Proposal for a Council Directive amending Directive 77/388/EEC as regards the value-added tax arrangements applicable to telecommunications services (97/C 78/05) (Text with EEA relevance) COM(97) 4 final - 97/0030(CNS)

(Submitted by the Commission on 3 February 1997)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 99 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the Economic and Social Committee,

Whereas Article 7a of the Treaty defines the internal market as an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaty;

Whereas the rules currently applicable to VAT on telecommunications services are inadequate for taxing all such services consumed within the Community and for preventing distortions of competition in this area;

Whereas, in the interests of the proper functioning of the internal market, such distortions must be eliminated and new harmonized rules introduced for this type of activity;

Whereas action should be taken to ensure that telecommunications services used by customers established within the European Union are taxed;

Whereas, for the purpose of establishing a special rule for determining the place of supply of telecommunications services, these services need to be defined; whereas such definition should draw on definitions already adopted at international level, which include international telephone call routing and termination services;

Whereas it has been agreed at international level, in accordance with the Melbourne Convention, to exempt telecommunications services supplied between telecommunications network operators; whereas this approach should be followed at Community level,

HAS ADOPTED THIS DIRECTIVE:

Article 1

Directive 77/388/EEC is hereby amended as follows:

1. In Article 9 (2) the full stop is replaced by a semicolon and the following section is added:

'(f) the place of supply of telecommunications services is the place where the customer has established his business or has a fixed establishment for which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides, if that place is outside the Community;

the place of supply of telecommunications services provided by a supplier established outside the Community to a customer who has established his business or has a fixed establishment for which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides within the Community, is the place where the customer is established. If a service-provider established outside the Community is identified for VAT purposes in a Member State on account of having supplied a telecommunications service there, he shall be deemed, for the purposes of this Article, to be established in that Member State;

telecommunications services shall be deemed to be services relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception.`

2. In Article 13 (B), the full stop is replaced by a semicolon and the following point is added:

'(i) the supply, between telecommunications network operators, of telecommunications services relating to the routing and termination of telephone calls.`

3. In Article 28f (1), '13 (B) (i)` is inserted in Article 17 (3) (b) after the words '. . . pursuant to Article . . .`.

4. In Annex F, point 5 is deleted.

Article 2

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 1 January 1999 at the latest. They shall inform the Commission thereof.

When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference at the time of their official publication. The procedure for such reference shall be adopted by the Member States.

2. Member States shall communicate to the Commission the text of the provisions of domestic law which they adopt in the field covered by this Directive.

Article 3

This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.

Article 4

This Directive is addressed to the Member States.