COMMISSION OF THE EUROPEAN COMMUNITIES 
C0MC89) 614 finat 
Brussels, 6 December 1989 
Proposal for a 
COUNCIL DECISION 
authorizing the Ftenah Repuhlio to apply 
a measure derogating from Article 2 of 
the Sixth Council Directive (77/388/EBC) 
of 17 May 1977 on the harmonization of the 
laws of the Member States relating to 
turnover taxes 
(presented by the Commission) 
C*YV\ folk 
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1. By letter received on 29 September 1989, the French Government submitted 
to the Commission a request for a derogation under Article 27 of the 
Sixth VAT Directive1 for a period of three years expiring on 
31 December 1992. The derogation is designed principally to prevent 
certain types of tax evasion or avoidance and secondarily to simplify 
the procedure for collecting VAT. These fraudulent practices, which 
have consisted mainly of the Issuing of false invoices designed to 
transfer an entitlement to tax deduction (with the invoiced taxes never 
being repaid to the Treasury), have in the past caused considerable 
revenue losses for the Treasury. These practices were perpetrated 
mainly by small-scale vaste recovery operators which had no permanent 
establishment and which were therefore difficult to monitor. 
This derogation from Article 2 of the Sixth Directive is intended not 
to subject to compulsory taxation all transactions involving supplies 
of fresh industrial waste and récupérable material. Such transactions 
should be subject to tax as from 1 January 1990 in accordance with 
Article l(2)(a) of the Eighteenth Council Directive (89/465/EBC) of 
18 July 1989.2 
2. The arrangements envisaged by the French Government consist of exempting 
from VAT: 
(i) supplies by: 
- firms with an annual turnover of less than FF 500 000; 
- firms which do not have a permanent establishment or which, 
although they have a permanent establishment, recorded a 
turnover in respect of such products in the previous year of 
less than FF 6 million, unless they are authorized to subject 
such transactions to VAT; 
1 OJ NO L 148, 13.6.1977. 
2 OJNO L 226, 3.8.1989. 
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Cii) imported supplies. 
3. The French Government also points out that half the firms in the 
sector, which account for more than 80% of the total turnover, would in 
future be subject to VAT in respect of such transactions. The transactions 
not subject to tax would be those carried out by firms operating mostly 
outside commercial channels; the exemption of their transactions should not 
therefore entail any distortion of competition, m any case, the value of 
the reoovered product does not escape taxation when sales are made by users 
of that product. 
4. The authorization would be valid until 31 December 1992. Prior to that 
date, the Commission would present to the Council a report on the 
application of this authorization. 
5. In accordance with Article 27(3) of the Sixth VAT Directive, the other 
Member States were Informed of the French request by letter dated 
27 October 1989. 
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Proposal for a 
COUNCIL EBCISICH 
authorizing the French Hepublic to apply a measure 
derogating from Article 2 of the 
Sixth Council Directive (77/388/EBC) of 17 Ifay 1977 
on the harmonization of the laws of the Member States 
relating to turnover taxes 
THE COUNCIL OF THE EUROPEAN OCMMDNITIES, 
Having regard to the Treaty establishing the European Economic Community, 
Having regard to the Sixth Council Directive (77/388/EBC) of 17 May 1977 on 
the harmonization of the laws of the Member States relating to turnover 
taxes - Common system of value added tax: uniform basis of assessment,1 
and in particular Article 27 thereof, 
Having regard to the proposal from the Commission, 
Whereas, under Article 27(1) of the aforementioned Directive, the Council, 
acting unanimously on a proposal from the Commission, may authorize any 
Member State to introduce special measures for derogation from that 
Directive in order to simplify the procedure for charging the tax or to 
prevent certain types of tax evasion or avoidance; 
Whereas the Eighteenth Council Directive (89/465/EBC) of 18 July 19892 
abolishes, as from 1 January 1990, the transitional derogation provided for 
in Article 28(3) (b) of the Sixth Direotive/ read in conjunction with 
point 20 of Annex F, which permits Member States to continue to exempt 
1 OJNO L 145, 13.6.1977. 
2 OJNO L 226, 3.8.1989. 
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supplies of récupérable material and fresh industrial waste; whereas the 
arrangements for taxing such supplies pose problems In France because some 
waste recovery operators have been accustomed in the past to 
issue false invoices designed to transfer an entitlement to tax deduction, 
with the taxes invoioed not being paid to the Treasury; whereas, by letter 
to the Commission dated 29 September 1989, the French Republio requested 
authorization to introduce a special measure derogating from Article 2 of 
the Sixth Directive; 
Whereas that special measure consists: 
- firstly of exempting transactions carried out by taxable persons whose 
annual turnover in respect of such products is below a given amount and 
restricting taxation to transactions carried out by firms which, by 
their structure, show themselves to be reliable and of good repute in 
tax matters; the authorities are to check these conditions under an 
authorization procedure which may Involve the provison of a guarantee; 
and 
- secondly of exempting imports; 
Whereas this measure constitutes a derogation from Article 2 of the 
Sixth Directive, according to which all supplies of goods or services 
effected for considération within the territory of a country by a taxable 
person acting as such and all Imports of goods are subject to value added 
tax; 
Whereas the authorization requested can be granted under certain conditions; 
Whereas the authorization shall be temporary, in accordance with the request 
made by the Republic of France, whereas this will permit an evaluation of 
the effects of the measure after a certain period of application; 
Whereas the Commission will present a report to the Council, before 31 De­
cember 1992, on the application of this authorization perhaps accompanied 
by a proposal for a Decision to prolong it; 
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Whereas this derogation wi 11 not have a negative effect on the European 
Communities' own resources accruing from value added tax; 
Whereas the other Member States were informed of the French Republic's 
request on 27 October 1989, 
HAS ADOPTED THIS DBŒSXGN: 
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Article 1 
By way of derogation from Article 2 of the Sixth Directive, the 
French Republic is hereby authorized, until 31 December 1992 and In respect 
of fresh Industrial waste and récupérable material, to exempt from value 
added tax: 
(i) supplies made by: 
- firms whose annual turnover is less than FF 500 000; 
- firms which do not have a permanent establishment or which, although 
they have a permanent establishment, have achieved in the previous year 
a turnover figure in respect of such products of less than FF 6 million, 
unless they are authorized to subject such transactions to VAT; 
(ii) Imported supplies. 
Article 2 
In the light of a report from the Commission on the application of the 
authorization referred to In Article 1, accompanied, where appropriate, by 
a proposal for a decision, the Council, acting on the basis of that 
proposal, shall determine, before 31 December 1992, whether the said 
authorization is to be extended. 
Article g 
This Decision is addressed to the French Republic. 

ISSN 0254-1475 
COM(89) 614 final 
DOCUMENT 
EN 09 
Catalogue number : CB-CO-89-578-EN-C 
ISBN 92-77-55697-S 
Office for Official Publications of the European Communities 
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