fromvalueaddedtax
butalsoofeconomic andmonetary unior .ofwhichthisharmonization isbut
onepartinthewidercontextofeoonomic integration *
Fortheavoidance ofdoubt,theCommission hasdecidedtopresentits
proposal intheformofacomplete text,incorporating allthoseprovisions
oftheseconddireotive whichitisnotproposed toamend.
10JNoC28,27March1971»P«1

-3-
Arti'le 1:Introductory
UpontheadoptionofthisDirective ,theMemberStatesarecalleduponto
takethenecessary measurestoadapttheirvalueaddedtaxsystemstothe
previsions ofthisdirective ,sothattheCommunity'sownresources accruing
fromvalueaddedtaxmaybecollected inaccordance withCommunityrules.
Article 2:Fie-ldcfapplication
ThisArticleincorporates theprovisions ofArticle 2oftheSecondDirective
of11April19^7ontheapplication ofthetaxtosuppliesofgoodsand
services andimportsofgoods.Italsosubjectstovalueaddedtaxthe
receiptofcertainservices bypersonsestablished intheCommunity .This
newcasefortheapplication ofthetaxmustbeconsidered inthelightof
thesituation resulting fromtheprovisions ofArticle 10ontheplaceof
supplyofservices ,andtheexemption providedforinArticle 16(1G)•
Althoughdifficulttoenforceincertaincases,theaimoftaxing,through
therecipient ,services supplied byapersonestablished abroad,istomake
itimpossible ,legally,tobearecipient ofservices intendedtobeutilized
withinaMemberState-withouthavingbornevalueaddedtax.
Artic_e 3îTerritrrv
Giver,theimportance ofthisquestion withregardtotheComnnmity 's01mresources ,
itprovednecessary thateachMemberStateshoulddetermine inthesamewartheterri­
toryonwhichitappliesvalueaddedtax.However ,exceptions maybemade
intv>ecaseofMemberStateswho,forhistorical reasonsparticularly ,wish
tocontinuetoapplyvalueaddedtaxtoaterritory smallerthanthatcom­
prisedbytheirnationalterritory plusitsterritorial waters.
Article 4:Taxablepersons
Thenewdefinition oftaxablepersonsdemonstrates theconcernwhichexists
thatthefieldofapplication ofvalueaddedtax,inkeepingwithitscharacter
asageneraltaxonconsumption ,shouldbeextendedtocoveralleconomic
activities ,wherevertheytakeplace,andalltransactions whichareinthe
natureofsucheconomicactivities butwhichmaybecarriedoutseparately or
occasionally .Suchtransactions shouldbetaxedinordertoensureimpartial
application ofthetax,particularly asregardssuppliesofimmovable property.

-4-
Thedefinition ofataxableperson,although applicable onlyintheMember
States,isnotconfined ,totheboundaries oftheCommunity ;thisisinorder
tomakethetaxmoreimpartial withregardtotheplaoewhereundertakings
maybecarrying onbusiness *
Inparticular ,thenewdefinition oftaxablepersonshouldbereadtogether
withArticle21(l)(personliableforpaymentoftaxinsidethecountry )and
Article17(2)and(3)(scopeoftherighttodeduction ).
Moreover ,paragraph 4goesintofinerdetails ,sothat,intheinterests of
simplifying administration orofcombating abuses (e.g.thesplitting upof
oneundertaking amongseveraltaxablepersonssothateachmaybenefitfrom
aspecialscheme)MemberStateswillnotbeobligedtotreatastaxable
personsthosewhose"independence "ispurelyalegaltechnicality .
Lastly,itisprovided thatlegalpersonsgovernedbypubliclawmustbe
treatedastaxablepersonstotheextentthattheypursueeoonomio activities
notinherently thoseofapublicauthority ,thati3tosayactivities which
couldbepursuedbypersonsgoverned byprivatelawwithoutusurping the
basicfunctions andpowersoftheStates,provinces ,communes andother
publiclawbodiesingeneraladministration ,theadministration ofjustice ,
ornational security ordefence .
Aparticular resultofthisdefinition isthatthemanagement ofmotorways ,
oanalsorharbours constitutes ataxableeconomic activity .
Article 5*Taxable supplies ofgoods
Paragraph 1
Thegeneraldefinition ofasupplyofgoodsisthatcontained inthesecond
direotive .Itappliestherefore tobothmovableandimmovable property .
Immovable property isinvolved inthisdirective intwoways:
(1)asproductswhichattheendofaneconomiccyolearesuppliedto
individuals asconsumers ;
(2)asameansofproduction thecostofwhichisreflected intheprice
ofgoodsorservioes .

Seenfromthisangle,"theprinciple requiresthattheconstruction and
marketing ofnewbuildings crustbesubjecttothetax,inwhatevercapacity
thevendornaybeacting.Toresolvedifficulties indistinguishing be­
tweennewbuildings andold,thenotionoffirstoccupation hasbeenused
todetermine themomentatwhichthebuildingleavestheproduction process
andbecomesasubjectofconsumption ,thatistosaywhenthebuildingbegins
tobeusedbyitsowneroratenant.
Withregardtooldbuildings ,adistinction shouldbemadebetweenresiden­
tialandotherbuildings .Inprincipleresidential buildings areexcluded
fromthescopeofvalueaddedtaxasbeingproperty whichhasalreadybeen
"consumed"byvirtueofthefirstoccupation thereof.Howeveroncesuch
abuildingissoldtoataxableperson,suchasadealerinimmovable
property ,itre-enters thecommercial circuit.Totakeaccountofthis
"re–commercialization "ofthebuilding ,whichwouldinvolveanundulyheavy
taxburdenonthebusiness ofthepropertydealer,itwasnecessary totax
itotherwise thanunderthegeneralrulesandtoprovide,inArticle 12A(l)(d)
thatMemberStatesmaytreatasthechargeableamountforvalueaddedtax
thedifference betweenthesalepriceandthepurchase price.
Withregardtosupplies ofoldbuildings whicharenotresidential buildings ,
thesetransactions aretaxablebecausethevendorisusuallyataxableperson
pursuinganeconomicactivitywithinthemeaningofArticle4(2)andbecause
allsuppliesforconsideration byataxableparsonaxetaxabletransactions .
However,theexemptions providedforinArticle14B(l)and(m)makethe
necessary modifications tothegeneralprinciples ofthetax.
Againsti;hebackground ofvalueaddedtaxseenasataxonconsumption which
appliesatallstagesofproduction anddistribution ,landwouldseemtobea
mostunsuitable subjectforvalueaddedtax,sinceitisneitherproduced
norconsumed.Bat,ifearthassuchcannotbe"produced",itcanhowever
bethesubjectofcertainproductive economicactivities whichmayaddvalue
toit:abuildingsiteclearedandpreparedwillbemorevaluablethansuch
asiteinitsnaturalstate,andthesourceofthedifferenceinvalueis
theeconomicactivity.Thesellingpricewillnotbebrokendownintothe
priceforthelandassuchandthepriceoftheworkwhichhasbeencarried
outonit.Ifsuppliesoflandareexempted fromvalueaddedtax,then

-6-
onetherebyexemptsalsotheworkwhiohmayhavecontributed toitsvalue,
ifthelandissupplied toanindividual ;bythesametokenhowever ,the
workwillbetaxedtwiceoverifthelandissupplied toanundertaking .
Moreover ,adistinction betweenasitepreparedforconstruction (foundation ,
roads,levelling ,installation ofdrainage andwatersupplysystems ,
installation ofelectricity supply,etc»)andasitewithacompleted
building onitisacompletely artificiel distinction ,sinceinbothcases
acertainquantity ofworkisincorporated indivisibly intotheearth.
Indeed ,plotsoflandwouldappeartobea"rawmaterial "ofeoonomic
activities .Evenifoneconsiders thattheycannotbethesubjectofcon­
sumption inthestrictsenseoftheword,theyarenevertheless puttouse,
tosatisfyeithertheneedsofindividuals (residential premises ),inwhich
casetheyhavethenatureofconsumer goods,ortheneedsofbusiness under­
takings ,inwhichoaeetheyconstitute investments .
Forthesereasons itappearsnecessary thatplotsofbuilding landshould
besubjecttovalueaddedtax.
Oneofthefeatures ofrealproperty inprivatelawistheexistence ofrights
inremwhichgivetheownertherightofeconomic utilization oftheproperty
towhichtheyattach("usufruct","emphyteusis ","superficie "etc.):the
transfer ofsucharightinvolves thetransfer oftherighttodisposeof
theproperty asowner,withinthelimitsallowedbythelaw.Ontheother
handtheholdingofsharesinaproperty companycanbeequivalent tohaving
aninterest inimmovable property .Thepurposeoftheprovisions of
paragraph 1istochargetcvalueaddedtax,foroDviousreasonsof
impartiality ,transactions which,economically speaking ,areequivalent to
asupplyofimmovable property orpartthereof .Thetaxation ofsupplies
ofnewbuildings andbuilding plotsmustnothoweverinvolveanyundue
increase inthefiscalburdenonsuchoperations .Therefore ,forsocial
reasons ,MemberStatesshouldrefrain ,atleastinrespectofoertainof
tuesetransactions ,fromlevying -ttatieainrespectoftheregistration thereof ,
andshouldapplyvalueaddedtaxthereto atareducedrate.
Paragraph 2
Bycomparison withthecorresponding provisions oftheSecondDirective of
11April1967,thenotionofasupplyofgoodshasbeenextended ,byaprovision
relating tocertainconstructive transfers ofmovable orimmovable properties
(see(b)).Thesecontracts usuallyeffectatransfer ofpropertyupontheir
expiry,byvirtueoftheexercisebytheuseroftheproperty ofanoption

-7-
topurchase •Theyshouldtherefore ,forreasonsofimpartiality ,"be
treatedastaxablesupplieswithinthemeaningofthisdirective sincewhen
theproperty ismadeavailable totheuser,whathastakenplaceinfact
can"bedescribed asaBalewithpayment "byinstalments -
Paragraph 3
Theclassesoftransaction treatedastaxablesupplies arealsoaddedto"by
anewprovision (paragraph 3(o));toavoidtheenjoyment ofunjustified
advantages "bytaxablepersonswhoareentitledtodeductinputtax,
applications ofgoodstoownuse,andtransfers ofgoodsfromataxable
business toanexemptbusiness aretreatedastaxablesupplies .
Thesameaimcouldhavebeenattained bymeansofadjustments todeductions
alreadymade,buttheteohnique oftreating thesetransactions astaxable
supplies waschosenforreasonsofimpartiality andsimplicity .
Paragraph 4
Sincecontributions tocompanies canbeconsidered assupplies forconsider­
ation,chargeable totax,andsincecertaintransfers fornoconsideration
havebeentreatedastaxablepupplies ,MemberStateshavetheoption,in
theinterests ofsimplicity andsoasnottooverburden theresources of
theundertaking makingthecontribution ,towaivethetaxinvolved »This
optionwouldbeexercized particularly wheretheundertaking receiving the
contribution intendstoapplythegoodsinquestion forthepurposes ofa
taxable business *
Article 6:Worksofconstruction
Theseconddirective treatsasasupplyofgoods"thedelivery ofworksof
construction ,including thoseinwhichmovableproperty isincorporated in
immovable property"(Article5(2)(©))•AnnexA(5)ofthatDirective ,without
givingadefinition of"worksofconstruction ",givesalistofvarious
operations whichareexamples thereofand,asameasureoftolerance ,
permitscertainoperations tobeclassified assupplies ofservxceswhere,
forspecifically nationalreasons ,theycannotbeconsidered assupplies of
goods.Itwouldappearthatdifferences inclassification couldgiverise
todiscrepancies asregardsthetaxableanoint,thetimeatwhichthe
chargetotaxarises,therateoftaxandtherulesforcollection .On
theotherhand,adefinition ofwhatconstitutes acontraotforthesupply

-8-
ofworksofconstruction ,whichcouldsolvecertainproblems ,wouldrun
intodifficulties "becauseofthedifferent concepts employed inthenational
laws.Withaviewtoeliminating allsourcesofdiscrepancy ,itseemed
desirable todrawupalistofoperations tobetreatedasworksofcon­
struction ,inrespectofwhichthedetailed rulesfortheapplication of
thetaxarethoselaiddowninrespectofsupplies ofgoods.
Article 7sTaxable supplies ofservices
Undertheprovisions ofthisArticle ,combinedwiththerepealofArticle6(2)
andAnnexBoftheSecondDirective of11April19^7,allsupplies of
services arehenceforth taxable ,withtheexception ofthosecoveredby
exemptions contained inthisDirective .
Paragraph 2,intheinterests ofmakingthetaximpartial ,dealswithtwo
casestobetreatedastaxablesupplies ofservices .Inthefirstcase
(application ofgoodsfromabusinessforpurposesnotconnected with ,the
business )asinthecaseoftaxableapplications withinthemeaningof
Article5(3)(a),taxisonlychargediftheinputtaxonthegoodsso
appliedisdeductible ;thisprovision istoavoidsuchapplications
escapingtaxaltogether .Inthesecondcase(suppliesofservicesbetween
personsconsidered tobeasingletaxableperson),taxisnotchargeable
wheretheinputtaxthereonwouldbedeductible bythereoipient hadthey
beensupplied byanothertaxableperson.
Article 9*Placeofsupplyofgoods
Bycomparison withthecorresponding provisions oftheseoonddirective of
11April1967fthisArtiolecontainsanewprovision tocovertheoase
wherethegoodssupplied aretobeinstalled orassembled bythesupplier .
Thiswasnecessary inviewofthedifficulties whichmighthavearisenby
reasonofthedifferences whichhavebeennotedbetweencertainnational laws.
Themainresultofthenewprovision isthatwhereasupplier exportsan
iteminitscomponent partsandassembles itinanothercountry ,theplace
ofsupplyisdeemedtobetheplaoewhereassembly iseffected .Thesup­
plierwillbetaxeduponimportation onthevalueofthepartsandwillbe
taxedagain,inthecountrywherahebecomesataxableperson,inrespect
ofthevalueoftheitemconoorned ,including assembly ,withdeduction of
thetaxpaidonimportation .

-9-
Takethespecialcasewhereasupplier delivers component partsinwhich
ownership haspassedtothepurchaser ,forexample ,ontheirleavingthe
factory ,andthenassembles theparts:thisspecialprocedure doesnot
defeattheruleastotheplaceofsupplyofgoods,whichisstilltheplaice
wheretheassembly takesplace.
Article 10:Placeofsupplyofservices
Forallsupplies ofservices ,withtheexception ofservices connected with
immovable property andtransport services ,theplacewheretheservices are
supplied isdeemedtobetheplacewherethesupplier hasestablished
theseatefhisbusiness activities .Thischoicewasmademainlyforreasons
ofsimplicity andfortheavoidance ofdifficulties ofinterpretation which
mightarisefromnotionssuchastheplaceofutilization orexploitation of
theservices .Asacorrollary tothischoice ,andtoavoidoverlapping of
taxes,whichwouldbetothedistinct disadvantage ofnational suppliers ,a
numberofexemptions havehadtobeprovided inrespectofservices supplied
tocustomers established outsidethecountryofthesupplier (Article16).
Whentaxboundaries areabolished withintheCommunity ,theseexemptions will
onlyapplyinrespectofcustomers established outsidetheCommunity }with
theresultthatthechoicemadenowastotheplaceofsupplywillremain
fullyeffective .
Withregardtotransport services ,andinviewofthepeculiar natureofsuch.
services ,itseemedadvisable toprovidethattheplacewheretheyare
supplied shouldbetheplacewheretransport takesplace,ascertained having
regardtothedistance covered .tinderthisprinciple alltransport onthe
territory ofaMemberStatewillbesubjecttovalueaddedtax.
Withregardtosupplies ofservices connected withimmovable property ,such
asthestorageofgoods,thelettingofbuildings ,orthelettingofsafes,
itseemedpreferable toconnectthetaxwiththelocality oftheimmovable
property .
Article 11:Chargeable eventandliability fortax
Thedetermination oftheeventbyvirtueofwhichthetaxbecomesdxia(chargeable
event)andthedetermination ofthemomentatwhichthetaxauthority
becomesentitledtoclaimthetax(whenthetaxbecomeschargeable )andthe

-10-
momentwhenthetaxmustbepaid(liability forpaymentofthetax)have
givenrisetonumerous controversies .Underthelawsofmostofthe
MemberStates,themomentwhenthe"chargeable event"takesplaceisindis­
tinguishable fromthatwhenthetaxbecomeschargeable .Onthecontrary
howeveijforpractical reasons ,thetaxusuallydoesnotbecomepayable
untilalaterdate*
Although thesedifferences betweenthevariousnational lawsasregards
theseconcepts andthetimesatwhichtheybecomerelevant shouldnotbean
obstacle totheharmonious collection ofthatportionofownresources which
from1January1975is"toaccruefromvalueaddedtax,thedetermination of
themomentatwhichthechargetotaxarisesisnonetheless important for*
(1)determining timelimitsforinvoicing
(2)determining thetimewhentherighttodeduction arises
(3)determining thetaxperiodinwhichataxabletransaction takes
place
(4)fixingthetimeatwhiohthetaxmustbepaidtothecollecting
authority ,assuchpaymentdependsonthedeclaration
(5)determining ,wherechangesaremadeinthetaxrulesorintherateof
tax,whetheratransaction istaxableornotunderthenewrulesorat
thenewrate.
j.tseemednecessary therefore toincorporate inthetextconcerning theuni­
formbasisofassessment forvalueaddedtaxdefinitions oftheconcepts of
"chargeable event",thetaxbecoming "chargeable ","theassessment of
1 _ .- 1theamountoftaxtobepaid"and"liability forpaymentofthetax"y
mainlybecauseoftheeffoetsofthesenotionsontheobligations oftaxable
personswho,underthevalueaddedtaxsystem,actineffectastaxcollectors *
Themomentsatwhichtheseconcepts becomerelevant havebeendetermined
havingregardtothefollowing considerations :
Underinternal systems
Itisgenerally agreedthatthomomentofthechargeable eventisthatof
eachsupplyofgoodsoreachsupplyofservices ,butthereisnosuchgeneral
Thedefinitions oftheassessment oftheamountoftaxpayableandtherules
governing paymentoftax,inrespeotofbothdomesticandimporttransactions ,
arecontained inTitleXIII,Article22.

-11-
agreement astowhenthetaxbecomeschargeable .Therearenumerousarguments
infavouroftheviewthatthetaxcouldbecomeduetothecollecting
atamomentotherthanthatofthechargeable event.Thusonecouldconsider
thatthetaxbecomeschargeable :
(a)inrespeotoftransactions betweentaxablepersons ,atthetimewhen
theinvoiceisdelivered confirming (oraccompanying )thesupplyof
goodsorservices or,failingthedelivery ofaninvoice ,whenthetime
limitforsuchdelivery expires ,
(b)inallothercases,atthetimeofreceiptoftheconsideration forthe
transaction .
Hiissolution isnotonlyattraotively simplebutalsomakesfTfairnessin
theapplication ofthetaxbystatingtheprinciple thatthetaxshjuldnot
becomeduebeforethetimewhenthevighttodeduction canbeexercized .On
theotherhand,forsmallbusinesses themajority ofwhosetransactions are
withindividuals ,therulerelating tothereceiptoftheconsideration
avoidspractical difficulties andthefinancing ofthetaxinadvanceby
theircustomers .
Thissolution doesnothoweverseemtohavebeenaccepted initsentirety in
thelawsofcertainStates,forfearnotonlyofdifficulties ofinspection
butalsoofatimelagincollection compared withthepresentsituation ,
giventhepossibility ofinvoices andpayments beingdelivered andmadeafter
thetaxabletransaction takesplace.Norisitpossible bycommercial custom
torequirethatineverycasethesupplyofgoodsorservices shouldbe
invoiced orpaidforimmediately .
Forthelatterreasons ,itseemedpreferable toretaintheprinciple setout
intheSecondDirective wherebythechargeable eventoccursandthetax
becomesehargeable atthesametime,whilststillallowing theMember
Statesteprovideforthetaxtobecomeehargeable whenthesupplyisinvoiced
orpaidfor.
However ,whenpayments onaccountarereceived priortothechargeable
event,receiptoftheseamountsgivesrisetoachargetotaxfsincethe
partiestothetransaction inthiswaydemonstrate theirintention thatall
thefinancial consequences ofthechargeable eventshouldariseinadvance .

-2-
Inports
Theprinciple setoutintheSecondDirective hasalso "beenobserved ,with
regardtoimports .
Asageneralrule,thechargeable eventistheimportation ofthegoodsinto
thecountryandthetaxbecomeschargeable atthistime.However ,iftheimport
issubjecttocustomsduty,agricultural leviesortaxeshavingequivalent
effectunderacommonpolicy ,then,forpractical reasons ,thechargeability
ofthetaxislinkedtothatofthoseduties,leviesortaxes.Suchlinking
isnolongeroptional asintheSecondDirective ,butisobligatory .The
particular aimofthisistoavoidtechnical difficulties whichmightarise
inadministration if,forexample ,customsdutiestobeincluded inthe
chargeable amountonlybecamedueaftervalueaddedtaxbecamedue.
Thereisnolongeranyreason ,however ,asregardsintra*»Community transactions ,
tolinkthevalueaddedtaxtoanon-existent chargeable eventorchargeto
dutyforcustomspurposes .Moreover ,certainMemberStateshavealready
abolished asbetweenthemselves notonlytariffbarriers butalsocustoms
barriers .Therefore theprinciples andrulestobeappliedinthisarea
henceforth arethosepropertovalueaddedtax.However ,whereupontheir
importation intoacountrygoodsareplacedundercustomsand/orfiscalrule
(including theCommunity transitprocedure ),I.emberStatesmayprovidethat
thetaxshallnotbecomechargeable beforethemomentwhenthegoodsarere­
leasedfromsuchcontroltobeputintofreecirculation (seealso
Article13ontheratesoftax).
Article 12:Taxable amount
Asinthecaseof"chargeable event",thedefinition of"taxableamount"
isadefinition applicable toeachindividual transaction bywayofsupply
orimportation ofgoodsorsupplyofservices .
Taxable amountforinternal transactions
Thedefinition of"taxableamount"mustbesuchastobeusableatall
stagesofthemarketing process (i.e.inrespectofeaohpartialpaymentof
valueaddedtax).Thedefinition mustnonetheless bedrawnprimarily with
aviewtoitsapplication tothefinaltransaction withtheconsumer rather
thantotransactions betweentaxablepersons .

-13-
Thus "thedefinition of"taxable amount"shouldbefirstandforemost a
definition whichcanbeeasilyappliedtothelaststageofthemarketing
process ,whenthefullamountofthetaxbecomespayablebytheoonsumer .
Theremustbeavailable forapplication atthisstageasimpledefinition
capableofbeinggenerally understood andappliedbythoseaccountable for
thetax.
Inthevastmajority ofcases,theconsideration forasupplyofgoodsor
services istheprice,thatisasumofmoneypayabletothesupplier .It
wouldtherefore seemlogicaltobasethedefinition of"taxableamount"
inthefirstplaceontheprice-anotionfamiliar toalltraders-always
provided ofcourse *thatitisatruepriceandconstitutes thesoleconsid­
erationforthetransaction concerned .Wherethepriceisnotthesole
consideration (forexampletransactions inwhichthesupplierreceives ,over
andabovetheprice,other"advantages ",orwherethetaxauthorities oan
provethatthepriceisnotatrueone),thetaxable amountwillhaveto
beestimated byapplying themeretheoretical notionofthe"open-market value".
ThepurposeofthisArticleisnottochangethesubstance oftheprovisions
inthisconnection ofthesecondDirective ,butsimplytoconfirm
onpaperanexisting situation offact.Giventhatinvirtually allcases
the"consideration "referred tointhesecondDirective isinfacttheprice,
itseemedmorelogicaltoprovidethatthetaxable amountshouldbedetermined
primarily byreference tothe"prioe"andfailingthisbyreference to"open
marketvalue".
For,whathastobetaxedistheactualcosttotheconsumer ofgoodsand
services andnotatheoretical valuerutuponthem.
Paragraph 3provides thatcertainitemsaretobeexcludedincalculating
thetaxableamount .Theseinclude interest duecmaccount ofdeferred
orlatepaymentandthecostofreturnable packings .
Theexclusion ofinterest onsalesondeferred termsisanalagous tothe
exemption inrespectofcredittransactions providedforinArticle14(®)(j)•
Theexclusion ofinterest onaccountoflatepaymentisjustified bythefact
thatsuchinterest ,beingintendedtopenalizethebuyer,cannotbesaidto
formpartofanormalcommercial transaction .

-I-
Thepurposeofexcluding thecostofreturnable packings istoavoidhaving
toadjustthe -taxableamounteachtime,asisnormallythecase,the
packing isreturned bythecustomer .
Taxable amountforimportations
Theprovisions ofthesecondDirective concerning thetaxableamount
inthecaseofimportsaresomewhat imprecise andinplacescontradictory .
OntheonehandArticle8(c)ofthatDirective providesthat,inthecaseof
importations ofgoods,thebasisonwhichtaxistobechargedisthecustoms
valueofthegoods,evenwherethegoodsareinfactexemptfromduty(e.g.
anygoodsimported fromotherMemberStates)ornotsubjecttoadvalorem
duties.Ontheotherhand,undertheprovisions ofAnnexArelating to
Article8(c)MemberStatesaretoendeavour toapplytoimportations ofgoods
fromtheotherMemberStatesabasisofassessment whichcorresponds tothat
appliedtodomestictransactions (whichiscertainly notthecustomsvalue).
Furthermore ,inthecaseofimportations fromthirdcountries ,MemberStates
maylikewise useinplaceofthecustomsvalueabasisofassessment corres­
pondingtothatemployed fordomestic transactions .Lastly ,whenthesecond
Directive wasbeingadopteditwasstatedinrelation toArticle8(c)that
theCommission plannedtopresenttotheCouncilassoonaspossible proposals
layingdowncommoncriteria inthismatterwhichwould
applybothtointrar-Community tradeand,whereMemberStatesavailedthemselves
oftheoptionprovided forinthesecondparagraph ofpoint14inAnnexAof
theDirective ,toimportations fromthirdcountries .
Withaviewtoclarifying theposition ,ithasbeensoughttoputdomestic
transactions andimportations onthesamefootingasregardsthetaxable
amount ,while endeavouring atthesametimetoretainthenotionof
"customsvalue"forcaseswheregoodsaresubjecttocustomsduties .Thus
theexpression "openmarketvalue",whichcanapplybothtodomestic trans­
actionsandtoimportations ,hasbeendefinedinsuchawayastobevirtually
equivalent to"customsvalue".Moreover ,asisthecasewith"customsvalue",
thenotionof"openmarketvalue"willapplytoimportations onlyinthose
exceptional casesinwhichthereisno"pricepaidortobepaid".Tomake
therulesabsolutely vrcitertight,ithasbeenprovided thatwherethecustoms
valuehastobedetermined (i.e.inthecaseofgoodsimported fromthird
countries subjecttoadvaloremduties)thetaxableamountforvalueadded

-15-
taxinnocasebelowerthanthevalueestablished forcustomspurposes .
Miscellaneous provisions
Itisprovidedthatwherethepriceremainsunpaid (whetherinwholeorin
part),thetaxable amountmaybereduced .Toavoidabuses,theMember
Statesaretolaydowntheconditions forapplying thisprovision .
Finallythereisageneralprovision ,applicable bothtodomestic transactions
andtoimportations ,wherebytheMemberStatesmay,provided theyfirstcon­
sulttheValueAddedTaxCommittee ,maintain orintroduce standard or
minimum ratesforcertain transactions .
Article 13*Rates
Paragraphs 2,3and4incorporate theprovisions ofArticle 9ofthesecond
Directive .Onlyparagraph 1containsnewprovisions ,whicharerequired in
connection withthecollection oftheCommunity^ownresources .
TitleXiExemptions
Article10(3)ofthesecondDirective lefttheMemberStatescompletely free,
subjecttotheobligatory consultations provided forinArticle16,toprovide
forwhatever exemptions theythoughtfit;whereasthepurposeofthepresent
Directive ,dictated bytheneedtoensureequality oftreatment asbetween
thevariousMemberStatesasregardscollection oftheCommunity 'sownre­
sources ,isthatthereshouldbeuniformity astothetransactions whieharetaxable
Thisnecessarily impliesuniformrulesastoexemptions .
Thelistofexemptions hasbeendrawnuphavingregard (i)totheexemptions
alreadyexistinginthevariousMemberStatesand(ii)theneedtokeepthe
numberofexemptions assmallaspossible .Thisneedreflects aconcernto
keepexceptions totheminimuminageneralsystemoftaxation ofconsumption ,
butalsoreflecigadesiretoavoidtheinconveniences whichsuchexemptions
cause,mainlybyreasonofthefactthat,unlessthetransaction exempted
formspartofaninternational tradingoperation ,taxespaidoninputswill
notbedeductible .
Article 14
Theexemptions provided forwithintheterritory ofacountryarebasedona

-16-
varietyofgrounds .Theexemptions setoutinsectionAarethosealready -
existing inthemajority oftheMemberStates.Theyrelatetoth^postal
services-(a),tomedicalservioes-(b),(o),(d),(e)and(f),towelfare
services-(g),toeducational services-(h)and(i)ftophysicalrecreation -
(j),andto"bodiesproviding servicesofasocial,culturaloreducational
nature-(k).
Theotherexemptions ,whicharesetoutinsectionB,relatetospecific
fields,suchasinsurance ,provision ofcreditanddealings incurrency and
onthestockexohange ,wheretheyarejustified forreasonsofgeneral
policycommontoalltheMemberStates.
Asregardsparagraph (d),itshouldbenotedthatintheMemberStatesthe
lettingofimmovable property isgenerally exempted ontechnical ,economic
andsocialgrounds .Butthearguments whichjustifytheexemption of
lettings ofpremises asdwellings andofagricultural tenancies nolonger
applyintheoaseofhotelpremises oroflettings forindustrial orcom­
mercialpurposes *
Theexemption underparagraph (k)ofgamingandlotteries isbasedonpurely
practical considerations .Suchaotivities areineffectill-suited to
taxation onavalue-added basisandarebetterdealtwithbymeansofspecial
taxes.
Theexemptions providedforinparagraphs (l)and(m)arethenecessary
corollary totheprovisions ofArticles 4and5conoeming supplies of
buildings orofbuilding land.Theobjectistoavoidtaxingoertainsup­
plies,evenwherethesearecarriedoutbytaxablepersonscarrying onan
activitycomingwithinArtiole4(2).
Theexemptions applyinthefollowing cases:
–wheretax -aidnetbecomedeductible byvirtue©fthetransaction wherebythe
owneracquiredtheproperty (propertyalreadyoutsidethefieldofappli­
cationofVAT,orpropertyacquiredunderpaymentoftaxbutwithnoright
ofdeducxion );
–wheretheproperty concerned isnotbuilding landasdefinedin
Artiole4(3)(c).

-17-
Artiele15ïHjggmrticns cnimrorted^cis
x_eexemptions providedforinrespectofinpcrtcdgoodsarealso"basedan
variousgrounds.Theymainlyconcerngoodsexempted •underthedomestic
scheme,"butaccounthasalso "beentaienofthegeneralprinciples ofcmstoes
legislation ,vithaviewtocoordinating VATandcustomsarrangements and
thussimplifying theadministrative workinvolved.Admittedly ,thecon­
siderations underlying theexemptions inrespectofcustomsdotyarenot
necessarily thesaeeasthosegav&n.irgYATexemptions,"butinagoodnumber
ofcases(importations underaipierraticarrangements ,temperaryimportations ,
transitandwarehousing ,■travellers 1allowances,consignments ,etc..•)
theaiapursuedandtheeconccicjustification areidentical.
Paragraphs 1,2,3»6,7»8,10and11requirenospecialexplanation ,
whereastheotherparagraphs Eeritfurthercomment.Theexemption provided
forinparagraph 4appliestogoodsvfrj<»->»qualifyfornon-tariffexemption from
customsduties,i.e.undercteoftheexemptions providedfor"bytheMember
States,subjecttotheirownconditions ,intheintroductory notestotheir
nationalcustomstariffs(e.g.removals,weddinggifts,fruitandcrops
growninfrontier zones).
Inparagraph 5»itwasconsidered desirable,inordertoavoidfrequentcases
ofdoubletaxation,toextendtheprovision inrespectofgoodsreimported
intotheStatefreewMohtheywareexportedtocoverthereimportation of
octorvehicles "breakdowninanother KemberStateandhavetobe
repaired there.
Likevise withaviewtoavoiding doubletaxation,paragraph 9covers
importations ofusedgoodsnotqualifying forexemption underanyother
provision ofthisArticle.Itwouldapplyforexampletonotorvehicles,
boatsetc.ownedbyaprivateindividual movingresidence froooneKenbrrr
Statetoanother.HavingpaidtaxonthegoodsinthefirstMemberState
atthetineofpurchase hpwouldnormally beliableoncomingtothenew
HemberStatetopaytaxasecondtime.Itwasfeltdesirable thatinsuch
circumstances taxshouldbechrjgcabl ^onlywhereadifferenceintherate
oftaxasbetweenthetwoMemberStatesconcerned eightresultintaxevasion.

-18-
Article 16:Exemption ofexportsandliketransactions andinternational
Inaccordance withthebasicprinciple ofthesystem,wherebysuppliesby
wayofexportmustberelieved ofinputvalueaddedtax,Article 16sets
outthetransactions whichareexempted fromtax"butnevertheless giverise
toarightofdeduction inrespectofthetaxonthevaluepreviously added.
Themajority ofthetransactions listedrequirenocommentary sincethese
areexemptions whiohalreadyexistintheMemberStates.Thisisthecase
asregardsthesupplies bywayofexportsetoutinparagraphs 1,2and3
andthetransactions ofalikenaturecoveredbyparagraphs 4»5»6,7»8,
9,11and12.
Theexclusion ofvesselsusedfornon-commercial purposes fromtheexemption
inrespectofsupplies ofsea-going vesselsandofgoodsandservioes in
connection withtheuseofsuchvessels isjustified bythenatureofsuch
transactions ,whichconstitute supplies ofconsumer goodsandservices and
assuchmustbesubjecttoVAT.
Theexemption provided forinparagraph 10inrespectofsupplies of
services isanecessary corrective totheprovisions ofArticle 10.
UnderArticle 10theplacewheretheserviceissupplied isdeemedtobethe
placewherethepersonproviding theserviceresides .Itfollowsthata
supplyofservioes toapersoninanotherMemberStateoroutsidethe
Community wouldinprinoiple betaxableinthecountryofthepersonpro­
vidingtheservice .
Itisconsidered undesirable thatsucharuleshouldapplytothesupplies
ofservices sotoutinparagraph 10.
For,inthecaseofservices suppliedtoapersonestablished inacountry
otherthanthatofthepersonsupplying theservioe ,application ofthe
generalruleaslaiddowninArticle10wouldmakeCommunity supplies subject
todistortions ofcompetition vis-^-visthoseinthirdoountries ,whileit
wouldalsoleadtodistortion ofcompetition withintheCommunity ,inthat,
beoauseofdifferences inratesasbetweentheMemberStates,thecompetitive
position ofsuppliers wouldvaryaccording totheStateinwhichtheywere
established .

-19-
Itisaccordingly providedthatthesuppliessetoutinparagraph 10areto
beexemptedinthecountryofthepersonsupplying theservice,uponcondition
thatthelatterprovesthatthecustomerisestablished outsidetheCommunity ;
heisnotrequiredtoprovethatthecustomerisataxablepersonwithinthe
meaningofArticle4-»Ontheotherhand,wherethecustomerisaperson
established inanotherMemberState,itisprovided ,inordertoprevent
thetransaction escapingtaxaltogether ,thatthepersonsupplying the
servicemustprovethatthocustomer isataxableperson,thelatterbeing
requiredunderArticles2(3)and23(8)todeclarethesupplytohis
nationaltaxauthority .
Exemptions inrespectofinternational transport operations aredealtwith
inparagraph 13«
Subparagraph (a)providesforexemption inrespectofthecarriageof
importedgoodstothefirstplaceofdestination ,whichisnormallythe
placeindicated intheconsignment noteaccompanying thegoodswhenthey
arrivefromthecountryofexportation .Thisisapurely"technical "
exemption ,designedtosimplifycollection ofthetax.For,underArticle
12B(2)(b)the"exempted"costofcarriageisinfactincludedinthetaxable
amountinrespectofthegoodsimported .
Subparagraph (b)concernsthetransport ofgoodswhicharebeingcarriedto
adestination outsidenational territory ortoanexportbondedwarehouse
orintransit .Thisexemption ,whichisbasedoneconomic grounds ,isin
factlinkedtotheexemption inrespectofthegoodsbeingsocarried .
Theexemption providedforinsubparagraph (c)appliestothedomestic
sectionofinternational passenger transport operations byairorsea.
Thisexemption wasconsidered desirable inordertoavoidthepractical
difficulties which,underpresentcircumstances ,asuddenchangeinthe
systemoftaxation ofsuchtransport operations wouldcause.Suchan
exemption ishowevercontrary tothebasicprinciple ofthecommonsystem
ofvalueaddedtaxation ,wherebyallmodesoftransport shouldreceive
equaltreatment asregardstaxation .Theexemption istherefore toapply
onlyuntil1January1975(cf.Article28),theCommission beingrequired
inthemeantime toexaminemethodsforputtingintoeffectasystemof
taxation applicable toalltypesofpassenger transport withintheCommunity ,

-19a_
irrespective ofthenationality ofthetransport undertaking concerned#
Thereisaprovision fortaxoninputsinrespectofthetransactions
exempted underthisArticleto"berefunded .
Article 17:Existence andscopeoftherighttodeduct
Paragraph 1
Thisparagraph specifies thetimefromwhichtherighttodeductmay"be
exercised and,consequently ,thetaxperiodduringwhichtheright
maybeexercised *
Ataxablepersonmayonlyexercise hisrighttodeductifthetaxin
respectoftheprevious transaotion hasbecomechargeable .

-20-
Paragraph 2
Thefirstsubparagraph islargelybased ,onArticle11(1)ofthesecond
Directive jwhichdefinesthecasesinwhichtaxmaybededucted .The
principle hasbeenmaintained thatvalueaddedtaxongoodsandservices
usedforthepurposesofnon–taxableorexempttransactions (exceptfor
transactions effectedabroadandexports )shouldnotbedeductible
Afourthcasewherededuction ispossiblehasbeenadded,namelywhere
taxispaidbyorduefromtherecipient ofservicessuppliedbyaforeign
supplierasdescribed inArticle2(3),wheretherecipient isataxable
person .
Paragraph 3
Theaimofthistextistorenderobligatory whatwasmerelyanoption
giventoMemberStatesbyparagraph 21ofAnnexAtothesecondDirective .
Paragraph 4
Thisprovision istoavoidcaseswhereataxablepersonestablished
abroadmighthavetobearvalueaddedtaxinvoioed tohimabroad
withoutpossibility ofrefund .Suchcasescouldbethoseforexample
ofabusinessman exhibiting atatradefairabroad ,orindeedacarrier
whoselorryhastoberepaired abroad .Inthiswayadoubleeconomic burden
isavoided .
Paragraph 5
Thisparagraph repeatsmoreorlessthecorresponding provisions ofthe
secondDirective (Article11(2),thirdsubparagraph ,andAnnexA
paragraph 22)onthegeneralpro-rata rule.Thereisnevertheless a
newprovision inthelastsubparagraph ,aimedatavoiding inequalities
intheapplication ofthetax.Suchinequalities mayworktothedetriment
ortotheadvantage ofthetaxableperson ,giventhattheproportion
isafixedamountwhichBaygiverisetodeductions eithergreater
orsmallerthanwouldhaveresulted onthebasisofactualuse.Inthis
connection theStatesmayauthorize orobligethetaxablepersonto
determine specialproportions sendtoBakededuotions onthebasisof
actualusetowhichallorpartofthegoodsandservices areputinthe
businessconcerned ,whereheisabletoshowsuchusebymeansofseparate
aocounts .

-21-
Paragraph 6
Itwouldappearthatcertainexpenditure ,eventhoughincurredinthe
ordinarycourseofbusiness,isalsoincurredforprivatepurposes,and
apportionment ofsuchexpenditure "between ""business"and"private"
purposes couldnot"beadequately supervised .
Forthisreason,itisprovidedthatthecategories ofexpenditure listed
inparagraph 6should "beexcludedfromthescopeoftherighttodeduct,
soastoensureuniformcollection ofownresources andtoavoidabuses,
andindeedlarge–scalefraud.
Article 18:exerciseoftherighttodeduct
Paragraph .1
Thisparagraph definesthepurelyformalprerequisites fortheexercise
oftherighttodeduct(holdingofaninvoiceorcustomsdocumentor
completion ofotherformaJities ).
Itshouldbepointedouthoweverthataninvoiceisnomorethanevidence
ofarighttodeductsthereisthusnorighttodeduction intheabsence
ofanactualtransaction (supplyofgoodsorservices).
Paragraph 2
Thisparagraph maintains theprinciple ofimmediate deduction ,asalready
laiddownbyArticle11(3),firstsubparagraph ,ofthesecondDirective.
Deduction ofthetaxdeductible inaccordance withparagraph 1mustbemade
forthetaxperioddnriwhisshitbecomesdeductible underArticle
17(1).
Thereisoneexception onlytothisrule,intheoaseofpersonswhobecome
taxablebyvirtueonlyofoccasional transactions asreferredtoin
Article4(3)(b)and(c).Deduction shouldnotbeallowedunlessitcanbe
shownthatthetransaction inquestionistaxable.
Italsoseemednecessary tolaydownarulewherebyataxablepersonwhohas
beenunabletomakeadeduction attherighttimemayexercisehisright
withinacertaintime-limit .

-22-
Paragraph 3
Theaimoftheruleslaiddowninparagraph 3istoavoidthequasi-taxation
oftaxablepersonsarisingfromanexcessofdeductible taxovertaxpay­
ableinrespectoftaxabletransactions inthesametaxperiod.
Article 19»calculation ofthedeductible .proportion
Paragraphs 1and3
Morepreciseruleswerenecessary inordertoavoiddescrepancios between
thenational lawsasregardsthedetermination andcalculation ofthe
factorstobetakenintoaccountindefiningthenormalproportion .
Paragraph 2
Thefactorsmentioned inthisparagraph mustbeexoluded fromthe
calculation oftheproportion lest,beingunrepresentative ofthe
taxableperson'sbusinessactivity,theyshoulddeprivetheamountof
anyrealsignificance .Suchisthecasewithsalesofcapitalitemsand
realestateandfinancial transactions whichareonlyancillary operations ,
thatistosayareonlyofsecondary importance inrelationtothetotal
turnoverofthebusiness .Thesefactorsareonlyexcludediftheyarenot
partoftheusualbusinessactivity ofthetaxableperson.
Article 20;adjustments ofdeductions
Paragraph 1
Deductions already mademustbeadjustediftheywerenotcorrectly made
atthedateofthereturnoriftheoriginal circumstances aremodified by
laterevents.Becauseofthefinancial consequences whichmayarisefrom
adjustments ofdeductions ,theyshouldbegoverned bycommonrules.
Adjustments musttherefore takeplace:
–(a)wherethedeductions provetobegreaterorsmallerthanthosewhich
thetaxablepersonwasentitledtomakeatthedateofthereturn;

-23-
eitherinthecaseofamistakeor"becausethedeductible percentage
attributable totaxablebusiness wasoverorunderestimated (where
goodsandservices areusedatthesametimefortaxableandnon-
taxablebusiness);
(b)wherethedifferencebetweenthefinalpro-rataamountandthe
provisional pro-rata amountdefinedinArticle 19exceedstenpoints;
(c)wherethefactors,usedinthecalculation oftheamountsoftax
deductible cometobealteredafterthereturnismade.
Suchcasesmaybeasfollows:
–whereataxableperson,havingalreadydeductedthetaxinrespectofa
purchase,cancelsthepurchaseorobtainsareductionoftheprice'
originally agreed;
–wheregoods,inrespectofwhichataxablepersonhasalreadydeducted
thevalueaddedtax,disappear withoutanacceptable explanation
beingforthcoming .However^toavoidpersonshavingtopaymoretaxin
additiontosufferingeconomicloss,itwasnecessary toprovidethat
adjustment shallnotberequiredwheretheloss,destruction orthoft
ofthegoodsisdulyprovedinaccordance withrulestobelaiddown
bytheMemberStates.
(d)whereataxablepersonchangesoverfromthenormalsystemtooneof
thespecialschemesforsmallbusinesses (Artiole25(l)(a))orfor
farmers(Article27).Infactthenormalsystempermitsinput
valueaddedtaxtobedeductedcompletely andimmediately ,espocially
asregardsinvestments ,whichisriotpossibleunderthespecial
schemes.Provision shouldtherefore bemadefordeductions nadebythe
taxablepersenunderthenormalschemetobededucted,lest,byopting
foroneofthespecialschemes,thetaxablepersonshouldreceive some
advantage bywayofdeduction overothertaxablepersonssubjectto
thatscheme.

-24-
Paragraph 2
Thisparagraphreproduces ,inmoreprecisewording,theruleinthethird
subparagraph ofArticle11(3)ofthesecondDirective ,whichprovidesthat
deductions oftaxoncapitalgoodsshallhesubjecttoadjustment during
aperiodoffiveyears.Itappearedadvisabletoadd,asdonealsoin
Article20(l)(b)thatnoadjustment need "bemadewherethevariationin
theproportion islessthantenpoints.
Article 21:personsliableforpaymentoftax
SincenotonlytaxablepersonsasdefinedbyArticle4butalsoother
personsmayberequiredtopayvalueaddedtax,itappearednecessaryto
specifywhichpersonsareliableforpaymentoftaxvis-a–visthe
collecting authority .
Undertheverywidedefinition ofataxableperson,giveninArticle4,
itispossibletotaxontheterritory ofaStateonesingletransaction
carriedoutbyapersonwhosebusinessiscarriedonabroad.
Certainsuppliesofservicesareexempted byArticle 16inthesupplier 1s
countrywhentherecipient isestablished abroad.Ifthetransaction is
nottoescapetaxinthecountryoftherecipient ,thentherecipient
mustbemadeliableforthepaymentofthetax.
Anypersonwhomentionsvalueaddedtaxonaninvoicemustbeconsidered
liableforpaymentofthetax,byreasonoftherighttodeduction which
theissue©ftheinvoicenayvestintherecipientifheisataxable
person.
Inrespectofimportsthepersonliableforpaymentistheconsignee
ofthegoods.Wheregoodsareimportedtobeputintofreecirculation ,
thiswillusuallybethepersonwho,atthemomentofimportation ,is
entitledtodisposeofthegoodsasowner.
Article 22*assessment ofthoamountoftaxtobopaidandliability
forpayment ofthotax
Thefollowingarethenecessaiy components oftheassessment of&tax!

-24&-
-theidentification and.wherenecessary theseekingoutofthe
personliableforpayment ;
-theassessment oftheamountdue,whichnecessarily impliesidentification
ofthechargeable event,andthetaxableamount,thatistosaythe

-25-
identification andvaluation ofwhatistobetaxed;
–calculation oftheamountoftaxpayable.
Oncetheseoperations havetakenplace,pajmentorcollection (orthe
enforcement thereof,ifnecessary )cantakeplace.
Although achargeableeventtakesplaceandtaxbecomeschargeable
eachtimeasupplyofgoodsorservicesiseffected,itisnot
apractical proposition forthevalueaddedtaxadministration toseek
outamultitude oftaxabletransactions andcalculate thetaxonthem
asandwhentheytakeplace.Thisiswhyprovision ismadoforthe
taxablepersontodrawupareturnshowingalltransactions whichhave
takenplaceduringacertainperiod,toenablethetaxadministration to
determine theamountoftaxpayable,tocollectpaymentandtocheckonthe
amountlater.
TitleXIV:obligations ofpersonsliableforpayment
AsisstatedinTitleXIII,thepurposeoftheobligations imposedon
personsliableforpaymentoftaxistoenabletheamountoftaxpayable
tobedetermined andcollected .
Incomparison withthesecondDirective andtheAnnexthereto,acertain
numberofchangeswillbenoticedwhichwereprompted both "bythe
desiretoensurethecollection inabalanced mannerofthatportionofthe
valueaddedtaxwhichistoaccruetotheCommunity^ownresources ,and
bythedesiretoavoidburdening taxablepersonswithadditional formalities .
Article 23?obligations undertheinternal system
Paragraph 1
Thisparagraph islimitedtoaconfirmation ofthesituation whichexistsin
factineachMemberStatefwherebyeverytaxablepersonhastostatewhen
hisactivityasataxablepersoncommences ,changesorceases.
Paragraph 2
HochangehasbeenmadetothesecondDirective asregardstheobligation
tokeepaccounts *

-26-
Para.Traph3
Althoughtheinvoiceisthekeydocument whichenablesthetaxableperson
toexercisehisrighttodeduction (seeArticle18),itwasnot
howeverconsidered necessary toharmonize thenumerous anddetailed
nationalprovisions concerning thedeliveryofinvoices .Thesearenot
onlypartoftaxlawbutalso,andprincipally ,ofcommercial law.Certain
partsofthetextofthesecondDirective havebeenrendered moreprecise.
Paragraphs 4and5
Certainadditions havebeenmadetothetextrelatingtoperiodical returns,
whichprovidesthateverytaxablepersonshallprovideinhisreturn!
"allinformation required tooalculate thetaxandthedeductions tobe
made",sothattaxadministrations willhavethenecessary information
attheirdisposal whenthetimecomestocalculate theportionofthevalue
addedtaxrevenuewhichistoaccruetotheCommunity 1sownresources .
Paragraph 6
Paymentofvalueaddedtaxisstilltobemadeatthesametimeasthe
returnissubmitted .
Paragraph 7
Nochangehasbeenmadeasregardsthesubmission ,ifnecessary ,ofan
adjustment returnduringthefirstsixmonthsofeachyear.
Paragraph 8
Theobligation tomakeareturnimposeduponrecipients ofcertainservices
whichareexemptinthecountryofthesupplierderivesfromtheprinciple
setoutinArticle21,wherebytherecipientismadeliableforpayment
ofthetaxonsuchservices .
Paragraph 9
Sincebyfarthegreaterpartoftherevenuefromvalueaddedtax,even
afterthearrangements fortheCommunity^ownresources areintroduced ,
willoontinuetogotowardsfinancingnationalbudgets,MemberStatesremain
freetointroduce additional obligations ontheirtaxablepersons,ifthey
considerthistobenecessary forthecollection ofthetaxortocombat
evasion .

-27-
Article 24sObligations Inrespect ofimports
Disparities intaxsystemsarenottheonlyreasonformaintaining customs
controls atintrar-Community frontiers .Importers areobligedtomakecus­
tomsdeclarations "byreasonalsooftheexistence ofalargenumberof
national provisions otherthanthoserelating totax.
Inaddition ,itappearsthatitisnotalwaysdisparities intaxsystems
alonethatnecessitate physical controlofgoodsatfrontiers .Neverthe­
less,forthepurposeofcalculating thevalueaddedtaxpayableonimports ,
mostMemberStatesstillrequiredeclarations ineachindividual case,as
theydoforcalculating customsduties.However ,whenthesedeclarations
relatetoimportsbytaxablepersonstheyarereallyonly"pre-declarations "
enabling assessment andcollection ofthetaxpayablewhich,inthiscase,
isdeductible .Experience hasshownthatitispossible tosimplify
considerably thedeclarations andcontrols atthefrontiers ,atleastas
regardsvalueaddedtax,and,whereappropriate ,tocarrythemoutwithin
theStates .Theabolition ofbordercontrols shouldnotbeconfused with
theabolition oftaxbarriers (abolition oftheimposition oftaxon
importation andtheremission oftaxonexportation ).Nevertheless ,it
ledtotheinclusion inthisDirective ofprovisions enabling MemberStates
tointroduce orcontinue touseasysteminvolving either"deferred payment"
or"suspension ofpayment"ofvalueaddedtaxonimports .Intheorythese
provisions havenoeffectonthebasicrateofvalueaddedtax.They
affectonlythemethodsofpaymentofthetaxonimportsbytaxablepersons-
thetaxbeingdeductible -andshouldnothaveanyeffectontheCommunity 's
ownresources .
Article24wasdrawnupwiththisinmindandalsotosatisfythedesire,
expressed inparticular bytheEuropean Parliament ,toseeintra-Community
frontier controls abolished .
Article25:Smallundertakings
Article 14ofthesecondDirective provides thateachMemberStatemay,
subjecttoconsultations ,applytosmallundertakings whosesubjection to
thenormalsystemofvalueaddedtaxwouldmeetwithdifficulties the
specialsystembestsuitedtonational requirements andpossibilities .

-28-
Despitethemorefar-reaching requirements oftheestablishment ofa
unilorm "basisofassessment forvalueaddedtax,thisprovision isnone­
thelesscompatible toacertainextentwiththisaim,oncondition thatit
canbereconciled withtheneedforacommonpolicyforsmallundertakings .
Suchacommonpolioyshouldpreventnational measures whichdiffertoomuch
fromoneanotherfromgivingrisetodoubtsastothetransparency and
impartiality ofthetaxandastoitsbalanced contribution tothe
Community 'sownresouroes .
Inthisrespectitwouldseemadequate toprovide ,withinacommonframe­
work,foranumberofpossibilities whichMemberStatesmayusetoenable
themtocopewithproblems posedbytheapplication ofvalueaddedtax
tosmallundertakings .
Article25(la)ofthedraftprovidesfirstlyfortheexemption fromtaxof
taxablepersonswhoseannualturnover netoftaxdoesnotexoeed4000
unitsofaccount .
Secondly provision ismadeforthegranting ofgraduated taxrelief
("decote")fortaxablepersonswhoseannualturnovernetoftaxdoesnot
exceed12500unitsofaccount# Thisprovision supplements theprevious
one.ItshouldenableMemberStateswishingtograntexemption toensure
asmoothandfairtransition tothenormalsystemoftaxation .However ,
itmustbestressed thatgraduated taxreliefcanonlyexistasameasure
marginal toexemption .Infact,ifitwereabletoexistonitsown,it
wouldonlyconstitute asubsidyforthetaxablepersonsconcerned ,andas
suchtherewouldbenogroundsforitBexistence .
Asregardstheselection ofcriteria fordetermining theareaofapplication
ofexemption andpossible graduated taxrelief ,turnover wastheoriterian
finallychosen .Thiswouldinfactpresenttheleastnumberof
complications forcalculation bythetaxablepersonandverification by
administrative bodies .
EachMemberStateapplying exemption andgraduated taxreliefwilldeter­
minethelimitsandconditions depending onitsownrequirements within
aCommunity framework .Itwilltherefore determine ,inparticular !

-29-
-whether "thenational limitswithinwhiohexemption andgraduated tax
reliefmightbeappliedwill "beatthehighestlevelorbeyondit;
-whetherthenational limitswillbeexpressed intermsofturnover or
ofvalueadded,thelatterclearlyneedingtobecompatible with
Community criteria expressed intermsofturnover netoftax;
-whetherexemption andgraduated taxreliefshouldbeidentical or
different inthecaseofpersonssupplying servicesandproducers/
retailers ,depending onthenatureoftheactivity inwhichtheyare
engaged ;
-thereference periodduringwhichthetaxablepersonmustfulfilthe
conditions forexemption .
Exemption andgraduated taxreliefareliabletoplayapartinovercoming
difficulties whichmaybeencountered bythesmallest undertakings when
applying valueaddedtax.Inaddition ,theymaysimplify thetaskoftax
authorities .Nevertheless ,asystemofexemption andgraduated tax
reliefcannotbeconsidered asnormalwithintheframework ofageneral
taxonconsumption suchasvalueaddedtax.Inaddition ,thecoexistence
ofdifferent specialnational systemsoouldhinderthesuppression of
fiscalborders .Thisisthemainreasonwhytheproposed provisions
areofatransitional nature .
Article25(lb)stipulates thateachMemberStateisentitledtointroduce
simplified procedures forcharging andcollecting thetax,provided that
theamountoftaxtobepaidshallnottherebybereduced .Subjectto
this,eachMemberStateshalldrawupdetailed rulesforitsownsimpli­
fiedschemesdepending onitsownideasandpossibilities .
Article25(2)laysdownthemethodofdetermining turnoverforthepurposes
ofapplying exemptions andgraduated taxrelief.Itexcludes unusual
transactions whichmaymakedrasticchangesintheturnover withinone
year.Italsodisregards operations which,asinthecaseofthetransfer
ofdebts,donotindicate theactualsizeoftheundertaking .Furthermore ,
Article25(3)excludesalltheseoperations fromexemption andgraduated
taxrelief.Theyaretherefore subjecttodifferent rulesgoverning
taxation andexemption .

-30-
Thereference "turnover iscalculated netoftax.Itistheresponsibility
ofMemberStatestoprovideformulae fortheconversion ofturnover before
taxtoturnover netoftax,inordertoenabletaxablepersonseligible for
exemption -theonlyonesforwhomtheproblemarises-toworkoutassimply
aspossible whethertheirturnover isabovetheceilingfixedforapplication
ofexemption .
Article25(4)enablestaxablepersonsexemptfromtaxationtooptforthe
normalsystemofvalueaddedtaxandpossibly tobeeligible forgraduated
taxrelief.ThisimpliesthatintheMemberStatesconcerned thosewho
exercise suchoptionshallbetreatedastaxablepersonsatthelowestlevel
forgraduated taxrelief .
Article26:Second-hand goods
Whenapplying thenormaltaxation rules,supplies ofgoods-neworsecond-hand -
madeforconsideration withinthecountrybyataxablepersonshallbesubject
tovalueaddedtaxcalculated inproportion totheirprice.Ifnospeoial
provisions weremade,theresultwouldbethatafinished itemre-introduced
intotheeconomio circuitwouldonceagainbefullysubjecttovalueadded
tax,whichcouldbeavoidedifthefinaloonsumer wishingtosellgoodswere
togetintodirectcontactwithanotherfinalconsumer .
Inordertoreducethecumulative effectoffurthertaxation whiohenoourages
avoidance ofthenormaltradechannels ,itseemedexpedient togranttaxable
personswhohavepurchased goodsforre–salewithoutpayingtaxtherightto
adeduction ofacertainamounttobedeemedtocorrespond toinputtax*
Nevertheless ,thisspecialsystemmustberestricted tosecond-hand goodsin
respectofwhiohapplication ofthenormalsystemwouldinvolvetoogreata
riskofavoidance .
Thisdeduction istobecalculated onthebasisofthepurchase prioeofthe
itemattheratesinforceatthetimeofacquisition .
Thissystemofdeduction ofinputchargeshasbeenchosenbecauseithasthe
advantage ofnotrevealing the-seller'sprofitmarginandofenabling the
second-hand itemtobeexported tax-free .

-31-
Nevertheless ,fortheprevention offraudswhichmightbeoccasioned thereby,
theapplication ofthisexceptional systemisaccompanied bysafeguard
measures andmaybemadedependent onauthorization fromMemberStates.
Article 27*Commonflat–rateschemeforfarmers
Paragraph 1
Thecommonflat–rateschemeforfarmersisonlyonetechnical andpractical
methodofapplying valueaddedtax,aimedatallowing farmerstooffsetata
flatratethedeductible taxontheirpurchases andonservices rendered tothem.
InordertoensurethattheCommunity^ownresources arecollected fairly
andtoavoidtheapplication ofvalueaddedtaxinthevarious MemberStates
leadingtodistortions ofcompetition ,thecommonflat–rateschememustnot
includefinancial advantages ordisadvantages forthetotality offarmers
subjecttothisschemeinMemberStatesapplyingit.
Paragraph 2
–Firstandsecondindents :"farmer","agricultural ,forestry orfisheries
undertaking "
Asacommonflat–rateschemehasbeenprovidedspecially forfarmers,itseems
necessary forMemberStatestoadopt,fortaxation purposes ,aCommunity
definition oftheword"farmer".Theactivities enabling ataxableperson
tobeclassedasa"farmer"arelistedinAnnexA,whichhasbeendrawnupon
thebasisoftheInternational Standard Industrial Classification ofall
1Economic Activities issuedbytheStatistical OfficeoftheUnitedNations.
Itwouldclearlyhavebeenpreferable ifacommondefinition oftheterm
"agricultural ,forestry orfisheries undertaking "hadbeenprovided,but,
giventhatnocommondefinition hasbeenprovided forthegeneralterm
"undertaking "inthenormalvalueaddedtaxscheme,itwouldhavebeenvery
difficult,ifnotimpossible ,tofindCommunity definitions forthespecific
notionof"agricultural ,forestryorfisheries undertaking ".Itistherefore
theresponsibility oftheMemberStatestodefinethisnotionundertheir
ownlaws.
–Fourthandfifthindents:"agricultural products "–"supplyofagricultural
services "
Theaimofthecommonflat–rateschemeistoenableafarmerunderthescheme
tohavethevalueaddedtaxonhisinputsoffsetatastandardrateeachtime
1Statistical Papers,SeriesM,No4,Rev.1,NewYork195°*

-32-
hemakesasupplyofagricultural products orservices.
Itisclearthatapplication ofthisschemewouldnothavethesameconsequences –
asregardsthecollection oftheCommunity'sownresources andtheconditions of
competition "betweenfarmersofdifferentMemberStates-ifflat–ratefarmersin
oneStatewereentitledtooffsettaxataflat–rateuponsalesofproductsor
thesupplyofservices inrespectofwhichflat–ratefarmersinothercountries
werenotentitled "tooffsettaxinthisway.Consequently ,thetestwaytoavoid
suchunequaltreatment offlat–ratefarmerswould "betodrawupcommonlistsof
goodsandservices onwhichtaxmay"beoffsetataflatrate.
Nevertheless ,"becauseofthetechnical difficulties indrawingupanexhaustive
listofagricultural products fromEuropean farms,itseemedpreferable to
abandontheideaofsuchalistandtolaydowncriteria wherebyacommon
definition ofagricultural products maybeformulated whichwillbeofvalue
havingregardtothefiscalaimspursued.
Thedefinition of"agricultural products "formulated inthefourthindentof
paragraph 2doesnoteliminate completely thedangerofdifferences ininter­
pretation arising,particularly asregardsprocessed agricultural products as
mentioned inpointVofAnnexA.Nevertheless ,itdoesensurethatallnor*-
agricultural products whichcouldbesupplied byafarmerareexcluded from
thescopeofthecommonflat–ratescheme.
Asregardssuppliesofagricultural services ,thelistsetoutinAnnexB
remainsindispensable inanycase,giventhefactthatitisimpossible tolay
downcommon,simple,clearcriteriaforfixingtheboundary betweenuseofthe
farmer'slabourandthenormalequipment ofhisagricultural undertaking for
agricultural purposes ontheonehand,andfornon–agricultural purposes on
theother.
–Sixthindent ?"valueaddedtaxchargeoninputs"
Thecommonflat–rateschemeisintendedtocompensate solelyforvalueadded
taxleviedonpurchases ofgoodsandservices byflat–ratefarmerstomeet
theneedsofproduction intheagricultural ,forestryorfisheries sectors.
Calculation ofthischargeoninputsmusttherefore relatesolelytoamounts
oftaxwhichwouldbedeductible byafarmersubjecttothenormal
deduction systemprovidedforinthisDirective .

-33-
Inviewofthefactthattheinputtaxchargeonthetotality offorestry
undertakings islighterthanthatonthetotalityofagricultural undertakings ,
afactwhichhasteenestablished inMemberStatesalreadyapplying acommon
flat–rateschemeforfarmers,itisexpedient ,withintheframework ofthe
commonflat–ratescheme,toprovide,inthecaseofeachMemberState,that
oneinputtaxchargebedetermined forallagricultural andfishery under­
takings,andanotherforallforestry undertakings .
Paragraph 3
Theprocedure provided forinthisparagraph forthecalculation andadoption
oflevelsofchargeoninputsineachMemberStateisdictated bythe
essential needtoensurethatthecommonmethodofcalculation explained in
AnnexCshouldbeappliedinauniform wayinallcountries applying the
commonflat–ratescheme#Itistherefore provided thattheCommission
shouldmakethenecessary calculations ,usingthecommonmethodofcalcula­
tion,todetermine thelevelsoftheinputtaxcharge"inthevarious Member
States,onthebasisofmacro–economicdatatobesupplied bythesecountries
forthatpurpose.Thelevelsofchargethuscalculated aretobesubmitted
totheValueAddedTaxCommittee inaccordance withtheprocedure setoutin
Article 31•
Theprovision forhavingthesecalculations broughtuptodateeverythree
yearswillmakeitpossibleforcontradictory requirements tobereconciled ,
developments inthesituation tobefollowed andover–frequent changesin
national legislation tobeavoided.
Paragraphs 4and5
Thelevelsofchargecalculated andadoptedinaccordance withtherules
providedforinparagraph 3should,intheory,constitute upperlimits^below
whichMemberStatesmayfixfreelythefixedpercentages whichtheyintendto
applyintheirterritory .
Itmusthoweverbekeptinmindthat,according tothecommonmethodof
calculation laiddown,calculation oftheinputtaxchargeisbasedonthe
inputsandoutputsofthewholeagricultural sector.

-34-
Now,giventhatalreadyinsomeMemberStatesanever–increasing numberof
agricultural producers ,beingoftheopinionthatthenationalflat-rate
schemedoesnotoffsetsufficientlytheirinputtaxcharge,areoptingfor
thenormalschemeinordertobenefitfromacomplete andimmediate deduo-
tionofinputtax,itistobeexpectedthatthenumberoffarmers whoopt
forthenormalschemewillincrease whenthecommonflat–rateschemeenters
intoforce.
Consequently ,ifontheonehandtheinputvalueaddedtaxchargeiscalcul­
atedbyreference toallfarmers,andontheotherhandaconsiderable number
offarmerswithanabove–averagechargeoptforthenormalsystem,theresult
isthatthechargethuscalculated willbehigherthanifitwerecalculated
byreference toindividual flat–ratefarmers.
Inordertoensurethatflat–ratefarmersdonotreceiveoffsetting payments
inexcessoftheirinputtaxcharge,itisprovidedthatthefixedoffsetting
percentages maynot,ontheentryintoforceofthepresentDirective ,exceed
90$ofthelevelsofinputchargeasadoptedinaccordance withtheprovisions
ofparagraph 3.
Furthermore ,giventhatthenumberoffarmerssubjecttothenormalvalueadded
taxschemewillsteadily increase intheyearsfollowing theentryintoforce
ofthisDirective ,notonlyfortaxreasons,butalsoasaresultofthe
modernization ofCommunity agricultural structures ,itisdesirable that
provision bemadeforfurtherreductions ofthemaximumfixedpercentage
levelsJthisisdoneinparagraph 5*
Paragraph 6
Thecommonflat–ratesystemwasconceived toenablefarmerstowhonitapplies
tooffsetthevalueaddedtaxchargeontheirinputsataflatrate,thus
freeingthemfromthoseobligations ofaccounting ,invoicing ,declarations
andpaymentoftaxeswhicharerequired ofothertaxablepersons.
Nevertheless ,bearinginmindthatoneoftheCommission 'saimsisthatthe
majority ofEuropean farmersshouldgradually changeovertothenormal
systemofvalueaddedtax,itwouldhavebeeninconsistent withthisaimto
preventthoseMemberStateswhosowishedfromimposingcertainofthe

–35–
obligations providedforinArticle23of-theirflat-ratefarmers.Indeed,
suchprovisions ,whichdonotaffectthefunctioning ofthecommonflat–rate
svstejj,canonlyencourage flat–ratefarmerstooptforthenormalscheme.
Consequently ,theKeacerStatesaregiventhepower,"butarenotobliged ,to
execrptfla-:–ratefarcersfromtheobligations requiredofothertaxable
persons .
mecasicsecnamcs oftheconssonflat–ratesystec,whicharethesubject
oftheseparagraphs ,areasfollows :
1»Flai–ratefarmersareentitledtooffsetthevalueaddedtaxchargeon
•neirinputsaccording totheaz>ountoftneirsuppliesofagricultural
productsandservices ,suchacountbeingdetermined byapplyingthe
fi^edpercentage fixedforthispurposetotheprice,netoftax,of
thosesupplies .
2.Iftherecipient ofgoodsorservices suppliedbyaflat–ratefarmeris
ataxaclepersonotnerthanaflat–ratefarmer,thefixedpercentage may
bepaid,depending onthesystecsadoptedbythevariousMemberStates,
eitr.erbythetaxablerecipient orbythepublicauthorities .
3.Iftherecipient ofthegoodsorservices isanotherflat–ratefanner
oranon–taxableperson ,thefixedpercentage mustbepaidbysuch
recipient .
ItEustnevertheless benotedthatinthelattercasethereisnothingto
stoptheflat–ratefarcerincreasing hissalepricebyanaoountequalto
thefixedpercentage ,provided marketconditions sopermit.
ThepurposeoftheConcunity rulesprovided forinthisparagraph isto
transfer froatheflat–ratefarcertothetaxablerecipient ofgoodsor
services theresponsibility foracertainnumberofformalities ,necessary
forpurposes ofverification ,whichwouldnormally attachtotheperson
thetaxablesupply ,and,atthesanetine,tomakethenecessary
technical provision tocovertheoperation ofthetwoprocedures opento
KecberStatesunderparagraph 8asregardstransactions betweenaflat-
ratefarrier sr-Hataxable t>ersonotherthanaflat–ratefaraer .

-36-
Forinbothcases-paymentofthefixedpercentage bythetaxable
recipient orbythepublicauthorities –thenational taxation authorities
mustbeabletoverifytheamountsdeducted bythetaxablerecipient ,or
asthecasemaybetheamountsclaimedfromthepublicauthorities bythe
flat–ratefarmer.
Paragraph 11
Thecommonflat–ratesystemwasconceived toensurethatfarmerstowhom
itapplies mayoffsetthevalueaddedtaxchargeontheirinputs.This
chargeisdetermined ,byacommonmethodofcalculation ,byreference to
totalsupplies ofagricultural products andservices .
Thus,inkeepingwiththelogicandtheaimsofthecommonflat–ratesystem,
itisnecessary toprovidethatsupplies byflat–ratefarmersofnon-
agricultural products orservices donotentitlethemtopaymentofthe
fixedpercentage .Otherwise ,allflat–ratefarmerscouldbeover–compensated
forthevalueaddedtaxchargeontheirinputs,whichwouldamountofgiving
themaneconomic aidfromwhichotherfarmers underthenormalschemewould
notbeabletobenefit.
Withregardtoexportsbyflat–ratefarmers,theirexclusion fromtheright
topaymentofthefixedpercentage isbasedontherulelaiddownbythe
first"ValueAddedTax"Directive ,Article 1,finalsub–paragraph ,which
providesthat,fromtheentryintoforceofthecommonsystemofvalueadded
tax,noMemberStateshallmaintainorintroduce anymeasureproviding for
flat–rateequalization ofturnover taxesonexportation orimportation in
tradebetween MemberStates.
Paragraphs12 and13
Inorderthatthecommonflat–ratesystemmaymaintainitsspecialcharacter
asasystemspecially adjustedtotheneedsofsmallagricultural producers
whoareconsidered notyet–atleastprovisionally –capableofbeing
integrated intothenormalsystemofvalueaddedtax,someobligatory
exceptions havebeenprovided for.

Thegeneralaimof"thecriterialaiddown"to"thiseffectinparagraph 12
istoexcludefromtbeflat–ratesystemthosetransactions which,though
carriedout"byanagricultural producer,couldnotberegardedas
constituting atypically agricultural activity:commercial distribution
ofagricultural products,suppliesofagricuihiral productsprocessed "by
industrial ratherthanagricultural means,orofproductsbought "bythe
farmerforresale;suppliesofservicesonaregularbasisand/or"bymeans
ofequipment whiencouldberegarded asexceeding theneeds,dimensions
andcharacteristics oftheagricultural undertaking inquestion.
Foritisconsidered thatbytransactions suchasthesetheflat–rate
fareererrtosintocompetition withtradesmen,manufacturers andservice
undertakings ;consequently theflat–ratefarmeroughtinrespectofsuch
transactions tobesubjecttothenormalsystemortothesystemforsmall
undertakings ,whileremaining subjecttotheflat–rate systemforhis
agricultural activities .
Theaiaofparagraph 13istoexcludefromtheflat–ratesystemallfanners
who,byreasonoftheiractivities andthesizeoftheirundertaking and
theaccounting facilities available tothem,cannotberegarded assmall
farmersunabletocopewiththeadministrative formalities ofthenormal
scheoe,orwiththereducedonesunderthesimplified schemeprovidedfor
inArticle25(l)(h).
16
InthecontextofthisDirective,theoosoonflat-*rate systemoustbe
regardedasatransitional systea.For,ifoneconsiders thatthissystem,
takenasawhole,doesnotincludeanyelementofsubsidyoraidforthe
farmerstowhomitapplies,andifonetakesaccountoftheprogressive
modernization ofCoosronity agricultural structures ,itisforeseeable that,
inthevariousmembercountries,thenumberandeconomicimportance of
farmerssubjecttothenormalsystemofValueMdedTaxwillincreasein
theyearsfollowing theentryintoforceofthepresentDirective.
Consequently ,thequestionofwhatsystemofValueAddedTaxshouldbe
appliedtothecategoryofsmallfarmerswillhavetobere-considered ,for
thiscategorywillprobably,overtheCommunity asawhole,befarsmaller
tVanatpresent,eitherinterasofnumbersorofturnover.

-38-
Itisaccordingly provided "thattheCommission istopresentnewproposals tothe
Councilonthistopic,andthiswillalsoenableaccounttohetakenofprogress
achieved inthemeantime intheharmonization ofCommunity taxes.
Article28:Transitional provisions
Inordertoensurecollection oftheCommunity 'sownresources accruing from
ValueAddedTaxaccording tothesameCommunity criteria ,anyprovisions
introduced intheMemberStatespursuant toArticle 17ofthesecond
directive of11April1967shouldceasetoapply.
Nevertheless ,itseemsimpossible ,foreconomic andsocialreasons ,to
abolishzeroratinginaveryshorttime.Themaintenance ofsucha
measure ,undorthesameconditions asthosewhichwerefixedintheabove-
mentioned article ,foratransitional period ,andatthelatestuntilthe
abolition oftaxbarriers ,shouldnevertheless bosubjecttotheexpress
condition thatitmustnotaffectthedetermination oftheCommunity 'sown
resources ,neitherasregardstheiramountnorasregardsthemethodof
calculation .Thisiswhyithasbeenprovided thattheMemberStatescon­
cernedmusttakethenecessary measures toensurethattaxablepersons
declaretheiractualturnover inrespectofzero-rated transactions ;thepro­
visionsofArticle22andArticle23(4),relatingrespectively totheassess­
mentoftheamountoftaxtobepaidandtheobligations ofpersonsliablefor
payment mustbeapplied ,mutatismutandis .
Titl*XvIItValueAddedTaxCommittee (Articles 29to31)
Thisproposal foradirective provides foragreatnumberofgeneralprin­
ciplesandruleswhicharetobeappliedinauniformmanner .However ,the
variousMemberStatesareresponsible foradopting thedetailed rulesfor
theapplication ofthesecommonprinciples andrules.Asthedirective
comesintooperation ,itmayprovenecessary forsomeoftheserulesof
application tobeharmonized ,orindeedmadeuniform ,soasnotmerelyto
ensurefairconditions ofcompetition betweentheMemberStatesandtofaci­
litatefreetrafficbetweenthem,butabovealltoensurethatownresources
accruing fromvalueaddedtaxarecollected inafairandbalanced manner .
Itcouldarisethatsuchrulesofapplication havetobeadoptedasamatter
ofurgency .Thiscouldnotbodoneiftheyhadtobeadoptedbythenormal
procedure underadireotive .Furthermore suchmeasures ,beingpurely
technical innaturewouldnotnormally bedealtwithbylegislative procedure ,
butbytheprocedure fordelegated legislation .Asimplified and

-39-
accelerated Community procedure shouldtherefore beprovidedfortheadoption
ofthesemeasures ,andforthispurposeaValueAddedTaxCommittee should
"besetup.
TheroleoftheValueAddedTaxCommitteewill "bethatofa"rule–caking
committee",giventhattherulesofapplication tohaadopted "bythe
Commission ortheCouncilmustnotinanywaydepartfromthebasicprinciples
laiddownbytheinstruments onvalueaddedtaxadoptedbytheCouncil.
ThemeasuresareadoptedbytheCommissioniftheyareinaccordance withthe
opinionoftheCommittee ,andiftheyarenot,bytheCouncil,or,failinga
decision bytheCouncil,bytheCommission .
ThesameCommittee alsofunctions asanadvisorycommittee .Assuch,itcan
dealwithanyquestionconcerning theapplication ofCommunity instruments on
valueaddedtax.
Annex C
1.Thepurposeofthismethodistodetermine ,inrespectoftheClasses
"agricultural products andgame"and"woodintherough",amendedas
indicatedinparagraph 1(1)ofAnnexCtotheproposalbytheadditionof
processed products ,theinputtaxchargepermonetaryunitof
production .
2.Valueofproduction ,thebasicnotioncurrently usedinagricultural and
forestry aocounts bytheSOEC,isadjusted bytheinclusion ofprocessed
agricultural products ;tothefiguresobtainedforinputsandgrossfixed
assetproduction onthebasisoftheaboveClassesascurrently defined,are
addedthefiguresforthoseitemsrelatingtotheproduction ofprocessed
products.
3.Incalculating theamountoftaxpermonetaryunitasre^Vrredtoin
paragraph 1above,thevalueofproduction mustbedetermined netofthevalue
addedtaxattaching thereto,andtheamountofthevalueaddedtaxoninputs
andgrossfixedassetproduction mustbedetermined separately .
4«Thevalueaddedtaxchargeoninputswillthusappearasafraction .The
numerator willbethevalueaddedtaxoninputsandgrossfixedasset
production .Thedenominator willbethevalueofproduction netofvalue
addedtax.

-40-
Proposal forasixthCouncil Directive of.....1973
ontheharmonization oflegislation ofMemberStates
concerning turnover taxes-Commonsystemofvalue
addedtax:uniform basisofassessment
THECOUNCIL OFTHEEUROPEAN COMMUNITIES ,
HavingregardtotheTreatyestablishing theEuropean Economic Community ,andin
particular Articles 99and100thereof ;
Havingregardtotheproposal fromtheCommission ;
HavingregardtotheOpinion oftheEuropean Parliament ;
HavingregardtotheOpinion oftheEconomic andSocialComnittee ;
WhereasalltheMemberStateshaveadopted asystemofvalueaddedtaxinaccor­
dancewiththeFirstandSecondCouncilDirectives of11April19^9(l)onthe
harmonization ofthelegislation ofMemberStatesconcerning turnover taxes;
WhereastheCouncilDecision of21April1970(2)onthereplacement offinan­
cialcontributions fromMemberStatesbytheCommunities' ownresources provides
thatthebudgetoftheCommunities shall,irrespective ofotherrevenue ,befinan­
cedentirely fromtheCommunities' ownresources ;whereastheseresources areto
includethoseaccruing fromthevalueaddedtaxandobtained byapplying acommon
rateoftaxonabasisofassessment determined inauniformmanneraccording to
Community rules;
Whereastheactualliberalization ofthemovement ofpersons ,goods,services
andcapitalandtheintegration ofnational economies mustbespeededupwitha
viewtotheestablishment bystagesofEconomic andMonetary Union;
Whereasthevalueaddedtaxconstitutes ageneraltaxonconsumption andwas
therefore chosenasoneofthebestmeasures ofthecontributing capacity ofthe
MemberStates ;whereasallsupplies andimportsofgoodsandallsupplies ofser­
vicesshouldinprinciple besubjecttothetax;
(1)CJNo.71,1^April1967,p.l.
(2)OJNo.L9^,28April1970,p.19.

-41-
WhereasaccountBhouldbetakenoftheobjective ofabolishing theimposition
oftaxonimportation andtheremission oftaxonexportation intradebetween
MemberStates ,andthecommonsystemofturnover taxesshouldbemadeimpartial
asregardstheoriginofgoodsandservices ,sothatacommonmarketpermitting
faircompetition andresembling arealinternal marketmaybecreated$tthe
plannedtime;
Whereas theMemberStatescanremovetheterritorial criteria fortaxcollec­
tiononlyiftheprinciple oftheimpartiality oftaxesonconsumption ,and
theircontribution totheCommunities ownresources ,arenotendangered ;
Whereas ,toenhancetheimpartiality ofthetax,themeaningof"taxable
person"mustbeclarified toincludepersonswhooccasionally carryoutcertain
-transactions ;
Whereastheexpression "taxabletransactions "hasledtodifficulties ,in
particular asregardstransactions treatedfictively astaxabletransactions
andworksofconstructions ;whereastheseconcepts mustbeclarified ;
Whereastheplaceoftaxabletransactions hasbeenthesubjectofconflicts
betweenMemberStates'laws,inparticular asregards thesupplies ofgoods
forassembly andtheplacewhereasupplyofservices takesplace;whereas
theplacewhereasupplyofservices takesplaceshouldbedefinedasthe
placewherethepersonsupplying theservices hashisprincipal placeof
business sothatthelawsoftheMemberStateswillnolongerneedtobe
amendedwhentheobjective setoutinArticlekoftheFirstDirective has
beenattained ;
Whereastheconcepts ofchargeable eventandofthechargetotaxmustbe
harmonized iftheintroduction andanysubsequent alterations oftheCommu­
nityrateofvalueaddedtaxaretobecomeoperative atthesametimeinall
MemberStates ;
Whereas thebasisofcalculation ofthetaxable amountmustbesoharmo­
nizedsothattheCommunity rateofvalueaddedtaxmaybeappliedtotaxable
transactions inacomparable mannerinallMemberStates ;
WhereastheratesappliedbyMemberStatesmustbe6uchthatthetaxapplied
atthepreceding stagewillinthenormalwaybedeductible ;

-42-
Whereasacommonlistofexemptions shouldbedrawnupsothatthe
Community 'sownresources mayT»«collected inauniformmanneriaallMember
States;whereasthenumberofexemptions mustbeassmallaspossible ,sothat
valueaddedtaxmayremainageneraltaxonconsumption ;
Whereastherulesgoverning deductions shouldbeharmonized totheextent
thattheyactually affecttherealamountscollected ;whereas ,inparti­
cular,thereshouldbeacommonlistofgoodsandservices inrespectof
whichdeductions maynotbemadeandthedeductible proportion should
becalculated insimilarmannerinallMemberStates ;
Whereas itshouldbespecified whichpersonsareliabletopaytax,inpar­
ticularasregardsservices supplied byapersonestablished inanother
country *
Whereasthetimesatwhichtheamountoftaxtobepaidistobeassessed
andpaidshouldbedefinedincommontermssothattheCommunity mayexer­
ciseitsrightstoitsownresources atthesametimeinallMemberStates ;
Whereastheobligations oftaxpayers mustbeharmonized asfaraspossible
soastoensurethattaxesarecollected inuniform mannerinallMember
States ;whereastaxpayers should ,inparticular ,makeaperiodic omnibus
returnoftheirtransactions ,relating tobothinputsandoutputs ,sothat
thecollection ofownresources maybesupervised ;
Whereasthevariousspecialahemesnowinforceshouldbeharmonized ;where­
asithasbeenfoundthattheMemberStatesmaybelefttochoosethespecial
schemesforsmallundertakings wheretaxreliefcannotbegranted tounder­
takingswhoseturnover doesnotexceedacertainamount ,sothattheown
resources shouldnotbeaffected bydivergence betweentheschemes ;where­
asithasbeenfoundthatthetaxonsecond-hand goodsshouldbereduced in
ordertoavoidpenalizing certainbranches oftrade;whereasMemberStates
whoselectaflat-rate schemeforoffsetting inputtaxforfarmerswho
havenotoptedforthenormalvalueaddedtaxschemeshouldapplythescheme
onacommonbasistopreventthevalueaddedtaxfromactingasahidden
chargevaryingfromcountrytocountryandtfiensuretheuniformcollection
ofownresources isnotjeopardized ;

-43-
Whereastheuniformapplication oftheprovisions ofthisDirective should
beensured ,andwhereastothisendaneffective Community procedure should
belaiddownbywhichanynecessary implementing measures maybeadoptedwhen
required ;whereasthesettingupofaValueAddedTaxCommittee wouldenable
theMemberStatesandtheCommission tocooperate closelyandeffectively ;
HASADOPTED THISDIRECTIVE :

-44-
TitleI:Introductory provisions
Article 1
MemberStatesshallmodifytheirpresentvalueaddedtaxsystems
inaccordance withthefollowing Articles .
Theyshallwithoutdelayadoptthenecessary laws,regulations and
administrative provisions sothatthesystemsas modified mayenterinto
forceon1January1975*

-45-
TitleII:FieldofApplication
Article 2
Thefollowing shallbechargeabletovalueaddedtax:
1)Supplies ofgoodsorserviceseffectedforconsideration withintheterri­
toryofthecountrybyataxableperson;
2)Theimportation ofgoods;
3)Suppliesefservices?elistedinArticle16(l©)feffectedwithintheterritory
oftheceuntrytoataxableperson "byapersonestablished inanothercountry,
andsuppliesefsuchservices effectedwithintheterritory ofthecountryto
anon-taxable personbyapersonestablished outsidetheCommunity .

-46-
TitleIII:Territory
Article 3
1."Territory ofthecountry "meansinrespect ofeachMemberState ,the
entirenational territory ,including territorial waters .Itmayalso
extendtothecontinental shelf .
2.AMemberStatewhich ,atthedateofthisDirective ,doesnotapplyintoto
theprinciple laiddownbyparagraph 1andproposes tocontinue thus
shallsoinformtheCommission notlaterthanthreemonthsafterthe
dateofthisDirective .
TheCommission may,withinsixmonthsfollowing receipt ofsuchinfor­
mation ,consulttheMemberStatesontheeffects oftherequest ,inpar­
ticularonthefairness ofcompetition andontheCommunity 'sownre­
sources ;itshallsubmitproposals totheCouncilwhich,actingbya
qualified majority ,shalldecidethereon withinsixmonths .
Ifnodecision isadoptedbytheCouncilwithinthatperiod ,theproposed
measures shallbeadopted bytheCommission .
PendingaCommunity decision theMemberStatemayapplythederogation
requested .

-47-
TitleIV:Taxable persona
Article k
1."Taxableperson"meansanypersonwhoindependently andregularly carries
outinanyplacetransactions pertaining totheoccupations specified in
paragraph 2,orwhooccasionally carriesouteneofthetransactie*«speci­
fiedinparagraph 3,whatever thepurposes orresults6fsuchoccupations
ortransactions maybe.
2.Theoccupations referred toinparagraph 1aretheactivities ofproducers
andtradersandpersonssupplying services ,including Diningandagricul­
turalactivities andactivities oftheprofessions .
3«Thetransactions referred toinparagraph 1are:
a)theexploitation oftangible orintangible property forthepurposeof
obtaining incometherefrom onapermanent basis;
b)thesupplyofbuildings orpartsofbuildings andthelandonwnichthey
stand,beforefirstoccupation .Abuilding meansanystructure fixedto
theground ;
c)thesupplyofbuilding land."Building land"means :
-landwhichisprepared forconstruction ,landonwhichanincomplete
building orabuilding fordemolition stands ,andrightstobuild
ontopofanexisting building ;
-landotherthanasdefinedaboveonwhichthepersonacquiring it,
atthetimeofsuchacquisition ,undertakes toerectabuilding within
fouryears.
k.Theuseoftheword"independently "inparagraph 1excludes fromthetax
employed personsandotherpersonsboundtoanemployer byacontract for
thehireoflabourorsimilarcontract creating arelationship ofemployer
andemployee .

48-
Untilsuchtimeastheobjective eetoutinArticle koftheFirstCouncil
Directive of11April1967isattained ,eachMemberStatemaytreatasa
singletaxableperson ,personsestablished initsnational territory who
arelegally independent butareboundtooneanotherbyfinancial ,economic
ororganizational relationships .
5.States ,regional andlocalgovernment authorities ,andotherbodiesgoverned
bypubliclawshallnotbeconsidered tobetaxablepersonsasregardstheir
activities pursued aspublicauthorities .
However ,wheretheycarryouttransactions coveredbyparagraph 1,they
shallbeconsidered tobetaxablepersonsinrespectofsuchtransactions .
Thisprovision extendstotheactivities ofbroadcasting authorities ,and
oftheagricultural intervention agencieB inrespectofdealings inagri­
cultural products inpursuance ofaRegulation onthecommonorganization
ofthemarketintherelevant product .

-49-
TitleV:Taxabletransactions
Article 5
Supfllyofgoods
1."Supplyofgoods"meansthetransfer oftherighttodisposeoftangible
property asowner.
Thefollowing shallbetreatedastheproperty towhichtheyrelate:
a)allrightsinIHBgivingtheholderthereofarightofuseroverimmovable
property ;
b)allinterests orsharesgivingtheholderthereofde.lureordefacto
rightsofownership orpossession overimmovable property orpartthere­
of.
2.Thefollowing shallalsobeconsidered assupplies withinthemeaningof
paragraph 1:
a)theactualhandingoverofgoods,pursuanttoacontractforthehireof
goodsforacertainperiod,orforthesaleofgoodsondeferred terms,
whichprovidesthatownership shallpassatthelatestuponpaymentof
thefinalinstalment ;
b)theactualhandingoverof:
-movableproperty ,pursuant toacontract fortheuseoftheproperty
foraspecified period,withnopossibility ofunilateral termination
bytheuser,whichprovides thattheusershallattheendofthecon­
tracthavetheoptionofpurchasing theproperty ,providedthatthe
totaloftheperiodic paymentstobemade,excluding financing costs,
corresponds approximately tothevalueofthepropertyatthetimeof
handingovertothehirer;
-immovable property ,pursuanttoacontractfortheuseoftheproperty
foraspecified period,withnopossibility ofunilateral termination bythe
user,andinparticular pursuanttoacontract whichprovidesthattheuser
shallattheendofthecontract havetheoptionofpurchasing theland
and/orthebuilding,wherethepricetobepaidforexercising theoption:

-50-
-isanominal amountbearing norelation totheeconomic valueofthe
property atthetimeoftheexercise oftheoption;or
•represents thevalueofthelandasascertained atthetimeoffor­
mationofthecontract and/ortheresidual valueofthebuildings at
thetimeoftheexercise oftheoption;or
-isfixedinthelightoftherealvalueoftheproperty atthetime
oftheexercise oftheoption;
e)thetransfer ofgoodspursuanttoacontract underwhichcommission is
payable onpurchase orsale;
d)supplyunderacontracttomakeupworkfromcustomer'smaterials ,that
istosay,thedelivery byacontractor tohiscustomer ofmovableproper­
tymadeorassembled bythecontractor frommaterials orobjectsentrusted
tohimbythecustomer forthispurpose ,whetherornotth6contractor
hasprovided apartoftheproducts used;
e)thehandingoverofaworkofconstruction asdefinedinArticle 6;
f)thetransfer ,byordermadebyorinthenameofapublicauthority ,of
theownership inproperty againstpaymentofcompensation ,wherethe
transfer ofsuchproperty byprivateagreement wouldattractliability
tothetax;
g)thesupplyofelectricity ,gas,heat,refrigeration andthelike.
3.Thefollowing 6hallbetreatedassupplies madeforconsideration ;
a)taxableapplications ,thatistosaytheapplication byataxableperson
ofgoodsformingpartofhisbusinessassetstohisownpersonaluseorthatof
hisstafforthedisposalthereoffreeofcharge,wherethevalueaddedtaxon
thegoodsincpiestion orthecomponent partsthereofiswhollyorpartlydeductible#
However,applications forthepurposeofgivingsamplesormakinggiftsofsmall
value,eligibleforclassification asgeneralexpensesgivingtaxrelief,are
nottobeconsidered astaxabletransactions ;
b)theapplication byataxablepersonforthepurposes ofhisbusinessof
goodsproduced ,nanufactured orextracted inthecourseofsuchbusiness ,
savewherethevalueaddedtaxonsuchgoods,hadtheybeenacquired froma
taxableperson,wouldbewhollydeductible ;

-51-
e)theapplication ofgoodsbyataxablepersonforthepurposes ofanon-
taxablebusiness,wherethevalueaddedtaxonsuchgoodsbecamewhollyor
partlydeductible upontheiracquisition orupontheirapplication inaccordance
withsubparagraph b)above.
k.Inthecaseofatransfer bywayofcontribution toacompany,orotherwise ,
oratransmission ofatotality ofassetsorpartthereoffornoconsidera ­
tion,therecipient maybetreatedbytheMemberStatesasthesuccessor to
thebusiness andthepersonality ofthetransferor .
Article 6
Worksofconstruction
Forthepurposes ofArticle5(2),c),"worksofconstruction "means:
a)allworksrelatingtobuildings ,bridges ,roads,portsandotherstructures
fixedtotheground,suchas:
-demolition ;
-construction ,including foundations ,supplyofprincipal materials ,fitting
out;
-incorporation ofmoveable property inimmovable property ,including all
installation works;
-extension ,modification andrenovation ;
-repairs andmaintenance ,otherthanday-to-daymaintenance ;
b^workonpreparing andimproving land,suchasfoundation forworkonindue-
strialandresidential developments ,divisionintoplots,levelling ,instal­
lationofwatersupplyandsewers,electricity supplyinstallations ,suppor-
ting-walls ,planting ofgardens.

-52-
Article 7
SupplyofServices
1."Supplyofservices "meansanytransaction whichdoesnotconstitute a
supplyofgoodswithinthemeaning ofArticle 5*
Suchtransactions include ,interalia:
•theassignment ofintangible property ;
*•theobservance ofanobligation torefrainfromanactortotolerate an
actorsituation ;
-theperformance ofaservice inpursuance ofanordermadebyorinthe
nameofapublicauthority .
2.Thefollowing shallbetreatedassulliesofservices forconsideration :
a)theuseofgoodsformingpartoftheassetsofabusinessforpurposesnot
connected withthebusiness ,wherethevalue-added taxonsuchgoodsis
wholly "orpartlydeductible ;
b)thesupplyofservices asbetweenpersonsconsidered tobeasingle
taxablepersonwithinthemeaning ofthesecondsubparagraph ofAr­
ticlek(*f),savewherethevalue-added taxonsuchservices ,werethey
tobesupplied byanothertaxableperson ,wouldbewhollydeductible .
Article 8
Imports
"Importation ofgoods"meanstheentryofgoodsintotheterritory ofthe
countryasdefined inArticle 3*

-53-
TitleVI:Placeoftaxable transactions
Article 9
Sup-plyofgoods
Theplaceofsupplyshallbedeemedtobe:
a)intheca6eofgoodsdispatched ortransported eitherbythesupplier or
bythepersontowhomtheyaresunrlieri orbyathirdperson:theplacewhere
thegoodsareatthetimewhendispatchortransport tothepersontowhomthey
aresupplied begins.Wherethecontract providesthatthepoodsaretobe
installed orassembled ,withorwithoutatrialrun,byoronbehalfofthe
supplier ,theplaceofsupplyshallbedeemedtobetheplacewherethegoods
areinstalled orassembled
b)inthecaseofgoodsnotdispatched ortransported :theplacewherethe
goodsarewhenthesupplytakesplace.
Article 10
Supplyofservices
1.Theplacewheretheserviceissupplied shallbedeemedtobetheplace
wherethebusinessofthepersonproviding theserviceisestablished or,
intheabsenceofsuchaplace,theplacewherehehashispermanent address.
2.However :
a)theplaceofsupplyofservices connected withimmovable property and
ofservices forpreparing andcoordinating worksofconstruction ,such
astheservices ofarchitects andoffirmsproviding on-sitesupervision
ofworks,shallbetheplacewherethepropertyissituated ;
b)theplacewheretransport servicesaresuppliedshallbetheplacewhere
transport takesplace,ascertained havingregardtothedistance covered.

-54-
TitleVII:Chargeableeventandthechargetotax
Article 11
1.a)"Chargeableevent"meanstheoccurrence byvirtueofwhichthelegal
conditions arefulfilled forthetaxtobecomedue.
b)Thetaxbecomes"chargeable"when
-thetaxauthority becomesentitledtoclaimthetax,notwithstanding
thatthetimeofpaymentbedeferred ;and
-conversely ,thetaxablepersonbecomesliabletodischargethe
tax,suchliability arisingatthesametimeasthetaxautho­
ritybecomesentitled toclaimasaforesaid .
2.Inrespectofsupplies ofgoodsandservices ,thechargeableeventoccurs
atthetimewhenthegoodsaredelivered ortheservices areperformed .
Thetaxshallbecomechargeableatthetimeofthechargeableevent.However,
whereinrespectofasupplyofgoodsorservices apaymentistobemadeon
accountbeforethegoodsaredelivered orperformance theservices hasbeen
completed ,thetaxshallbecomechargeableonreceiptofthepaymentandon
theamountreceived .
Moreover ,MemberStatesmayprovidethatthetaxshallnotbecomechargeableuntil:
a)inrespectofsuppliesbysmallundertakings coveredbyArticle25and
suppliestonon-taxable persons,thetimeofreceiptofpaymentforthe
goodsorservices ;
b)inrespectofsuppliesbetweentaxablepersons,thetimeofissue
oftheinvoiceprovidedforinArticle23(3);
3.Asregardsimported goods,thechargeableeventoccursatthetimewhen
thegoodsentertheterritory ofthecountryasdefinedinArticle 3.
Thetaxshallbecomechargeableatthetimeofthechargeableevent.

-55-
However ,wheregoodsaresubject ,onimportation ,totheCommonCustoms
Tariffduties ,toagricultural leviesortochargeshavingequivalent
effect ,thetaxshallbecomechargeable atthesametimeassuchcoranonduties,
chargesandlevies .
Whereonimportation goodsareplacedunderatransit ,bondedwarehouse
ortemporary importation arrangement undercustomsand/orfiscalsuper­
vision ,with-suspension ofcustomsdutiesand/orcharges ,MemberStates
mayprovidethatthetaxshallbecomechargeable onlywhenthegoodsarede­
claredforfreecirculation .

-56-
TitleVIII–Taxableamount
Article 12
A.Withintheterritory ofthecountry
1)Thetaxableamountshallhe:
a)inrespectofsuppliesofgoodsandservices,otherthanthosereferred
toinb),c)andd)below,theprice,expressed asasumofmoneywhich
hasbeenoristobeobtained bythesupplier ,wheresuchprice
constitutes thesoleconsideration forthesupply;
b)inrespectofsuppliesunderArticles5(3)and7(2),andsuppliesby
wayofexchange,and,generally ,wherethepriceexpressed asasum
ofmoneyisnotthesoleconsideration forthesupplyofgoodsor
services ,the"openmarketvalue"ofthesubjectoftherelevant supply.
"Openmarketvalue"ofgoodsorservices meanstheamountwhicha
customer atthemarketing stageatwhichthesupplytakesplace
wouldhavetopaytoasupplieratarm*slengthwithintheterritory
ofthecountryatthetimeofthesupply,underconditions offair
competition ,toobtainthegoodsorservicesinquestion ?
c)inrespectofthesuppliesspecifiedinArticle5(2)(b),thetotalof
theperiodic payments plusanysumtobepaidonexercising theoption;
d)inrespectofsuppliesofbuildings andland,otherthanasreferredto
inArticle4(3)(b)and(c),purchased forthepurposeofresalebya
taxablepersontoanon–taxablepersonortoataxablepersonforwhom
thevalueaddedtaxonthebuilding orlandinquestionisnotdeductible ,
thetaxableamountmaybethedifferencebetweenthesellingpriceand
thepurchase price.
2)Thetaxableamountshallinclude:
a)taxes,duties,leviesandcharges,excluding thevalueaddedtax;
b)incidental expenses suchascommission ,packing,transport andinsurance
costschargedbythesuppliertothepurchaser evenwheresuchcostsare
thesubjectofaseparate agreement .

-57-
3)Thetaxableamountshallnotinclude:
a)pricereductions grantedbywayofdiscountforadvancepayment;
b)pricediscounts andrebatesallowedtothecustomer andaccounted
foratthetimeofthesupply;
c)interesttobepaidondeferredordelayedpayments ;
d)returnable packingcosts;
e)amountspaidinthenameorforaccountofthecustomer andcredited
inthesupplier *sbookfstoasuspense account.
4)InrespectofthesuppliesspecifiedinArticle5(2)(f),theamountof
compensation paid,excluding reemployment allowance ,shallbedeemed
tobethetaxable amount.
B.Importation ofgoods
1.Thetaxable amountshallbe:
a)theprice,expressed asasumofmoneypaidortobepaidbythe
importer ,wherethissumisthesoleconsideration forimportation ;
b)the"openmarketvalue",wherenopriceispaidorwheretheprice
paidisnotthesoleconsideration fortheimportation .
"Openmarketvalue"ofimported goodsmeansthaamount,excluding
valueaddedtax,whichanimporteratthemarketing stageatwhich
theimportation takesplacewouldhavetopaytoasupplieratarm's
lengthinthecountryfromwhichthegoodsareexportedatthetime
whenthetaxbecomeschargeable,underconditions offaircompetition ,
toobtainthegoodsinquestion ;
2.Thetaxable amountshallinclude :
a)thetaxes,duties,leviesandchargesdueoutsidethecountryof
importation andthoseduebyreasonofimportation ,excluding the
valueaddedtax;
b)incidental expenses,suchascommission ,packing,transport and
insurance costs,arisinguptotheplaceofdestination withinthe
territory ofthecountry.

-58-
3.Thetaxable amount ehallnotincludethosefactors whicharenot
included undertheinternalsystem,asprovidedinpointA3(atod).
k.Thetaxableamountinrespectofgoodstemporarily exported andthenreimported
bytheexporterafterrepairs ,modifications ,adaptations ormanualopera­
tionshavebeencarriedoutforhisaccountinanothercountryshallbethe
costoflabourandofanymaterials orpartssupplied ,plusthetaxes,
duties,levies,chargesandincidental expenses mentioned atpointB2
a)andb).
5-Thetaxableamountinrespectofgoodsimported subjecttoCommonCustomsTariff
advaloremdutiesshallinnocasebelovrerthanthevalueforcustoms
purposesdefinedinCouncilRegulation (EEC)No.803/68of27June1968,
plussuchofthefactorslistedinpointB2a)andb)asarenotalrea­
dyincluded therein.
C.Miscellaneous provisions
1.Thetaxableamount shallbereducedtoanappropriate extentinthe
caseofsupplies ofgoodsorservices whichremainunpaidinwholeor
inpartorwhicharecancelled ,orwherethepriceisreducedafterthe
supplytakesplace.TheMemberStatesshalllaydowntherulesfor
applyingthisprovision .
2.WhereaMemberStateproposes tomaintain orintroduce standard or
minimumratesforcertaintransactions inordertopreventfraudor
tosimplify thecalculation andcollection ofthetax,itshallconsult
theValueAddedTaxCommittee inaccordance withtheprocedure laid
downinArticle 31•
3.Wherethefactorsfordetermining thetaxable amountareexpressed
inacurrencyotherthanthatoftheMemberStateswherevaluation takes
place,theexchangerateshallbedetermined inaccordance withArticle12
ofCouncilRegulation (EEC)No.803/68of27June1968.

-59-
TitleIX:Rates
Article 13
1.Therateapplicable totaxabletransactions shallbethatinforceat
thetimeofthechargeable event.However ,inthecasesprovided for
inthelastsubparagraph ofArticle11(3),therateapplicable shall
bethatinforceatthetimeofrelease forfreecirculation .
2.Thestandard rateofvalueaddedtaxshallbefixedbyeachMemberState
asapercentage ofthetaxableamount andshallbethesameforsupplies
ofgoodsandforsupplies ofservices .
3«Incertaincases,supplies ofgoodsorservices maybemadesubjectto
increased orreduced rates .Eachreduced rateshallbesofixedthat
theamountofvalueaddedtaxresulting fromtheapplication thereof
shallbesuchasinthenormalwaytopermitthededuction therefrom of
thewholeofthevalueaddedtaxdeductible underArticle 17*
k.Therateapplicable inrespectofimportedgoodsshallbetherateapplicable
tosupplies oflikegoodswithintheterritory ofthecountry .

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TitleX:Exemptions
Article lA
Exemptions withintheterritory ofthecountry
AExemptions forcertainactivities inthepublicinterest
1.MemberStatesshallexemntthefollowing :
a)thesupplyofservices ,otherthanpassenger transport ,andsupplies
ofgoodsincidental thereto ,bypublicpostalandtelecommunications
services ;
b)thesupplyofhospital andmedicalservices ,andSupplies ofgoods
incidental ther<=r.o ,bymedical establishments runby:
-bodiesgoverned bypubliclaw;or
-non-profit-makingorganisations ;or
-private charitable organisations ;
c)thesupplyofmedicalservices inthelawfulexercise ofthemedical
andlikeprofessions ;
d)supplies ofhumanbloodandmilk;
e)thesupplyofservices bydentaltechnicians intheirprofessional
capacity andsupplies ofprosthesss bydentists anddentaltechnicians ;
f)services supplied byindependant professional groupsofamedicalor
likenaturetotheirmembersforthepurposes oftheirexempted acti­
vities ;
g)thesupplyofservices directly relating towelfareassistance and
socialsecurity andsupplies ofgoodsincidental thereto ,by:
-bodiesgoverned bypubliclaw;or
-non-profit-makingorganisations ;or
-private charitable organisations ;

-61-
h)thesupplyofservices fortheprotection oreducation ofchildren
andyoungpersons ,andsupplies ofgoodsincidental thereto ,by:
-bodiesgoverned bypubliclaw;or
-non-profit-makingorganisations ;dr
-privatecharitable organisations ;
i)thesupplyofservices ,andsupplies ofgoodsincidental thereto ,
havinganeducational purpose orbeingdirectly connected withedu->
cationorvocational training orretraining ,by:
•bodiesgoverned bypubliclaw;or
-privateeducational establishments placedunderthesupervision
ofthecompetent publicauthorities andauthorised toprepare
students foraqualification fromaschooloruniversity oraprofessional qualifi­
cation,recognised orapproved bytheState;
j)thesupplyofservices ,andsupplies ofgoodsincidental thereto ,
bynon-profit-makingsportorphysical training organisations to
theirmembers ;thisexemption shallapplyonlytooperations direct­
lyconnected withthepursuitofsportandphysical training activities
byamateurs ;
k)thesupplyofservices bytheatres ,cinema-clubs ,concert-halls ,museums ,
libraries ,publicparks ,botanical orzoological gardens ,educational
exhibitions ,andoperations withintheframework ofactivities inthe
publicinterest ofasocial ,cultural oreducational nature ,by:
-bodiesgoverned bypubliclaw;or
-non-profit-makingorganisations ;or­
-private charitable organisations .
2.a)"Non-profit-makingorganisation "meansanorganisation meetingthe
following requirements :
aa)itshallnothaveasitsobjectthemakingofprofits ;
bb)itshallassignanyprofitsmadetotheimprovement andcontinuance
oftheservices whichitprovides ;

-62-
cc)itshallobtainnomaterial advantages forpersonsotherthanthe
customers orusersoftheorganization ;thisprovision shallbe
withoutprejudice totheemployment bytheorganization ofwage-
orsalary-earningstaff.
b)"privatecharitable organization "meansanorganization whoseacti­
vitiesaredirected tothepublicgoodortobenevolent ends,and
whichmeetsoneofthefollowing requirements :
aa)itspricesshallbeapproved bythecompetent publicauthorities ;
or
bb)itsprofitsshallbeassignedtopromoting thepublicinterest
orbenevolent endsinaccordance withrulestobelaiddownunderna­
tionallaws.
B.Otherexemptions
MemberStatesshallexempt:
a)insurance andreassurance transactions andservicesrelatingthereto
supplied byinsurance brokersandinsurance agents;
b)thesupplyofservicesbyundertakers andsuppliesofgoodsincidental
thereto ;
c)supplies ofgoodsandservicestoorganizations responsible forcon­
structing ,installing andmaintaining cemeteries ,gravesandmonuments
commemorating wardead;
d)thelettingofimmovable property ,excluding'
1)theprovision ofaccommodation inhotelsandsimilarestablishments ,holiday
campsandcampingsites;
2)thelettingofimmovable propertyforindustrial orcommercial
uses,suahasfactories ,shopsandsections ofbuildings ,and
contracts forthesupplyofcoldstoragefacilities ;
3)thehiringofsafes,andcontracts forthesupplyofparkingfacilities ;
e)suppliesofgoodshavingformedpartoftheassetsofabusiness exempted under
thisArticle,andofsecond-hand goodswithinthemeaningofArticle 26,on
theacquisition ofwhich,byvirtueofArticle 17(6),valueaddedtax
didnotbecomedeductible ;

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f)dealingsindebts,shares,debentures andothersecurities ,exclu­
dingalldocuments establishing titletogoodsandallrights,inte­
restsandsharescoveredbyArticle5(1)(a)andb);
g)thesupplyofnewpostagestampsvalidforuseonletterspostedin
theterritory ofthecountry,excluding supplies bydealersinstamps
forcollectors ;
h)dealingsincurrencyotherthanforcollection ,andingoldtobe
usedascoin,andcredittransfers ;
i)supplies oftaxmarks,discs,bandsorstampsissuedbyothercoun­
triestobefixedtogoodsforexporttosuchcountries oroninvoi­
cesorbillsofladingaccompanying suchexports;
j)themakingofadvances andthegrantingofcredit;
k)gamingandlotteries ;
1)supplies ofbuildings orpartsthereofandofthelandpertaining
thereto ,afterfirstoccupation ,byataxablepersonforwhom
thevalueaddedtaxonthebuildingisnotdeductible ortowhomArticle 12A
(l)(d)doesnotapply.Forthepurposesofthisexemptionflat-rate
farmers,asdefinedinArticle 27,shallbedeemedtobetaxable
personssubjecttothenormalscheme;
a)supplies ofland,otherthanbuildinglandasdefinedinArticle^(3)(c).
Article 15
Exemptions ofimported goods
TheMemberStatesshallexemptthefollowing :
1)Finalimportation ofgoodsthesupplyofwhichbyataxablepersonwithin
theterritory ofthecountrywouldbeexemptedunderArticles 1*+A(l)(d),
l*fE(c),f),g).h)andi),or16(kto7);

-64-
2)Importation ofgoodsunderadeclaration forthetransit orbondedware­
housearrangements ,supplies ofgoodsstillsubject tosucharrangements
andsupplies ofservices incidental tosuchimportation orsupplies ;
3)Importation ofgoodsunderadeclaration forthetemporary importation
arrangement whichtherebyqualify forexemption fromcustomsdutiesor
wouldqualifytherefor iftheywereimported fromathirdcountry ,sup­
pliesofsuchgoodsstillsubject tosucharrangement andsupplies ofser­
vicesincidental tosuchimportation orsupplies ;however ,toavoidserious
distortions ofcompetition ,theexemption mayberevised subject tocon­
sultation inaccordance withArticle 31;
k)Finalimport^Lon ofgoodsqualifying fornon-tariff exemption fromcus­
tomsdutiesonwhichwouldqualifytherefor iftheywereimported from
athirdcountry ,butexcluding theimportation ofgoodsinrespect of
whichexemption fromvalueaddedtaxwoulddistort competition tothe
detriment oftheinternal market ;
5)Reimportation ofgoodsinthestateinwhichtheywereexported ,under
theconditions andwithinthelimitslaiddowninrespect ofexemption
fromcustomsduties ,orv/hichwouldqualifytherefor iftheywereim­
portedfromathirdcountry ;thisprovision shallalsoapplytothe
reimportation ofmotorvehicles whichhavehadtoberepaired inanother
MemberState ;
6)Importation ofgoods :
a)underdiplomatic andconsular arrangements ,whichqualifyforexemp­
tionfromcustomsdutiesorwouldqualifytherefor iftheywereim­
portedfromathirdcountry ;
b)byinternational organizations recognised assuchbythepublic
authorities ofthehostcountry ,inaccordance withthetermsof
headquarters agreements ;
7)Importation ofgoodsinthepersonal luggageoftravellers ,underthe
conditions andwithinthelimitslaiddownbyCommunity rules ;
8)Importation ofgoodsinsmallconsignments ,undertheconditions and
withinthelimitslaiddownbyCommunity rules ;

-65-
9)Importation ofusedgoodsnotqualifying forexemption asspecified
abovewheretheownercanprovethatvalueaddedtaxwasfinallypaid
ontheacquisition thereofinanother MemberStateatleastsix
monthsearlier.MemberStatesmay,however,collectvalueaddedtaxby
applying tothemarketvalueofthegoodsarateequaltothedifference "between
thenationalrateandthatintheotherMemberStateasrulingonthe
dayofimportation ;
10.Importation byseafishingundertakings oftheircatches,unprocessed
orafterundergoingpreservation formarketing ;
11.Thesupplyofservices ,otherthantransport services asdefinedin
Article16(13)tinconnection withtheimportation ofgoods,andthe
valueofwhichisincluded inthetaxable amountinaccordance
withArticle 12B(2)(b).
Article 16
Exemption ofexports andliketransactions
andinternational transport
TheMemberStatesshall,subjecttotheconditions andlimitslaiddown
byCommunity rules,exemptthefollowing :
1.Goodsconsigned ortransported outoftheterritory ofthecountryas
definedinArticle 3byoronbehalfofthevendor;
2.Goodsconsigned ortransported outoftheterritory ofthecountryas
definedinArticle 3byoronbehalfofapurchaser established inanother
country,subjecttoconditions tobelaiddownbyeachMemberState;
3.Goodsconsigned ortransported toanexportwarehouse undercustomscon­
trol,ordelivered tosuchwarehouse ;
4.Goodsforthefuelling andprovisioning ofsea–goingvessels,inaccordance with
rulestobelaiddownbyeachMemberState,excluding suppliestovessels
which,regardless oftonnageorflag,donotcarrypassengers forreward
andarenotusedinthecourseofcommercial ,industrial orfishingacti­
vities :

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5.Thesupply ,modification ,repair ,chartering andhiringofsea-going
vessels ,andthesupply ,repairandhiringofobjects -including
fishingequipment -incorporated orusedtherein ,excluding vessels
notqualified fortheexemption provided foratpoint4;
6.Thesupply ,modification ,repair ,chartering andhiringofaircraft
usedbyairlines oninternational routes ,andthesupply ,repairand
hiringofobjectsincorporated orusedthereon ;
7.Goodsforthefuelling andprovisioning ofaircraft asreferred toinpoint6;
8.Operations carriedoutwithinportsforthedirectneedsofsea-going
vesselsotherthanpleasure boats ,andservices ofpilots ,tugsand
salvagevessels ;
9.Operations carriedoutininternational airports forthedirectneeds
ofaircraft asreferred toinpoint6;
10.Supplies ofthefollowing services ,uponcondition thatthepersonsup­
plyingtheserviceprovesthatthecustomer :
-ieestablished outside theCommunity ;or
•isataxablepersonestablished intheCommunity butinacountry
otherthanthatofthepersonsupplying theservice ;
a)assignments ofpatents ,trademarksandlikerights ,andthegranting
oflicences ;
b)workonmovabletangible property ,otherthanworkunderacontract
tomakeupworkwithinthemeaningofArticle5(2)(d);
c)advertising services ;
d)the'hiringoutofmovabletangible property otherthanmotorvehicles ,
aircraft andships}
e)services ofconsultants ,engineers andplanningoffices ,
andsimilar services ;
f)obligations torefrainfromcarrying onorexercising ,inwholeor
inpart,abusiness activity orarightincluded inthisparagraph 10;

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g)bankingandfinancial transactions notspecified inArticlel*f;
11.Services supplied bybrokersandotherintermediaries ,actinginthename
andforaccountofanotherperson,wheretheyformpartoftransactions
specified inthisArticle,andotherusualservicesdirectlyrela­
tingtoexportation asdefinedinpoints1,2and3;
12.Supplies ofgoodsandservices todiplomatic andconsular missions
accredited toeachMemberState,ortointernational organizations
recognised assuchbythehostMemberState.
Thisexemption shallapplyundertheconditions andwithinthelimits
laiddownbyeachMemberStateuntilcommonrulesareadoptedinaccor­
dancewiththeprocedure laiddowninArticle 31.
Thebenefitoftheexemption maybegrantedbymeansofadrawback pro­
cedure :
13*Supplies ofservices in:
a)thetransport ofgoodsfromanothercountrytothefirstplaceof
destination ;
b)thetransport ofgoodswhicharebeingcarriedtoadestination outside
nationalterritory ,ortoanexportbondedwarehouse orintransit;
c)international passenger transport byseaorair,subjecttothetime
limitsetinArticle 28.

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Bywayofderogation froma)andb)above,thetransport ofgoodsaccom­
panyingpassengers orconnected withthetransport ofpassengers ,such
asluggage ,motorvehicles ,6hallbeexempted onlywherethetransport
ofsuchpassengers isitselfexempted .

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TitleXI:Deductions
Article 17
Existence andscopeoftherighttodeduct
1.Therighttodeductshallariseatthetimewhenthedeductible tax
becomes chargeable .
2.Wheregoodsandservices aretobeusedforthepurposes ofhistaxable
business ,thetaxablepersonshallbeentitled todeductfromthe
taxwhichheisliabletopay:
a)valueaddedtaxinvoiced tohiminaccordance withArticle25(3)in
respect ofgoodsorofservices supplied tohin;
b)valueaddedtaxdueorpaidinrespectofgoodsimported anddeclared
inaccordance withArticle 2^;
c)valueaddedtaxdueunderArticles5(3)(b)and7(2)(b);
d)valueaddedtaxduefromapersontowhomserviceshavebeen
supplied inoneorotherofthecircumstances described inArticle2(3)-
3*MemberStatesshallalsogranttotaxablepersons therighttodeduct
ortoberefunded valueaddedtaxinvoiced tothorninrespectof
goodsandservices ^supplied tothemforthepurposes :
a)ofoccupations ortransactions coveredbyArticle4(2),carried
outinanothercountry ,wheretheseoccupations ortransactions wolild
betaxedifcarriedoutintheterritory ofthecountry ;or
b)ofoccupations whichareexemptunderArticle 16.
k.EachMemberStateshallrefundtoanytaxablepersonestablished in
anothercountrywhosupplies nogoodsorservices withinitsterritory
thevalueaddedtaxinvoiced tohiminrespect ofgoodsandservices
supplied tohiminthesaidterritory ,wherethevalueaddedtaxon
suchgoodsorservices wouldbedeductible ,ifthetaxableperson
inquestion carriedonhisbusiness withinitsterritory .

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Therefundshallbemadeuponapplication fromthetaxableperson .No
application shallbemadeinrespect ofanamountoftaxlowerthan100
unitsofaccount ,butseveralinvoices naytogether formthesubject
ofasingleapplication .
5.Asregardsgoodsandservices usedbothfortransactions coveredbypara­
graphs2and3»inrespect ofwhichvalueaddedtaxisdeductible ,andfor
transactions inrespectofwhichvalueaddedtaxisnotdeductible ,only
suchproportion ofthevalueaddedtaxshallbedeductible asisattributable
totheformertransactions (generalproportion rule).
Thisproportion shallbedetermined ,inaccordance withArticle 19*
forallthetransactions carriedoutbythetaxableperson .
However ,toensurethatthetaxisappliedconsistently ,MemberStates
may:
a)authorise thetaxablepersontodetermine aproportion foreach
sectorofhisbusiness ,provided thatseparate accounts arekeptfor
eachsector ;
b)compelthetaxablepersontodetermine aproportion foreachseo-
torofhisbusiness andtokeepseparate accounts foreachsector ;
c)authorise orcompelthetaxablepersontomakethededuction onthe
basisoftheactualuseofallorpartofthegoodsandservices .
6.Valueaddedtaxonthefollowing shallnotbedeductible :
a)expenditure onaccomodation ,lodging ,restaurants ,food,drink,enter­
tainment andpassenger transport ,unlessincurred byanundertaking
whoseprincipal orsubsidiary business isthepursuitofsuchacti­
vities ;
b)expenditure onluxuries ;
c)entertainment expenditure ;
d)goodsrelating totheexpenditure andcostslistedina),b)andc)
above,andsupplies ofservices inconnection withsuchproperty ,expen­
ditureandcosts .

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Article 18
Rulesforexercising therighttodeduct
1.Toexercisehisrighttodeduct,thetaxablepersonmust:
a)inrespectofdeductions underArticle17(2)(a)tholdadetailedinvoice,
drawnupinaccordance withArticle23(3)»
b)inrespectofdeductions underArticle17(2)(b),holdanimportdocument,
specifying himasconsignee andpermitting calculation oftheamount
oftaxdue;
c)inrespectofdeductions underArticle17(2)(c)and(d),complywiththe
formalities established byeachMemberState;
2.Thetaxablepersonshalleffectthededuction bysubtracting fromthe
totalamountofvalueaddedtaxdueforagiventaxperiodthe
totalamountofthetaxinrespectofwhich,duringthesameperiod,the
rightIDdeducthasarisenandcanbeexercised underparagraph 1(immediate
deduction).
However ,asregardstaxablepersons whocarryoutoccasional transac­
tionsasprovidedinArticlek(3)b)andc),therighttodeductshall
beexercised onlyatthetimeofthesupply.
Wherebyerrororomission thetaxablepersondoesnotmakethededuction
attherighttime,hemayexercisehisrighttodeductatanytimeupto
andincluding 31December oftheyearfollowing thatinwhichthededuc­
tionshouldhavebeenmadeinaccordance withthefirstsubparagraph .The
deduction shallinsuchcasebemadeinaccordance withtheprovisions
inforceatthetimewhenthededuction shouldhavebeenmade.Itmaybe
exercised whenthereturnprovidedforinArticle23(7)ismade.
3-Whereforagiventaxperiod,theamountofauthorised deductions
exceedstheamountoftaxduetheMemberStatesmayeithermakearefund
orcarrytheexcessforwardtothefollowing period.
However ,uponapplication fromthetaxableperson,theexcessamountat
31December shallberefunded tothetaxablepersonwithinthreemonths.

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Article 19
Calculation ofthedeductible proportion
1.Theproportion deductible underthefirstsubparagraph ofArticle
17(5)shallbemadeupofafraction having:
-asnumerator ,thetotalamount,exclusive ofvalueaddedtax,ofturn­
overpercalendar yearattributable totransactions inrespectofwhich
valueaddedtaxisdeductible underArticle17(2)and(3);
-asdenominator ,thetotalamount,exclusive ofvalueaddedtax,ofturn­
overpercalendar yearattributable totransactions included inthenu­
meratorandtotransactions inrespectofwhichvalueaddedtaxisnot
deductible .
Theproportion shallbedetermined eachcalendar year,fixedasa
percentage androunded uptothenextunit.
2.Bywayofderogation fromparagraph 1,thereshallbeexcluded fromthecal­
culation ofthedeductible proportion ,amountsofturnoverattributable
totransactions specified inArticlel^B(f),tothesaleofcapitalgoods
usedbythetaxablepersonforthepurposes ofhisbusiness ,andtoinci­
dentalrealestateorfinancial transactions ,exceptwhereth°«ieoperations
formpartoftheregularbusinessactivity ofthetaxableperson.
3.Theprovisional proportion foracalendaryearshallbethatcalcu?-
latedonthebasisofthepreceding year'stransactions .Intheabsence
ofanysuchtransactions toreferto,orwheretheywereinsignificant
inamount,deductible proportion shallbeestimated provisionally ,under
supervision ofthetaxauthorities ,bythetaxablepersonffomhisown
forecasts .Deductions madeonthebasisofsuchprovisional proportion
shallbeadjusted whenthefinalproportion isfixedduring
thenextcalendar year.

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Article 20
Adjustments ofdeductions
1.Thetaxablepersonshalladjusttheinitialdeduction :
a)wherethatdeduction washigherorlowerthanthattowhichhewas
entitled underArticles 17»l8and,ifapplicable ,26;
b)wherethedifferencebetweenthefinalproportion andtheprovisional
proportion definedinArticle 19exceeds 10points;
c)whereafterthereturnismadesomechangeoccursinthefactorsused
todetermine theamounttobededucted ,inaccordance Article18(2),in
particular wherepurchases arecancelled orpricereductions areobtained ;
however ,adjustment shallnotberequired incasesofdestruction ,loss
ortheftofproperty ,dulyprovedorconfirmed ,norinthecases
specified inArticle5(3);
d)where,insteadofbeingtaxedinthenormalway,hebecomessubject
tooneofthespecialschemesprovidedforinArticles25(l)(a)and27.
MemberStatesshalltakeallnecessary measures toensurethatthetaxable
persondoesnotundulybenefitunderthesespecial schemesfromdeduc­
tionsmadeunderthenormalscheme.
2.Asregardscapital goods,adjustment shallbespreadoverfiveyears
beginning withthatinwhichthepropertyisacquired .Theannualadjust­
mentshallbemadeonlyinrespectofonefifthofthetaximposed onthe
goods. adjustment shallbemadeonthebasisofthevariations in
thefinalproportion forthefouryearsfollowing theyearofacqui­
sitioninrelation tothefinalproportion fortheyearofacquisi­
tion.However noadjustment needbemadewherethedifferenceisless
than10points.

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TitleXII:Personsliableforpayment oftax
Article 21
Personsliabletopaytaxtothetaxauthority
Thefollowing shallbeliabletopayvalueaddedtax:
1.Undertheinternal system :
a)taxablepersonswhocarryouttaxabletransactions ,andagents
oftaxablepersonsestablished inanothercountry whocarryout
taxabletransactions ;
b)personstowhomservicescoveredbyArticle2(3)aresupplied;
c)anypersonwhomentions thevalueaddedtaxonaninvoiceorother
document inthatbehalf ;
2.Onimportation :thepersonspecified asconsignee intheimportdocu­
mentsor,intheabsenceofsuchdocuments orspecification ,theimpor­
ter.Theconsignee ,thedeclarant andhisagentshallbejointlyliable
fortax.

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TitleXIII;Assessment oftheamountoftaxtobepaidand
liability forpayment ofthetax
Article 22
1.Theamountoftaxtobepaidshallbeassessed bythetaxautho­
rityonthebasisofthereturnmadebythepersonliableforpayment .
Suchreturnmaybeverified bythetaxauthority thismay
leadtoreassessment oftheamounttobepaid.Intheabsence ofare­
turn,theamountmaybeassessed bytheauthority .
2.Liability topaytaxmeanstheobligation topaytheamountofthetax
attheendoftheperiodprescribed bylawfollowing eitherthesubmis­
sionofthereturnorassessment oftheamountoftaxdue.

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TitleXIV:Obligations ofpersonsliableforpayment
Article 23
Obligations undertheinternal system
1.Everytaxablepersonshallstatewhenhisactivity asataxableperson
commences ,changesorceases.
2.Everytaxablepersonshallkeepsufficiently detailed accounts topermit
application ofthevalueaddedtaxandinspection bythetaxauthority .
3.a)Everytaxablepersonshallissueaninvoiceinrespectofallgoods
andservices supplied byhimtoanothertaxableperson,andshallkeep
acopythereof.
Everytaxablepersonshalllikewise issueaninvoiceinrespectofpay­
mentsonaccount madetohimbyanothertaxablepersonbeforethesupply
ofgoodsorservicesiseffectedorcompleted .
b)Theinvoiceshallstateclearlythepriceexclusive oftaxandthe
corresponding taxateachrateaswellasanyexemptions .
c)WhereaMemberStatehasmadeprovision asauthorised byArticlell(2)(b),
theinvoiceshallbeissuedwithin30daysfollowing thechargeable
event.
k.Everytaxablepersonsubjecttothenormaltaxsystemsshall eachmonth
submitareturnsettingoutthesuppliesinrespectofwhichtaxhas
becomechargeableduringthepreceding monthtogetherwithallinformation re­
quiredtocalculate thetaxandthedeductions tobemade,including the
totalamountoftherelevantsuppliesandthetotalamountofexanpted .
supplies .
5.TaxablepersonssubjecttothespecialschemesprovidedforinArticles
25and27maybeauthorised byMemberStatestosubmitquarterly ,half-
yearlyorannualreturnssettingoutthesameinformation asrequired un­
derparagraph 4.

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6.Everytaxablepersonshallpaythenetamountofthevalueaddedtax
whensubmitting thereturn.
7.Duringthefirstsixmonthsofeachyearthetaxablepersonshallsubmit
areturncoveringallsupplies madeinthepreceding yearandsetting
outalltheinformation requiredforanyadjustment .
8.EverypersonwhotowhomaservicecoveredbyArticle2(3)issupplied
shalldeclaretohisnational taxauthority theobjectoftheser­
vice,thepricewhichhasbeenoristobepaidandtheamountoftax
chargeable,andshall,whereappropriate ,paytheamountthereof.
9.MemberStatesmaywherenecessary imposeotherobligations shouldthis
provenecessary forthecollection ofthetaxortheprevention offraud.
10.MemberStatesmayrelease fromcertainobligations taxablepersons who
makeonlyexemptsupplies .
Article 2k
Obligations inrespect ofimports
Detailedrulesrelating toaccounts andpayments tobemadeonthebasis
thereofinrespectofimported goodsshallbelaiddownbyeachMemberState.
MemberStatesmayprovideinteraliathatthevalueaddedtaxongoodsim­
portedbycertaincategories oftaxablepersons ,payable byreasonofim­
portation ,neednotbepaidatthetimeofimportation ,uponconditionthat
thetaxbementioned ,asataxduebyreasonofimportation ,intheperiodic
returnstobesubmitted bythetaxablepersonunderArticle23(4)»

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TitleXV;Special schemes
Article 25
Special schemeforsmallundertakings
1.Wheretheapplication ofthenormaltaxschemetosmallundertakings
wouldgiverise"todifficulties ,eachMemberStatemay,undersuchcon–
ditionsandwithinsuchlimitsasitmayprescribe ,andsubjecttoconsul­
tationwiththeValueAddedTaxCommittee asprovided forinArticle 30,
apply:
a)untilsuchtimeastheobjective specified inArticle koftheFirst
Directive (67/227/EECof11April1967)isattained ;
aa)exemption fromtaxfortaxablepersonswhoseannualturnover does
notexceed4000unitsofaccount ;and
bb)ifappropriate ,graduated taxrelieffortaxablepersonswhose
annualturnover exceedsthemaximum amountfixedbythatState
fortotalexemption butdoesnotexceed12500unitsofaccount ;
b)simplified procedures forchargingandcollecting thetax,provided
thattheamountoftaxtobepaidshallnotthereby bereduced.
2«Therelevantturnoverforthepurposes oftheapplication ofparagraph 1a)
shallbethetotalpre-tax amountofthesupplies ofgoodsandservices
definedinArticles 5and7,including exemptsupplies andsupplies
madeinanothercountry.
However,disposals oftangible orintangible investment property which
formedpartofthefixedassetsoftheundertaking ,supplies ofbuil­
dingsandofbuildingland,thetransactions specified 4nArticleIkBd)
andf)andthelettingofbuildings shallbedisregarded incalculating
theturnover .
3«Paragraphla)shallnotapplytotaxablepersonswhosemainorsubsi­
diarybusinessconsists ofrealpropertytransactions ,nortothetrans­
actionsspecified inthesecondsubparagraph ofparagraph 2.

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k.TaxablepersonstotallyExempted fromtaxshallnotbeentitled tode­
ducttaxinvoiced tothemortomentionthetaxoninvoices issuedby
themoranyotherdocumerte inthatbehalf .Theymay,however ,optfor
thenormalvalueaddedtaxschemeand,whereapplicable ,qualifyfor
thegraduated reliefprovided forinparagraph 1a).
5.Withoutprejudice totheapplication ofparagraph 1(b),taxablepersonswho
qualifyforgraduated reliefshallbetreatedastaxablepersonssubjectto
thenormalvalueaddedtaxscheme .
Article 26
Special schemeforsecond-hand goods
1."Second-hand goods"meansusedmovableproperty whichcanbere-usedas
itisorafterrepair ,excluding original worksofartcreated "bythe
handoftheartist ,antiques ,collectors' items ,andstampsandcoins
beingcollectors' items.
2.Bywayofderogation fromArticles 17and18:
a)whereBecond-hand goodsaresupplied byanon-taxable persontoa
taxablepersonforresalethetaxablepersonshallbeentitled to
deductthevalueaddedtaxcalculated onthepurchase priceofsuch
goodsattherateinforceatthetimeofacquisition ,savewherethe
taxablepersonissubjecttothespecialschemeprovided forinAr­
ticle25(l)(a);
b)whereataxablepersonsupplies second-hand goodsthevalueaddedtaxon
whichisbyvirtueofArticle17(6)notdeductible ,therecipient shall
likewisebeentitledtodeductthevalueaddedtaxcalculated asin(a)
abovewhereheisataxablepersonandintendstoresellthegoodsinquestion .

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3.Thedeductions providedforinparagraph 2shallnotexceed4/5ofthe
amountoftaxdueontheresale.Theinitialdeduction shall,where
necessaiy ,beadjustedatthetimeofresale.
4.MemberStatesmaymaketheapplication oftheprovisions referred toin
paragraphs 2and3subjecttospecialadministrative obligations .
Article 27
Commonflat–rateschemeforfarmers
1•Wheretheapplication tofarmersofthenormalvalueaddedtaxscheme,
orthesimplified schemeprovidedforinArticle25(l)(b),wouldgive
risetodifficulties ,MemberStatesmayapplytofarmersthecommon
flat–rateschemeprovided forinthefollowing paragraphs .
2.Forthepurposes ofthisArticle,thefollowing definitions shallapply:
–"farmer":ataxablepersoncarrying onanyoftheproductive activities
listedinAnnexAonanagricultural ,forestryorfisheries undertaking
operated byhim;
–"agricultural ,forestry orfisheries undertaking ":anundertaking
considered tobesuchbytheMemberStateconcerned ;
–"flat–ratefarmer":afarmersubjecttotheflat–rateschemeprovided
forinparagraphs 7etseer.;
–"agricultural products":goodsproduced byanagricultural ,forestry or
fisheries undertaking inaMemberStateasaresultoftheactivities
listedinAnnexA;
–"agricultural service":anyserviceassetoutinAnnexBsuppliedbya
farmerpersonally and/orbymeansoftheequipment normallyavailable
ontheagricultural ,forestryorfisheries undertaking operated byhim;
–."valueaddedtaxchargeoninputs":therespective amountsineach
MemberStateof(a)thetotalvalueaddedtax,calculated inaccordance
withparagraph 3below,attaching tothegoodsandservicespurchased
byallagricultural andfisheriesundertakings and(b)theliketotal
inrespectofallforestryundertakings ,wheresuchtaxwouldbe

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deductible underArticle 17byafarmersubjecttothenormalvalue
addedtaxscheme;
–••fixedoffsettingpercentages ":thepercentages fixedbyMemberStates
inaccordance withparagraph 4»andapplied "bytheminthecases
specified inparagraph 7»toenableflat–ratefarmerstooffsetata
fixedratethevalueaddedtaxchargeoninputs.
3.TheCommission shallberesponsible forcalculating thelevelofthevalue
addedtaxchargeoninputsineachMemberState,usingthecommonmethod
ofcalculation setoutinAnnexC.Suchcalculation shallbebasedon
macro–economicstatistics forthepreceding twoyearssupplied bythe
MemberStatesforthepurposes ofthecommonmethodofcalculation set
outinAnnexC.
Thecalculations shallbeupdated bytheCommission everythreeyearsand
alsowhenever inanyMemberStatetheratesinforceorthelistsofgoods
andservices subjecttosuchratesaresochangedastobelikelytoaffect
theleveloftheinputchargeintheMemberStateconcerned .
Thelevelsofinputchargesocalculated ,rounded downthethenearest
tenthofonepercent,shallbesofixedinaccordance withtheprocedure
laiddowninArticle 31thattheymaybeadopted *
–forthefirsttime,notlaterthan30September 1974?
–foreachthree–yearlyupdating:notlaterthan30September ofthe
thirdyear;
–intheoaseofchangeslikelytoaffectthelevelofthechargeassoon
aspossible *
MemberStatesshallsupplytheCommission withthemaoro–economic
statistics andotherdatarequiredforthecommonmethodofcalculatation :
–forthefirsttime,notlaterthan30May1974;
–foreachthree–yearlyupdating,notlaterthan30Juneofthethird
.year;

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–inthecaseofchangeslikelytoaffectthelevelofthecharge,as
soonaspossible .
4.MemberStatesshallfix,atlevelsnotexceeding JOfoofthelevelsof
inputchargeadoptedinaccordance withparagraph 3,twofixedoffsetting
percentages asfollows:
a)thefirsttooffsettheinputchargeinrespectofagricultural
fisheries undertakings ,andapplicable tosupplies byaflat–ratefarmer
ofagricultural products fromsuohundertakings andofagricultural
servioes ;
b)thesecondtooffsettheinputchargeonforestryundertakings ,and
applicable tosupplies byaflat–ratefarmerofagricultural products
fromsuchundertakings#
MemberStatesmay,subjecttoconsultation withtheValueAidedTax
Committee asprovidedforinArticle30,varytheoffsettingpercentage
providedforin(a)abovebyreference tosubdivisions ofagriculture or
bytreating separately agriculture properandfisheries *Insuchcase
theyshallfixdifferentfixedoffsetting percentages foragricultural
products fromeachsuchsubdivision orfromagriculture properandfrom
fisheries .Boneofthesedifferentfixedoffsetting percentages shall
exceedthelevelofthefixedpercentage providedforunder(a).

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5.Inorderthatflat–ratefarmers maygradually transfer tothenormal
valueaddedtaxschemeor,asthecasemay"be,tothesimplified scheme
providedforinArticle25(l)(b),thefixedoffsettingpercentages
appliedineachMemberStateshallnotexceed:
–fromthefourthyearfollowing theentryintoforceofthisDirective ,
80%ofthevalueaddedtaxchargeoninputsadoptedinaccordance with
paragraph 3;
–fromtheseventhyearfollowing theentryintoforceofthisDirective ,
70$ofthevalueaddedtaxchargeoninputsadoptedinaccordance with
paragraph 3.
6.MemberStatesmayreleaseflat–ratefarmersfromtheobligations imposed
uponthembyArticle 23•
7.Plat-rate farmersshallbeentitled ,subjectasprovidedinthefollowing
paragraphs ,tooffsetthevalueaddedtaxchargeoninputsbyapplying
totheprice,exclusive oftax,oftheagricultural products andagricultural
services supplied bythemthefixedpercentage providedforinparagraph 4«
Thisoffsetting shallexcludeallotherformsofdeduction .
8.Asregardssuppliesofagricultural products andagricultural services
byaflat–ratefarmertoataxablepersonotherthanaflat–ratefarmer,
thefixedpercentage shallbepaid,according astheMemberStatesshall
provide:
a)eitherbythetaxablepersontowhomthegoodsorservicesaresupplied ;
or
b)bythepublicauthorities .
9.Asregardsallsuppliesofagricultural products andagricultural services
otherthanthosecoveredbyparagraph 8,thefixedpercentage shallbe
paidbytherecipient ofsuchsupplies.
10.Inrespectofthetransactions specified inparagraph 8,thetaxableperson
towhomthegoodsorservices aresupplied :
–shalldrawupinduplicate apurchase document tobeusedinplaceof
theinvoice,whichshallclearlystate,interalia,thepriceexclusive
oftaxand,wherepursuanttoparagraph 8(a)thefixedoffsettingper­
centageispayablebyhim,theamountpaidbyhimtotheflat–rate

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farmermrespectofthatpercentage ;suchpersonmayhoweverdrawupa
combined purchase documentsettingout,forastatedperiod,allhis
transactions withaparticular flat–ratefarmer;
–shallgivetheflat–ratefarmeracopyofsuchpurchase document ;
–shallkeep,inaccordance withrulestohelaiddown "bytheindividual
MemberStates,acopyofthedocument countersigned bythefarmer;
–shallbeentitled,whereheisrequiredpursuanttoparagraph 8(a)topay
thefixedoffsettingpercentage ,todeductfromthevalueaddedtaxdue
fromhimanamountequaltothatpaid,asindicated onthepurchase
document ,totheflat–ratefarmerinrespectofthatpercentage ..
11.Nofixedoffsetting percentage shallbepayabletoaflat–ratefarmerin
respectofthefollowing transactions :
a)suppliesbysuchfarmerbywayofexportation ;
b)thesupplybysuchfarmerofnon–agricultural productsornon–agricultural
services .
12.Thefollowing transactions shallnotqualifyfortheflat–ratescheme:
a)commercial distribution byaflat–ratefarmeror:
–supplies ofagricultural products whichhavebeenprocessed withmeans
notnormally employed onanagricultural ,forestry orfisheries Tinder-
taking;or
–supplies ,inexcessoflimitstobedetermined bytheMemberStates
subjecttoconsultation withtheValueAddedTaxCommittee asprovided
inArticle30,ofgoodsnotproducedintheagricultural ,forestryor
fisheries undertaking oftheflat–ratefarmerinquestion ;
b)servicesprovidedbytheflat-ratefarmeronaregularbasisand/orby
meansofequipment notnormallyassociated withanagricultural ,forestry
orfisheries undertaking ofthetypeoperated byhim.

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Inrespectofthesetransactions theflat–ratefarmershallbesubjecttothe
normalvalueaddedtaxschemeor,astheoasemayhe,tothesimplified
schemeprovidedforinArticle25(l)(b).
Detailedrulesfortheapplication ofthisparagraph shall "beadopted "by
theMemberStates.
13.Thefollowing shall "beexcluded fromtheflat–rateschemeandshallbe
subjecttothenormalvalueaddedtaxschemeor,asthecasemaybe,to
thesimplified schemeprovidedforinArticle25(l)(b):
a)farmerswhoalsocarryonanon–agricultural occupation inrespectof
whichtheyarealreadysubjecttothenormalvalueaddedtaxschemeor
tothesimplified schemeprovidedforinArticle25(l)(b);
b)farmersoperating anagricultural ,forestryorfisheries undertaking
theannualturnover ofwhichexceeds 50000unitsofaccount;
c)anyagricultural ,forestryorfisheries undertaking legallyconstituted
asapartnership orcompany.
14.EachMemberStatemayexcludefromtheflat–rateschemecertaincategories
offarmers,andfarmerstowhomthenormalvalueaddedtaxscheme,oras
thecasemaybethesimplified schemeprovidedforinArticle25(l)(b),can
beappliedwithoutgivingrisetoadministrative difficulties .

-86-
15.Everyflat-rate farmermayopt,subjecttotherulesandconditioBs tobelaid
downbyeachMemberState,forapplication ofthenormalvalueadded
taxschemeor,asthecasemaybe,thesimplified schemeprovided forin
Article25(1)(b).
16.TheCommission shall,beforetheendofthesixthyearfollowing the
entryintoforceofthisDirective ,presenttotheCouncilnewproposals con­
cerningtheapplication ofthevalueaddedtaxtotransactions in
respectofagricultural products andservices .
17#TheAnnexesA,BCreferredtointhisArticlemaybeamendedin
accordance withtheprocedure laiddowninArticle 31.

-87-
TitleXVT!Transitional provisions
Artide 28
1.Theexemption providedforinArticle16(13)(C)shallapplyuntil1January
1977.
TheCommission shallinduecoursemaketotheCouncilproposals concerning
thetaxschemetobeappliedfrom1January 1977tointernational passenger
transport byseaandair.
2.Anyprovisions "broughtintoforce "bytheMemberStatesinexercise ofthe
rightsconferred onthembyArticle 17oftheSecondCouncilDirective
No67/228/EECof11April1967shallwitheffectfrom1January1975cease
toapply.
However,thoseMemberStateswhichhaveexercised therightconferred under
thelastindentofthisArticleregarding exemption withrefundofanytax
paidatthepreceding stage,maymaintaininforcetheexemptions existing
on1April1973oijonthedateonwhichCouncilDirective No67/228/EECof
11April1967cameintoforce,untilsuchdateasshallbefixedbythe
Councilonaproposal fromtheCommission .Suchdatenottobelaterthan
thatonwhichthechargingoftaxonimports andtheremitting oftaxon
exportsintradebetweentheMemberStatesareabolished .TheMemberStates
shalladoptthenecessary provisions toensurethattaxablepersonsdeclare
therealturnover ,calculated inconformity withthisDirective ,inrespect
ofsuchexempttransactions .
3.MemberStateswhichavailthemselves oftheprovisions ofthesecondsubpara­
graphofparagraph 2shallsupplytotheCommission ineverytwoyears,and
forthefirsttimebefore30June1975»withsuchinformation aswillenable
ittodetermine whetherthegroundsonwhichtheexemptions referredtoin
thatsubparagraph havebeenmaintained inforcestillobtain.TheCommission
shalltakesuchinformation intoaccountinthereportsprovided forin
Article 32andwillmakeproposals insuchreportsfortheadaptation by
stagesoftheabovementioned exemptions totheobligations resulting from
theachievement ofEconomic andMonetary Union.

-88-
TitleXVII:ValueAddedTaxCommittee
Article 29
1.AValueAddedTaxCommittee ,hereinafter called "theCommittee ",is
herebysetupandshallconsistofrepresentatives oftheMemberStates
witharepresentative oftheCommission asChairman .
2.TheCommittee shallestablish itsownrulesofprocedure .
Article 30
Inaddition totheconsultations madecompulsory byArticles 25and27,the
Committee mayexamineanyquestion relating totheapplication ofanyCommu­
nityactconcerning thevalueaddedtax,raisedbytheChariman eitheron
hisowninitiative orattherequest oftherepresentative ofaMemberState.
Article 31
1.Withoutprejudice toArticles 12,15,16and27,themeasures necessary
forapplying thisDirective shallbeadopted inaccordance withthepro­
cedurelaiddowninparagraphs 2and3-
2.Therepresentative oftheCommission shallsubmittotheCommittee adraft
ofthemeasures tobetaken,considering inparticular theconsequences
thereofbothonthefairness ofcompetition atnational andinternational
levelandonownresources .TheCommittee shalldeliver itsOpinion on
suchmeasures withinatime-limit whichmaybesetbytheChairman accor­
dingtotheurgencyoof thematter .Opinions shallbedelivered byamajo­
rityof'flvotes,thevotesoftheMemberStatesbeingweighted inaccor­
dancewithArticle1^8(2)oftheTreaty .Thechairman shallnotvote.

-89-
3.a)TheCommission shalladopttheproposedmeasures wheretheyarein
accordance withtheOpinionoftheCommittee .
b)Wherethemeasures arenotinaccordance withtheOpinionofthe
Committee ,orintheabsence ofsuchOpinion ,theCommission shall
withoutdelaymaketotheCouncilproposals concerning themeasures
tobetaken.TheCouncilshallactbyaqualified majority .
c)If,threemonthsaftertheproposal wasmadetotheCouncil ,the
Councildoesnotact,theproposed measures shallbeadoptedbythe
Commission .

-90-
TitleXVIII :Miscellaneous provisions
Artide 32
Forthefirsttimeon1January197bandthereafter everytwoyears ,the
Commission shall,afterconsulting theMemberStaes ,sendtheCouncil -a.
reportontheapplication ofthecommonvalueaddedtaxsysteminthe
MemberStates .
Article 33
Attheappropriate timetheCouncil ,actingonaproposal fromtheCom­
mission andinaccordance withtheinterests ofthecommonmarket ,shall
adoptfurtherDirectives onthecommonvalueaddedtaxsystem ,inparti­
culartorestrict progressively ortorepealmeasures takenbytheMember
Statesbywayofderogation fromthesystem ,inordertoachieve complete
paralellism ofthenational valueaddedtaxsystemsandthuspermitthe
attainment oftheobjective statedinArticle koftheFirstDirective .
Article 3^
Thefollowing provisions oftheFirstCouncilDirective ,No.67/227/EEC
of11April1967,arerepealed :
a)thefourthsubparagraph ofArticle 2:
b)Article5.
Article 35
TheSecondCouncilDirective ,No.67/228/EEC,of11April1967ishereby
repealed witheffectfrom31December 1974*
Article 36
ThisDirective isaddressed totheMemberStates .

-91-
ANNEX A
LISTOFACTIVITIES INAGRICUL TURALPRODUCTION
I.CROPPRODUCT!Off
1.Generalagriculture ,including wine-growing .
2.Growingoffruit(including olives)and.ofvegetables ,flowersand
ornamental plants,bothintheopenandunderglass.
3.Production ofmushrooms ,spices,seedsandpropagating materials ;
nurseries .
II.STOCKFARMCTG ïïSTfTOBPsLATO?
1.Generalstockfarming
2.Poultryfarming
3.Rabbitfanning
4.Beekeeping
3'Silkworm farming
6.Snailfarming
III.FORESTR Y
IV.FISHERIES
1.Freshwaterfishing
2.Fishfarming
3.Breeding ofmussels,oystersandothermolluscs andcrustaceans
4.Frogfarming
V.Whereafarmerprocesses ,usingmeansnormally employedinanagricultural ,
forestryorfisheries undertaking ,productsderivingessentially fromhis
agricultural production ,suchprocessing shallalsoberegarded as
agricultural production *

-92-
ANNEX B
LISTOFAGRICUL TUHALSERVICES
Fieldwork,reapingandmowing,threshing ,haling,collecting ,harvesting ,
sowingandplanting ;
Packing andpreparation formarket,forexampledrying,cleaning ,
grinding ,disinfecting andensilage ofagricultural products ;
Storageofagricultural products ;
Stockminding,rearingandfattening ;
Hiringoutofagricultural machinery ;
Technical assistance ;
Destruction ofweedsandpests,dustingandsprayingofcropsandland;
Operation ofirrigation equipment ;
Lopping,+,reefellingandotherforestryservices.

-93-
ANNEX C1
COMMON METHOD OFCALCULA TION
I.Forthepurposes ofcalculating thevalueaddedtaxchargeoninputsina
MemberStatefor,respectively ,allagricultural andfisheries undertakings
andallforestry undertakings ,thefollowing shallbetakenintoaccount:
1)Thevalueofthetotalfinalproduction ,exclusive ofvalueaddedtax,
ofrespectively theClasses"agricultural products andgame"and"waod
intherough"assetoutbelowatpointsIIIandIV,plustheoutputof
theprocessing activities referredtoinpointVofAnnexA;
2)Totalinputsinrespectoftheproduction andoutput
referredtoin(l);
3)Grossfixedassetproduction inconnection withtheactivities listed
inAnnexA.
II.Therespective valueaddedtaxchargesoninputsshallbeexpressed asthe
relationship betweenthestunofthetotalvalueaddedtaxdeductible under
Article17oftheDirective attaching toinputsasreferredtoinpoint1(2)
andtogrossfixedassetproduction asreferredtoinpointI(3),andthe
valueoftotalfinalproduction ,exclusive ofvalueaddedtax,asreferred
toinpointl(l).
III.Agricultural products andgame SPECcodenumber
Cereals (excluding rice)
Wheatandspelt
Winterwheatandspelt 10.01.11
10.01.191
1
Winterwheatandspelt
Springwheat
Durumwheat 10.01.51
10.01.59
Winterwheat
Springwheat
'Theclassification inthisAnnexisthatusedinthe30ECEconomic
AccountsforAgriculture .

-94-
Ryeaadmeslin
Rye
Winterrye
Springrye
Meelin
Barley
Springbarley
Winterbarley
Oatsandsummermesiin
Oats
Summermeslin
Maize
Othercereals (excluding rice)
Buckwheat
Millet
Grainsorghum
Canaryseed
Cereals ,notelesewhere specified
(excluding rice)
Rice(inthehuskorpaddy)
Puises
Driedpeasandfodderpeas
Driedpeas(otherthanforfodder)
Driedpeas(excluding chickpeas)
Chickpeas
FodderPeas
Haricotbeans ,broadandfieldbeans
Haricot beans
Broadandfieldbeans10.02.00
10.01.11
10.01.19
10.03.10
10.03.90
10.0^.10
îo.oif.90
10.05.10
10.05.92
10.07.10
10.07.91
10.07.95
10.07.96
10.07.99
10.06.11
07.05.112
2
07.05.15
07.05.95

-95-
Otherpulses
Lentils 07.05=91
Vetches 12.03.31 2
Lupins 12.03.^9 *
Driedpulses
notelsewhere classified ,pulse 07.05.97
mixtures andcerealand
pulsemixtures
Roots,brassicasgroupforfodder
Potatoes
Potatoes (excluding seedpotatoes )
Newpotatoes 07.01.13
07.01.15
Maincroppotatoes 07.01.17
07.01.19
Seedpotatoes 07.01.11
Sugarbeet 12.04.11
Mangolds andfodder "beet;swedes ,foddercarrots
anddodderturnips ;otherrootsandfodder "brassicas
Mangolds andfodder "beet }
12.10.10Swedes ,foddercarrots , i
fodderturnips 1 12.10.10
Swedes \
1
Foddercarrots , !
fodderturnips !
Foddercabbages andkales 12.10.99
Otherrootsandfodderbrassicas
Jerusalem artichokes 07.06.10
Sweetpotatoes 07.06.50
Rootsandfodderbrassicas not
elsewhere specified O7.O6.3O
12.10.99
Industrial crops
Oilseedsandoleaginous fruit
(excluding olives )
Colzaandrapeseed 12.01.91
Wintercolza
Summercolza
Rape
Sunflower Seed 12.01.95
Soyabeans 12.01.^0
Castor6eed 12.01.50
Linseed 12.01.6l
12.01.69

-96-
Sesame ,hemp,mustardandpoppyseed
Sesameseed
Hempseed
Mustard seed
Oilpoppyandpoppyseed
Fibreplants
Flax
Hemp
Unmanufactured tobacco (including driedtobacco )
Hops
Otherindustrial crops
Chicoryroots
Medicinal plants ,aromatics ,spices
andplantsforperfume extraction
Saffron
Caraway
Medicinal plants ,aromatics , '
spicesandplantsforperfume >
extraction notelsewhere specified ■
Freshvegetables
Cabbages forhumanconsumption
Cauliflowers
Othercabbages
Brussels sprouts
Whitecabbages )
Redcabbages )
Savoycabbages !
Greencabbages !
Cabbages notelsewhere specified !
Leafandstalkvegetables otherthancabbages
Celeryandceleriac
Leeks
Cabbagelettuces12.01.97
12.01.9^
12.01.92
12.01.93
5^.01.10
57.01.10
2^.01.10
2^.01.90
12.06.00
12.05.00
09.10.31
07.01.82
09.09(11-13-15-17-18)
09.10(11-20-51-55-71)
12.07(10-20-30-^0-50-
60-70-80-91-99)
07.01.21
07.01.22
07.01.26
07.01.23
07.01.27 1
07.01.51
07.01.53
07.01.97 2
07.01.68
07.01.31
07.01."

-97-
Endives
Spinach
Asparagus
Witloofchicory -
Artichokes
Otherleafandstalkvegetables
Cornsalad
Cardoons andediblethistle
Fennel
Rhubarb
Cress
Parsley
Brocoli
Leafandstalkvegetables not
elsewhere specified
Vegetables grownforfruit
Tomatoes
Cucumbers andgherkins
Melons
Aubergines ,^narrowsandpumpkin^courgettes
Sweetcapsicum
Othervegetables grownforfruit
Rootandtubercrops
Kohlrabi
Turnips 5
Carrots 5
Garlic
Onionsandshallots
Beetroot (redbeet)
Salsifyandscorzonera
Otherrootandtubercrops(chives ,
radishes ,Frenchturnips ,horseradishes )
Podvegetables
Greenpeas
Bean8
Otherpodvegetables
Cultivated mushrooms07.01.36
07.01.29
07.01.71
07.01.34
07.01.73
07.01.36
07.01.37
07.01.91
07.01.97
07.01.75
07.01.7 7
07.01.83
07.01.85
08.09.10
07.01.95
07.01.93
07.01.97 3
07.01.27 2
07.01.54
07.01.67
07.01.(62-63-66)
307.Ol.56
307.01.59
07.01.41
07.01.^3
07.01.45
07.01.47
07.01.49
07.01.87

-98-
Freshfruit ,including citrusfruit
(excluding grapesandolives )
Dessertapplesandpears
Dessertapples
Dessertpears
Ciderapplesandperrypears
Ciderapples
Perrypears
Stonefruit
Peaches
Apricots
Cherries
Plums(including greengages ,
mirabelles andquetsches )
Otherstonefruit
Nuts
Walnuts
Hazelnuts
Almonds
Chestnuts
Othernuts(excluding tropical nuts)
Pistaches
Nutsnotelsewhere specified
Othertreefruits
Figs
Quinces
Othertreefruits ,notelsewhere specified
(excluding tropical fruit)
Strawberries
Berries
Blackcurrants andredcurrants
Blackcurrant 8
Redcurrant8
Raspberries
Gooseberries08.06(13-15-17)
08.06(36-38 )
08.06.11
08.06.32
08.07.32
08.07.10
08.07(51-55 )
08.07(71-75 )
08.07.90
08.05.31
08.05.91
08.05.11
08.05.19
08.05.50
08.05.70
08.05.97 1
08.03.10
08.06.50
08.09.90 1
08.08(11-15 )
08.08Λ1
Ο8.Ο8Λ9
08.08.90
Otherberries (e.g.cultivated blackberries )5o8.09«90

-99-
Citrusfruit
Oranges 08.02(21-22-24-27)
Mandarines andClementines 08»02(32-36)
Lemons 08.02.50
Grapefruit 08.02.70
Othercitrusfruit 08.02.90
Citrons -
Limes *-
Bergamots -
Citrusfruitnotelsewhere specified -
Grapesandolives
Grapes
Tablegrapes 08.04(21-23)
Othergrapes (forwinemaking,fruitjuice
production andprocessing intoraisins ) 08.04(25-27)
Olives
Tableolives O7.Ol.78
Otherolives (foroliveoilproduction ) 07.01.79
07.03.13
Othercropproducts
Foddercrops 12.10.99 1
Nurseryproducts
Fruittreesand"bushes 06.02(19-40-51-55)
Vineslips 06.02(10-30)
Ornamental treesandshrubs 06.02(71-75-79-98)
Forestseedlings andcuttings 06.02.60
Vegetable materials usedprimarily forplaiting
Osier,rushes,rattans 14.01(11-19-51-59)
Reeds,bamboos 14.01(31-39)
Othervegetable materials usedprimarily forI4.OI.9O
plaiting
Flowers ,ornamental plantsandChristmas trees
Flowerbulbs,cormsandtubers 06.01.10
(l)e.g.Hay,clover (excluding brassicas )

-100-
Ornamental plants
Cutflowers,branches andfoliage
Christmas treea
Perennial plants
Seeds
Agricultural seeds(1)
Flowerseeds
Products gatheredinthewild(2
By-products fromcultivation^'ofi
Cereals (excludingrice)
Rice
Pulses
RootcropB
Industrial crops
Freshvegetables
Fruitandcitrusfruit
Grapesandolives
Othercrops
Cropproducts notelsewhere specified06.01(31-39)
06.03(11-15-90)
06.04(20-40-50)
06.04.90
06.02.92
06.02.95
12.03(11-19-35-39-44-
46–84–86–89 )
12.03.31 1
12.03.49 1
12.03.81
07.01(88-89)
08.05.97 2
08.08.31
08.08.35
08.08.90 2
23.06.10 1
08.08.49 2
12.08(10-31)
12.08.90
12.09.00
13.03.12
14.02(10-21-23-25-^9)
14.03.00
I4.O4.OO
14.05(11-19)
15.16.10
23.06.10 2
23.06.30
13.01.00
(1)Excludingcerealseeds,riceseedsandseedpotatoes (011*1,011.2,011*4)
(2)e.g.wildmushrooms,cranberries ,bilberries ,blackberries ,wildraspberries ,
2tc...
(3)e.g.straw,beetandcabbagetops,peaandbeenhusks

-101-
Grapemustandwine
Graperaust
Wine
By–products ofwineproduction
Oliveoil
(2)Pureoliveoilv'(1
Oliveoil-unrefined2
By-products ofoliveoilextraction(322.04.00
22.05(21-25-31-35-41-44-
45-47-51-57-59-61-69)
23.05.00
i5.O7.O6
15.07(07-08)
23.04.05
Cattle
Domestic cattle
Calves
Otheroattle,lessthan1yearold
Heifers
Cows
Malebreeding animals
1-2yearsold
Morethan2yearsold
Cattleforslaughtering andfattening
1-2yearsold
Morethan2yearsold
Pigs
Domestic pigs
Piglets01.02<11-13-14-15-17)
01.03(11-15-17)
(1)e.g.winelees,argol,etc...
(2)thedistinction "betweenthesetwoproductsisbasedonthemethodofpro­
cessingratherthanondifferentproduction stages
(3)e.g.oliveoiloakesandotherresidualproductsofoliveoilextraction

-102-
Youngpigs _
Pigsforfattening _
Sowsandgiltsfor"breeding _
Breeding boars _
Eqruines
Horses 01.01(11-15-19)
Donkeys 01.01.31
Mulesandhinnies 01.01.50
Sheepandgoats
Domesticshee? OI.O4(11-13)
Domesticgoats Ol.O4.l5
Poultry ,rabbits ,pigeonsandotheranimals
Hens,cooks,cockerels ,pullets ,chicks 01.05(10-91)
Ducks 01.05,93
Geese Ol.O5.95
Turkeys Ol.O5.97
Guinea-fowl Ol.O5.98
Domesticrabbits 01.06.10
Domesticpigeons 01.06.30
Otheranimals
Bees -
Silkworms -
Animals rearedforfur -
Snails(excluding sea-snails ) 03,03.66
Animalsnotelsewhere specified 01.06.99
02.04.99 1
Gameandgamemeat
(1)Game 01,01.39
01.02.90
01.03.90
01.04.90
01.06.91
Gamemeat 02.04.30
(l)Livegameincludesonlyspeoiallyrearedgameandothergamekeptincapti­
vity.

-103-
Milk,untreated
Cow'smilk
Ewe'smilk
Goat'smilk
Buffalomilk
Heneggs
Hatching eggs
Other
Othereggs
Hatching eggs
Other
Otherlivestock prod-acts
Rawwool(includinganimalhairv^)
Honey
Sikworm cocoons
By–products oflivestock production
Livestook productsnotelsewhere specified2)
AGRICUL TURALSERVICES(3
AGRICUL TURALPRODUCTS ALMOST EXCLUSIVEL YIMPORTED
Tropicaloilseedsandoleaginous fruit
Ground-nuts
Copra
Palmnutsandkernels
Cottonseed
Oilseedsandoleaginous fruitnotelsewhere
specified04.05.12 1
O4.O5.i4
04.05.12
04.05.16
O4.O5.I8
53.01(10-20)
53.02(93-95)
04.06.00
50.01.00
15.15.10
43.01(10-20-30-90)
53.02.97
12*01*11
12.01.15
12.01.20
12.01.30
12.01.96
12.01.99
(1)Ifitisaprincipal product.
(2)e.g.skinsandanimalhairandpeltsofslaughtered game,wax,manure,
liquidmanure
(3)i.e.serviceswhicharenormallyprovidedbyagricultural holdings
themselves ,e.g.ploughing ,mowingandreaping,threshing ,tobaccodrying,
shee]>-shearing ,careofanimals.

-104-
Tropical fibreplants
Cotton
Otherfibreplants
Manilahemp
Jute
Sisal
Coir
Ramie
Fibreplants ,notelsewhere specified
Othertropical plantsforindustrial use
Coffee
Cocoa
Sugarcane
Tropical fruit
Tropical nuts
Coconuts
Cashewnuts
Brazilnuts
Pecans
Othertropical fruit
Dates
Bananas
Pineapples
Papaws
Tropical fruit,notelsewhere specified
Ivory,unpolished55.01.00
57.02.00
57.03.10
57.04.10
57.04.30
54.02.00
57.04.50
09.01.11
18.01.00
12.04.30
O8.Ol.75
08.01.77
08.01.80
08.05.80
08.01.10
08,01(31-35)
08.01.50
08.08.50
08.01(6O-99)
05.10.00
IV.WOODINTHER0UGH
Coniferous timberforindustrial uses
Coniferous longtimber
-1logs
(1)fir,spruce,douglas
(2)pine,larch
-2minetimber
(1)fir,spruce,douglas
(2)pine,larch

-105-
•*3otherlongtimber
(1)fir,spruce,douglas
(2)pine,larch
Coniferous ply–wood
-1fir,spruce ,douglas
-2pine,larch
Cor.iferous firewood
Pir,spruce ,douglas
Pine,larch
Leaf-woodforindustrial uses
Longtimber (leaf-wood)
-1logs
(1)oak
(2)beech
(3)poplar
(4)other
-2minetimber
(1)oak
(2)other
-3otherlongtimber
(1)oak
(2)beech
(3)poplar
(4)other
Ply-wood (leaf)
-100k
-2beech
-3poplar
-4other
Firewood (leaf)
oak
beech
poplar
other
Forestryservices^
Otherproducts (e.g.bark,cork,resin)
(l)i.e.Serviceswhichareusuallyperformed byforestryundertaking themselves
(e.g.fellingoftimber)