amending Implementing Decision 2013/53/EU authorising the Kingdom of Belgium to introduce a special measure derogating from Article 285 of Directive 2006/112/EC on the common system of value added tax

EXPLANATORY MEMORANDUM

Pursuant to Article 395(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (hereafter ‘the VAT Directive’), the Council, acting unanimously on a proposal from the Commission, may authorise any Member State to apply special measures for derogation from the provisions of that Directive in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance. By letter registered with the Commission on 12 September 2018, Belgium requested an authorisation to continue to exempt from VAT taxable persons whose annual turnover is no higher than EUR 25 000. In accordance with Article 395(2) of the VAT Directive, the Commission informed the other Member States by letters dated 14 September 2018. By letter dated 17 September 2018, the Commission notified Belgium that it had all the information necessary to consider the request.

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

Chapter 1 of Title XII of the VAT Directive allows for the possibility for Member States to apply special schemes for small enterprises, including the possibility of exempting taxable persons below a certain annual turnover. This exemption implies that a taxable person does not have to charge VAT on his supplies and, consequently, he cannot deduct the VAT on his input. Under Article 285 of the VAT Directive, Member States which did not make use of Article 14 of Council Directive 67/228/EEC, can exempt taxable persons whose threshold is no higher than EUR 5 000. As Belgium did not make use of this option, this resulted in the application of a particularly low threshold which in 2012 corresponded to EUR 5 580. At the request of Belgium, by Council Implementing Decision 2013/53/EU the Council authorised Belgium to exempt from VAT taxable persons whose annual turnover is no higher than EUR 25 000 until 31 December 2015. This decision was prolonged until 31 December 2018 by Council Implementing Decision (EU) 2015/2348. Belgium requested an extension of that measure for another limited period. Belgium indicated that the special measure reduces administrative burden for taxable persons and for tax authorities. It therefore contributes to the simplification of tax collection, as set out in Article 395(1) of the VAT Directive. The measure is and will remain fully optional for taxable persons. According to Belgium, at the end of 2017 around 142 000 taxpayers, being 15% of all registered taxpayers made use of the special measure. The impact of the special measure on VAT revenues remains negligible. Given a potential positive impact on the reduction of administrative burden for businesses and tax administration without a major impact on the total VAT revenue, it is proposed to extend the derogation for another limited period, until 31 December 2021.

The Commission has recently launched a proposal modifying Articles 281 to 294 of Directive 2006/112/EC governing the special scheme for small enterprises. It is thus possible that a directive amending those Articles enters into force and sets a date from which Member States are to apply national provisions to implement it. If this date is set before the derogation expires on 31 December 2021, this Decision should cease to apply.

•Consistency with existing policy provisions in the policy area

Similar derogations have been granted to other Member States. Luxembourg was granted a threshold of EUR 30 000, Estonia a threshold of EUR 40 000, Italy a threshold of EUR 65 000, Croatia a threshold of EUR 45 000, Latvia a threshold of EUR 40 000 and Romania a threshold of EUR 88 500.

Derogations from the VAT Directive should always be limited in time so that their effects can be assessed. Moreover, the provisions of Articles 281 to 294 of the VAT Directive on a special scheme for small enterprises are currently subject to review. As announced in the VAT Action Plan, and the 2017 Commission Work Programme, the Commission's proposal on the SMEs scheme has recently been presented.

It is therefore proposed to grant the derogating measure until 31 December 2021 or until the date from which Member States are to apply any national provisions that they are required to adopt in the event that a directive is adopted amending Articles 281 to 294 of Directive 2006/112/EC.

•Consistency with other Union policies

The measure is in line with the Union's objectives for small businesses, as laid down in the Commission Communication "Think small first" – a "Small Business Act" for Europe" which calls on the Member States to take account of the special features of SMEs when designing legislation and, therefore, to simplify the existing regulatory environment.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY