PROPOSAL FOR AN AMENDMENT TO THE PROPOSAL FOR A COUNCIL DIRECTIVE SUPPLEMENTING THE COMMON SYSTEM OF VALUE ADDED TAX AND AMENDING DIRECTIVE 77/388/EEC
Date: 1990-06-19
Institutions: European Commission
Subjects: VAT, intra-EU trade, single market, tax harmonisation

COMMISSION  OF  THE  EUROPEAN  COMMUNITIES 

C0MC90) 182 final - SYN 274 
Brussels,  19 June 1990 

PROPOSAL FOR AN 
AMENDMENT TO THE 
PROPOSAL FOR A COUNCIL DIRECTIVE 
SUPPLEMENTING THE COMMON SYSTEM OF VALUE ADDED TAX AND 
AMENDING DIRECTIVE 77/388/EEC 

TRANSITIONAL ARRANGEMENTS  FOR TAXATION 
WITH A VIEW TO ESTABLISHMENT OF THE INTERNAL MARKET 

(presented by the Commission) 

EXPLANATORY  MEMORANDUM 

1.  THE  ATTACHED  PROPOSAL  HAS  BEEN  DRAWN  UP  WITH  A  VIEW  TO  THE 
DEFINITIVE  ABOLITION  OF ALL  FISCAL  FRONTIERS  AND  IS  DESIGNED  TO 
EXPEDITE  PROGRESS  ON  THE  FISCAL ASPECTS  OF THE  INTERNAL  MARKET 

Completion  of  the  internal  market  has  as  its  corollary  the 
removal  of  fiscal  frontiers,  that  is  to  say,  "abolishing  the 
imposition  of  tax  on  the  importation  and  the  remission  of  tax 
on  exportation  in trade  between  Member  States".C1)  In  order  to 
give  practical  shape  to  the  commitments  made  by  the  Member 
States  in  this  connection,(2)  the  Commission  presented  in  1987 
a  proposal(3)  supplementing  the  common  system  of  VAT  as  laid 
down  in  the  Sixth  Directive.  That  proposal  forms  part  of  an 
overall  strategy  for  the  approximation  of  indirect  tax  rates 
and  harmonization  of  indirect  tax  structure. 

The  1987  proposal  introduces  the  principle  of  "taxation  in  the 
country  of  origin"  since  a  consequence  of  abolishing  fiscal 
frontiers  is  that  taxable  supplies  will  attract  tax  in  the 
country  from  which  goods  are  transported  to  another  Member 
State.  In  this  way,  intra-Community  sales  and  purchases  of 
goods  are  afforded  the  same  treatment  as  sales  and  purchases 
within  Member  States. 

(£) Directive  77/388/EEC,  OJ  No  L  145,  fifth  recital. 
(2) Article  99  of  the  Treaty  of  Rome  as  amended  by  the  Single  Act, 

etc 

(3) Proposal  COM(87)322,  OJ  No  C  252  of  22.9.87 

It  should  be  borne  in  mind  here  that  one  of  the  conclusions 
reached  by  the  Council  on  13 November  1989  was  that  these 
uniform  tax  arrangements  in  the  country  of  origin  remained  a 
"medium-term  objective".(4) 

The  ultimate  objective  has  thus  been  clearly  identified  and  is 
not  in  doubt.  The  attached  proposal  for  a  Directive  by 
amending  the  Sixth  Directive  as  amended  by  COM(87)  322,  thus 
1987  proposal,  by 
dovetails  with  and  supplements 
introducing  a  number  of  transitional  provisions  to  help  Member 
States  achieve  that  objective  under  optimum  conditions.  This 
proposal  takes  account  of  all  these  considerations. 

the 

2.  THE  TRANSITIONAL  TAX  ARRANGEMENTS  SET  OUT  BY  THE  COMMISSION  IN 
THE  ATTACHED  PROPOSAL  ARE  CONSISTENT  WITH  THE  GUIDELINES 
ADOPTED  BY  THE  COUNCIL  AND  WILL  HAVE  A  DYNAMIC  EFFECT  ON  THE 
PROCESS  OF ABOLISHING  FISCAL  FRONTIERS 

At  the  outset,  in  order  to  facilitate  rapid  adoption  of  the 
proposals  for  the  complete  abolition  of  fiscal  frontiers,  the 
Commission,  in  a  communication  sent  to  the  Council  and  to 
Parliament  on  14 June  1989,(5)  suggested  the  introduction  at 
the  earliest  possible  opportunity  of  a  transitional  phase 
between  now  and  the  end  of  1992  during  which  the  necessary 
adjustments  enabling  Member  States  to  give  practical  shape  to 
while 
be 
their 
reaffirming  the  principle  of  generalized  taxation  in  the 
country  of  origin,  the  Commission  developed  a  new,  pragmatic 
approach  which,  until  such  time  as  VAT  rates  had  been  brought 
sufficiently  into  line, would  secure  differential  treatment  for 
certain  classes  of  taxable  transaction  in  order  to  avoid  the 

made.  Furthermore, 

commitments 

would 

(4) conclusions of  the  ECOFIN  Council  of  13 November  1989 
(5) COM(89)  260  final. 

risks of distortion of competition that could arise in the case 
of  purchases  made  by  final  consumers  in  sectors  deemed  to  be 
sensitive.  Accordingly,  the  following  would  be  the  only 
transactions  that  would  continue  to be  taxed  at  the  rates  and 
under  the  conditions  obtaining  in  the  Member  States  of 
destination: 
- sales  to  institutional  non-taxable  persons  and  to  fully 

exempt taxable persons; 

- mail-order sales to private individuals; 
- sales of new passenger vehicles. 

Ultimately  these  derogations would  have  lapsed  since  a process 
of convergence of rates was introduced at the same time. 

In  spite  of  Commission  efforts  to  introduce  elements  of 
flexibility  into its proposals, the Council made the point that 
a  general  agreement  on  the  tax  arrangements  proposed  by  the 
Commission  could  not  be  reached  before  1 January  1993.  It 
considered that such an agreement presupposed  the fulfilment of 
conditions  which  could  not  be  satisfied  by  that  date.(6)  It 
thus  adopted  the  following  conclusions: "For  a  limited  period, 
the  smooth  operation  of  VAT  arrangements  in  the  case  of 
transactions  between  different  Member  States  carried  out  by 
taxable persons must  be ensured  by taxing  the  recipient  in the 
country  of  destination  at  the  rate  and  under  the  conditions 
obtaining  in that country.  Exempt  or non-taxable bodies making 
purchases  of  a  certain  value  in  other  Member  States  will  be 
treated  in  the  same  way.  ...  The  differential  treatment  of 
certain  classes  of  transaction  will  enable  distortions  of 

(&) ECOFIN Council of 9 October 1989. 

competition  to  be  avoided  without  hampering  freedom  of 
movement.".(7)  The  Commission  welcomed  the  fact  that  the 
Strasbourg European Council asked the Council  "to adopt as soon 
as  possible  the  decisions  which  will  make  the  process  of  the 
complete abolition of fiscal frontiers irreversible". 

In  the  attached  proposal,  which  the  Commission  calls  on  the 
Council  to  adopt  at  the  earliest  possible  opportunity, the 
Commission  sets out a balanced transitional  solution based on a 
system  of  taxation  in  the  country  of  destination  which 
corresponds  to  the  Council  guidelines  and  which  also  provides 
for  the  link  that  the  Council  would  like  to  see  established 
between  statistics  and  taxation  as  regards  taxpayers' 
obligations.(8) 

The  arrangements  are  gradualist  in  design  and  thus  contain 
elements  of  internal  dynamism  guaranteeing  the  irreversibility 
of the process of abolishing  fiscal frontiers. 
THE  ATTACHED  PROPOSAL  LAYS  DOWN  A  TRANSITIONAL  PERIOD  FOR 
TAXATION  IN  THE  COUNTRY  OF  DESTINATION  AND  SETS  THE  DATE  FOR 
THE  TRANSITION  TO  THE  DEFINITIVE  ARRANGEMENTS  FOR  TAXATION  IN 
THE COUNTRY OF ORIGIN 

The  transitional  tax  arrangements  proposed  by  the  Commission 
will  take  effect  on  1 January  1993; they will  expire  not  later 
than  31 December  1996  following  an  overall  examination  with  a 
view to determining  on the basis of a Commission  proposal, the 

y)  Conclusions of the ECOFIN Council of 13 November 1989. 
(8) The actual  introduction  of  the  statistical  machinery  linked  to 
the  transitional  arrangements  is  the  subject  of  the 
transitional  measures  inserted  in  the  proposal  for  a  Council 
Regulation  (EEC)  (COM(90)177) on the statistics relating to the 
trading of goods between Member States. 

procedures under which the definitive unification  of the common 
VAT  system  shall  operate.  In  consequence,  the  definitive  tax 
arrangements will be operative by 1 January  1997.  The Council, 
therefore,  is  called  upon  to  approve  simultaneously  the 
introduction  of  the  transitional  arrangements  and  the 
introduction  of  the definitive  arrangements  as proposed  by  the 
Commission. 

The  Commission  takes  the  view  that  such  provisions  are 
essential: 
-  in  order  to  guarantee  the  irreversibility  of  the  process  of 
abolishing  fiscal  frontiers,  in  accordance  with  the  wish 
expressed  by  the  Strasbourg  European  Council  on  8  and 
9 December  1989: only  the  implementing  of  the  definitive 
arrangements  will  allow  the  degree  of  integration  desired 
within the internal market to be achieved; 

-  in  order  to  give  time  to  businesses  and  administrations  to 

adapt to the new fiscal situation. 

To this  end,  the Council  and  the Commission  will have to adopt 
the  practical  procedures  for  the  transition  to  the  definitive 
arrangements not later than 31 December 1995. 

4.  THE  TRANSITIONAL  PROVISIONS  PROPOSED  BY  THE  COMMISSION 
ESTABLISH  A  SYSTEM  OF  TAXATION  IN  THE  COUNTRY  OF  DESTINATION 
WITHOUT  ANY  FRONTIER  CONTROLS  AND  WITHOUT  ANY  INCREASE  IN  THE 
BURDEN ON BUSINESSES 

(a) It  should  be  pointed  out  that  a  number  of  provisions 
essential  for the establishment  and  the  functioning  of  the 
internal market will be provided  for as of the beginning of 
the transitional  period. 

They are: 

- Abolition  of  any  checks  or  formalities  imposed  for  tax 
purposes  when  goods  cross  intra-Community  frontiers  or 
prior to the movement of goods 

As  a  result,  the  transitional  measures  proposed  by  the 
Commission  are  of  a  kind  liable  to  bring  about  a 
lightening  of  the  administrative  and  costs  burdens  on 
firms engaging  in intra-Community  trade while at the same 
time  providing  the  means  for  carrying  out  the  necessary 
checks.  From  now  on,  intra-Community  transactions  will 
be  subject  to  the  same  checks  as  domestic  transactions 
carried  out  in Member  States.  Monitoring  of VAT  payable 
in connection  with  intra-Community  trade will  be  carried 
out on the basis  of normal  trade documents  inter alia on 
invoices which must  indicate clearly either the amount of 
VAT  charged  or  the  exempt  status  of  the  transaction  as 
well  as  the  means  of  identifying  the  taxable  status  of 
the traders; 

- Equal  treatment  as  between  intra-Community  and  domestic 
transactions as regards the obligations of persons liable 
to pay the tax 

VAT  payable  on  intra-Community  transactions  will  be 
settled  and  paid  on  the  basis  of  the  regular  return 
currently  used  by  traders  for.domestic  transactions.  As 
a result, no new or additional  obligation will be  imposed 
on  traders  provided  that  the  amount  relating  to  intra-
Community  transactions  is  broken  down  by  goods  sent  to 

and goods coming  from other Member States; 

- Removal of the current restrictions on tax-paid  purchases 

made by travellers  in the Member State of purchase 

Tax  will  be  charged  directly  on  such  purchases  by  the 
seller, at the rate and under the conditions obtaining in 
the  country  of  origin  of  the  goods.  As  a  result,  there 
will  no  longer be  any  restrictions  on travellers  wishing 
to make tax-paid purchases; 

- The  easing  of  burdens  on  Small  and  Medium  size 
Enterprises  (SME)  and  the  introduction  of  flexibility 
into the VAT treatment of operations involving SME's 

In this  regard  the benefit  of the exemption  arrangements 
applicable  to  SME's  domestic  transactions  shall  be 
extended  to  such  intra-Community  supplies  as  they  may 
carry out; 

(b) In view of the Council guidelines which seek to retain as a 
general  rule  the  principle  of  taxation  at  the  rates  and 
under  the  conditions  obtaining  in  the  country  of 
destination,  the  Commission  after  having  examined  various 
technical  solutions  for  the  taxation  of  intra-Community 
operations  which  give  rise  to  transport  or  dispatch,  have 
opted  for a legal text which  firstly captures the operation 
carried  out  in  the  country  of  departure  and  secondly 
defines  acquisition  as  a  new  taxable  event  in  the  country 
of  arrival.  This  option  means  that  all  reference  to 
concepts  of  importation  are  avoided  and  that  taxation  in 
the  country  of  destination  can  be  assured  without  any 

checks  or  formalities  when  crossing  borders.  The  tax 
mechanisms employed  conform to the following rules: 
- Exemption  of supply: transactions between taxable persons 
(whether entitled  to deduct  tax  in  full or  in part) must 
benefit  in  the  country  of  departure  from  the  exemption 
currently  applied  to  supplies  for  export.  (However,  for 
reasons  indicated  earlier,  supplies  by  SME's  will  not 
come within the scope of this exemption). 
In the absence  of any border  formalities  or checks, this 
exemption  presupposes  that  the  following  two  conditions 
are met: 
- the person  by whom  the goods are acquired  is a taxable 

person  (or a person ranking as such): 
Accordingly,  it is up to him to provide evidence of his 
VAT status if necessary by means of a statement to that 
effect  issued by the administration  in the Member State 
in which he is registered; 

- the  goods  are  dispatched  or  transported  to  another 
Member  State,  with  the  onus  of  furnishing  proof  of 
their  departure  from  the  country  of  departure  falling 
on  the  seller;  where  appropriate  on  the  basis  of 
documents  provided  by  the trader  for whose  account  the 
transport  operation  is carried out: 

- Taxation of the acquisition 

The  corresponding  acquisition  will  give  rise  to  taxation 
in the country of destination and the tax will be payable 
by  the  person  by  whom  the  goods  are  acquired.  The 
acquisition  operation  is  defined  as  the  process  of 
acquiring  the  right  to  dispose  of  tangible  property  as 

owner.  It  is  based,  therefore,  on  a  legal  and  economic 
event  which  takes  place  in  the  country  of  destination 
that  is  the  counterpart  of  the  supply  operation  carried 
out in the country of origin. 

10 

In  this  way,  the  taxable  transaction  in  the  country  of 
destination  is as such disconnected  from the physical and 
material  operation  of  introducing  the goods  into the tax 
territory,  an  operation  which  constitutes  the  very 
concept  of  importation.  Naturally,  this  concerns  only 
purchases  of  goods  that  are  being  dispatched  or 
transported  from  one  Member  State  to  another  since  the 
transitional  arrangements will  in no way  alter the  scope 
of VAT as regards domestic transactions. 
Accordingly,  checks  on  the  taxation  of  acquisitions  of 
intra-Community  origin  are  based  on  the  commercial 
documents  usually  issued  or  received  by  traders:  order 
forms,  transport  documents,  delivery  notes,  sales  and 
acquisition 
of 
facilitate 
account.  Furthermore, 
assistance, 
administrative 
invoices  must  explicitly  give  the  VAT  numbers  of  the 
seller and of the person by whom the goods are acquired. 

settlements 
to 
and  mutual 

in 
cooperation 

invoices, 
order 

contracts, 

Special  arrangements 
So  as  to  limit  during  the  transitional  period  the  major 
risks  of  distortion  of  competition  linked  to  differences 
in rates between Member States, the principle of taxation 
in the country  of destination will  be applied  to  certain 

11 

to 

the 

subject 

following 

transactions 

targeted 
conditions: 
* The  mechanism  for  taxing  intra-Community  transactions 
between  taxable  persons  is  extended  to  acquisitions 
made by  institutional  non-taxable persons and by exempt 
taxable persons where, in the year under consideration, 
they  exceed  a threshold  fixed  initially  at ECU 35 000. 
This  is  because,  given  that  such  traders  act  as  final 
consumers  where  VAT  is  concerned, their  purchasing 
decisions are liable to be influenced by the difference 
in  rates.  It  was  necessary,  therefore,  to  apply  to 
them the special arrangements defined above. 

The  doubling  of the threshold  from  1 January  1995 will 
provide  for  the  widening  of  the  scope  of  the 
arrangements  for taxation  in the country  of origin  for 
the  entire  duration  of this period.  As  the  Commission 
would  like  this  special  arrangement  to  be  relatively 
flexible  traders  whose  purchases  remain  below  the 
threshold may opt for taxation of their acquisitions in 
the  country  of  destination.  This  option  is  valid  for 
two consecutive years and is irrevocable; 

* On  account  of  their  high  unit  value,  which  makes  them 
particularly  susceptible to differences  in rates, it is 
proposed  that  new  private  vehicles  never  previously 
registered  should  be  taxed  in  respect  of  their 
acquisition  in the Member State of use, where the first 
registration on a permanent basis takes place; 

* Mail-order  sales  are  an  area  of  activity  in  which, 
because  of  the  very  structure  of  this  type  of 

12 

distribution,  demand  is particularly  sensitive.  In an 
open market,  significant  differences  in rates  from  one 
Member  State  to  another  might  only  underline  this 
phenomenon.  Such  differences  in  rates  could  cause 
activities to be shifted elsewhere.  The aim during the 
transitional  period  is to  exert  control  over this  risk 
without  hampering  the  free  movement  of  goods.  The 
Commission  thus  proposes  that  mail-order  sales,  which 
it has moreover defined  in a manner consistent with the 
objectives laid down, should be taxed  in the country of 
destination  where  the seller has an  annual  turnover  of 
intra-Community 
than 
ECU 1 million.  The  tax  mechanism  envisaged  involves 
shifting  the  place  of  taxation  of  such  sales  in  order 
to make the non-established  seller's tax  representative 
liable for VAT in the country of destination. 

mail-order 

of  more 

sales 

Treatment  of operations  involving SME's 
Supplies  for export  carried  out by SME's  entitled  to the 
exemption  laid  down  in Article 24 of the  Sixth  Directive 
and  in  the  proposal  for  a  Twenty-Second  VAT  Directive 
will,  as  is the case  for their domestic  transactions, be 
covered  by  the  exemption  from  tax  applicable  to  SME's 
domestic  transactions.  In  consequence,  supplies  for 
export by  SME's will  not give  rise to the  exemption  laid 

13 

down  in  Article 15  of  the  Sixth  VAT  Directive  in  the 
country  of  departure.  Symmetrically,  they  will  not  give 
rise  to  an  acquisition  in the  country  of  destination  of 
the goods.  However,  it is worth recalling that SME's can 
in  any  event  opt  to  benefit  from  the  normal  VAT 
arrangements. 
With regard to purchases made by SME's, such transactions 
will  be  subject  to  taxation  in  the  country  of  departure 
of the goods  insofar as they do not  exceed  the  threshold 
fixed  in the special arrangements applicable to purchases 
by  exempt  taxable  persons - i.e.  either  ECU 35 000  or 
ECU 70 000 - SME's  in this regard  are treated  as  if they 
were  taxable  persons whose  domestic  activities  are  fully 
exempt  from VAT. 

14 

EXPLANATORY  NOTE ON THE LEGAL TEXT: 

Observations  regarding  the  provisions  applicable  during  the  tran 
sitional  period  solely  to  intra-Community  transactions - Article 2 
of the modified version of COM(87)322 introducing a new wording  for 
Article 28 of the Sixth Directive 

Point  (a) 

The  provisions  laid  down  define  the  special  tax  arrangements 
applicable to mail-order sales during the transitional period. 

Scope of the special arrangements for mail-order sales 

Essentially,  these  arrangements  cover  mail-order  sales  to  private 
individuals.  However,  mail-order  sales  to  institutional  non 
taxable  persons  or  to  fully  exempt  taxable  persons  will  also  be 
covered  in  cases  where  such  sales  do  not  qualify  for  the 
arrangements  generally  applicable  during  the  transitional  period 
and  provided  for  at  (b) , second  indent  and  (c) .  Mail-order  sales 
to taxable persons are subject to the general arrangements provided 
for at (b). 
Passenger vehicles  are also excluded  from  the scope  of the  special 
arrangements  for  mail-order  sales,  since  they  are  covered  by  the 
specific provisions laid down at  (b), first indent and (c). 

15 

Definition of mail-order  sales 

The concept of mail-order  sales is determined by  factors to do with 
the way  in which the offer  is made, e.g.  in a catalogue  reproduced 
in bulk, using any medium whatsoever, whether or not printed, which 
the  consumer  can  consult  in  the  absence  of  the  trader  or  his 
representative.  Furthermore,  the  application  of  three  criteria 
will make it possible to ascertain whether the offer does, in fact, 
display  the  characteristics  recognized  as  being  specific  to  mail 
order  sales  contracts.  Thus,  among  the  transactions  excluded  from 
the  special  arrangements  for  mail-order  sales  are  (i)  sales  in 
respect  of which no prior  offer was made and which  are  in response 
to  distance  ordering,  and  (ii)  sales  consequent  upon  simple 
advertising  comprising  an offer to buy  (in the press). 

Condition  of  eligibility  for  the  special  arrangements  tied  to  the 
volume of cross-frontier  transactions 

Traders  with  a  cross-frontier  mail-order  turnover  exceeding 
ECU 1 million  (all  Community  destinations  taken  together)  must 
apply  the  special  arrangements.  Nevertheless,  traders  not 
satisfying  the  eligibility  condition  tied  to  the  volume  of  their 
cross-frontier  transactions  may  in  their  own  interest  apply  for 
special  arrangements,  which  will  apply  for  two  consecutive 
years.  The threshold mechanism  is defined as follows: as soon as a 
mail-order  firm  exceeds, during  a calendar year,  a volume  of mail 
order  sales,  in the  country  of departure  of  the  goods, which  come 
within  the  scope  of  this  special  arrangement  and  are  destined  for 
the other  11 Member  States, of 1 million ECU, the firm  falls within 
the scope of the special arrangement; Member States must define the 
practical procedures  for the implementation  of this criterion. 

16 

Taxation mechanism for mail-order sales 

Supplies covered  by the  special arrangements  for mail-order sales 
are  deemed  to  take  place  in  the  country  to  which  the  goods are 
dispatched or transported. The tax is paid in that country, within 
the  conditions  laid  down  in  Article 21(1) (a)  of  the  Sixth 
Directive,  where  appropriate  through  the  intermediary  of  a  tax 
representative. 

Traders will continue to exercise their right to deduct  input tax 
in the  Member  State  in which  they  are  established  in  accordance 
with  Article 17(3)(a)  of  the  Sixth  Directive  as  regards 
transactions which they carry out in another Member State provided 
those  transactions,  if  carried  out  within  the  territory  of  the 
country, would have conferred the right to deduct input tax there. 

Point (b) 

This point lists the transactions that fall within the scope of the 
general  transitional  arrangements.  The  proposed  provisions  lay 
down  the  system  of  exemptions  to  be  applied  in  the  country  of 
departure to supplies of goods and to supplies of services directly 
linked to such goods. 

Nature of the exemption mechanism 

Pursuant  to  the  combined  provisions  of  Articles 5 and 8(1)(a) of 
the Sixth  Directive a seller makes a supply which  is situated  in 
the country of departure and which is therefore taxable there.  In 
order to tax the acquisition of the goods dispatched or transported 

17 

to the Member  State  of destination  it is essential  that the supply 
made by the seller  in the country  of departure  is exempt.  Failing 
this,  double  taxation would  arise.  Supplies  referred  to under  (b) 
are  for  this  reason  treated  as  supplies  under  Article 15  of  the 
Sixth Directive which qualify  for exemption upon export.  It should 
be underlined that this exemption does not preclude the exercise of 
the right of deduction of the seller or of the supplier of services 
under Article 17(3)(b) of the Sixth Directive, given that the right 
to  deduction  is  maintained  for  transactions  exempt  under 
Article 15. 

Definition  of  transactions  exempt  in  the  country  of  departure  of 
the goods 

1. Status of the trader carrying out the exempt  transaction 

The exemption  will  apply  only  if the supply  of the goods or the 
related  services  is  effected  by  a  taxable  person,  whether 
entitled to deduct tax in full or in part. 
Small and medium-sized businesses, all of whose transactions are 
exempt  within  a Member  State pursuant  to the exemption  from tax 
laid  down  in Article 24  of  the  Sixth  Directive  (as well  as  by 
the  proposal  for  a  Twenty-Second  VAT  Directive)  are  excluded 
from  the  arrangements  for  taxation  in  the  country  of 
destination.  Similarly  intra-Community  supplies  made  by  them 
will  benefit  from  the  Article 24  exemption  and  will  not  give 
rise  to  any  acquisition  transaction  in  the  country  of 
destination.  Supplies by flat-rate  farmers are dealt with under 
the same principles. 

18 

2. Nature of transactions  and  status of person by whom  goods are 

acquired 

(a) The supplies of private vehicles qualifying  for exemption 
in  the  country  of  departure  are  those  carried  out  by  a 
taxable  person  whose  activity  is  purchasing  and  selling 
vehicles other than used vehicles covered by Article 32 of 
the 6th VAT Directive(9) : it should be remembered  that used 
cars  sold  by  taxable  resellers  of  used  goods  have  been 
directly  excluded  from  the  scope  of  the  transitional 
arrangements since the latter apply without prejudice to the 
provisions  of  Article 32  which  lays  down  the  Community 
arrangements applicable to used goods: 
* Private  vehicles  supplied  under  the  transitional 
arrangements  must,  therefore,  form  part  of  the  seller's 
stock in trade. 

* The  scope  of  the  concept  of  private  vehicles  used  here 
corresponds  to  that  given  by  Article 2  of  Directive 
83/182/EEÇ; it therefore includes motorcycles.  Commercial 
vehicles*10)  however  are  excluded  from  the  special 
arrangements for destination taxation. 

(y) This  concerns  the  new  proposal  for  a  directive  regarding 
special  arrangements  to  apply  to  used  goods,  works  of  art, 
antiques and collectors items (COM(88) 846 final). 

(10)Commercial  vehicle within the meaning  of  Directive 83/182/EEC 

means: 
any road vehicle which by its design or equipment, is suitable 
for and intended transporting, whether for payment or not: 
- more than nine persons, including the driver; 
- goods, 
as  well  as  any  road  vehicle  for  special  use  other  than 
transport as such 

19 

*  Private vehicles  supplied  by  a taxable  user  other  than  the 
taxable  person  mentioned  above  will  also  be  exempt  if  they 
satisfy  the  conditions  laid  down  under  the  general 
transitional  arrangements:  these  vehicles  are,  in  fact, 
capital  goods  the  supply  of  which  will  be  exempt  in  the 
country  of  departure  and  the  acquisition  of  which  by  a 
taxable  person  (or a person  ranking  as  such)  will  be  taxed 
in  the  country  of  destination  (this  is  necessary  in  order 
to  avoid  a  situation  in  which  the  taxable  person  by  whom 
they  are  acquired  would  have  to  seek  a  deduction  for  VAT 
paid  in the  country  of  departure). 

(b) Generally  speaking,  the  exemption  in  the  country  of 
departure  covers  supplies,  other  than  those  identified 
above,  where  they  are made  to  an  eligible  trader,  that  is  to 
say,  where  the person  by whom  goods  are  acquired  is: 
*  either  a  fully  or  partially  taxable  person,  irrespective 

of  the  amount  of  acquisitions  made  by  him; 

the 

*  or  an  institutional  non-taxable  person  or  a  fully  exempt 
taxable  person  whose  purchases  exceed 
35  000  ecus 
(70 000  ecus  from  1 January  1995)  during  the  calendar  year 
was 
under 
when 
made.  Nevertheless,  since  such  persons  who  do  not  fulfil 
this  condition  may  opt  for  taxation  of  their  acquisitions 
in  the  country  of  destination,  the  seller  may  claim 
exemption  for  his  supplies  in  the  country  of  departure  if 
the  person  by  whom  the  goods  are  acquired  has  exercised 
the  option  available  to  him. 

consideration 

supply 

(c) In  conformity  with  the  general  principles  of  the  common  VAT 
system,  supplies  of  services  directly  linked  to  supplies  of 

20 

goods  which  are  exempt  under  the  transitional  arrangements 
are  themselves  exempt  in  the  country  in  which  they  are 
territorially  located  under  this  proposal.  The  services 
concerned  here  are  mainly  transport  of  goods  services  and 
ancillary  services  as  well  as  services  of  intermediaries 
acting  in the name and on behalf of another.  This provision 
aims  at  applying  the  same  tax  arrangements  to  services  as 
that  applied  to  the  supplies  to  which  they  relate  thus 
preserving the neutrality of the tax arrangements  for intra-
Community trade. 

For the record,  it is recalled that the COM(87) 322 proposal 
defined  a  new  territoriality  for  transport  services  by 
providing  for  the  taxation  of  the  totality  of  intra-
Community  transport  services  in the country  of departure  of 
the  transport  only.  The  transitional  arrangements  modify 
the  application  of  this  new  rule  to  the  extent  that  they 
reintroduce exemption  for transport  services directly  linked 
to a supply of goods for export as defined  in point  5(b). 

However,  in  the  case  of  passenger  transport  the  tax 
treatment  of  such  supplies  in  relation  to  journeys 
undertaken  within  the  Community  will  be  the  subject  of 
specific provisions on the basis of a Commission  proposal to 
be made before 31 December 1991. 

By way  of conclusion,  it should  be pointed  out that,  in all 
the  situations  covered  at  (b) ,  the  exemption  applies 
irrespective  of the place  of establishment  of the person by 
whom  goods  are acquired  provided  the  latter  are  transported 
to  a  country  other  than  the  country  of  departure  by  the 

21 

seller  or  for  his  account. 
However,  if  the  transport 
operation is carried out by the person by whom the goods are 
acquired  or  for his account, the exemption  applies only on 
the  express  condition  that  the  person  by  whom  goods  are 
acquired 
in  the  country  of 
departure.  Subject to the provisions at  (i), the exemption 
provided  for at  (b) is restricted  to supplies made by the 
last seller in the country of departure. 

is  not  established 

Point (c) 

The tax provisions in the country of destination are developed in 
(c) .  The  proposed  provisions  define  the  acquisition  transaction 
and  the  procedures  for  taxing  such  transactions.  They  are, 
therefore, the consequence of the provisions  laid down at  (b) and 
need to be looked at in conjunction with the latter. 

Definition of "acquisition" transactions taxable in the country of 
destination 

(a) By  analogy  with  supplies  exempt  in  the  country  of  departure 
under  the  provisions  of  (b), the  matching  acquisitions  are 
liable to tax in the country to which the goods are transported 
or  dispatched.  The  acquisition  transaction  is,  therefore, 
defined  as  "the process  of acquiring  the right  to dispose of 
tangible  property  as  owner": it  thus  exactly  mirrors  in  the 
country  of  destination  the  supply  transaction  carried  out  in 
the country of departure, this being defined as "the process of 
transferring  the  right  to  dispose  of  tangible  property  as 
owner".  These  two  transactions,  which  are  located  in  two 
different  countries  for  VAT  purposes,  are  based  on  the 

22 

occurrence  of  one  and  the  same  legal  event  which  finds 
practical embodiment  in the drawing-up of a supply-acquisition 
contract. 
The point  should be made that the acquisition transaction may 
involve  only  goods  that  are  transported  or  dispatched  to 
another Member State, regardless of the conditions under which 
such  transport  takes  place  and,  in particular,  regardless of 
the conditions governing payment of the transport costs (by the 
seller or for his account, by the person by whom the goods are 
acquired or for his account). 

(b) To  the  extent  that  differences  in the  scope  of  the  right to 
deduct continue to exist, it has appeared necessary to make the 
appropriation  of  certain  property  taxable  in  the  country  of 
destination by assimilating such transactions with acquisitions 
made  for  consideration.  Similar  considerations  apply  to  the 
transfer  of  property  between  two  Member  States  by  a  fully 
exempt  taxable  person  or  by  a  non-taxable  person  within  the 
meaning of Article 4(5).  In both cases, the question concerns 
the preservation of the neutrality of VAT whether it be applied 
to  domestic  transactions  or  within  the  framework  of  intra-
Community  relations: in consequence,  it  is intended  to tax in 
the  country  of  destination  goods  which  otherwise  would  have 
been  consumed  there  without  the  VAT  applicable  being 
charged.  Naturally, the Member State of destination is obliged 
to take account of VAT which may have been charged on the goods 
in the Member State of departure so as to avoid possible double 
taxation. 

23 

Place at which an acquisition transaction takes place 

In  order  to  ensure  that  taxation  takes  place  in  the  country  of 
destination,  an  acquisition  transaction  from  a  territorial 
viewpoint,  is situated  at the place where the goods that have been 
transported  or dispatched are situated. 

Chargeable event and chargeability  of VAT  in respect of acquisition 
transactions 

In  this  context,  chargeable  event  and  chargeability  coincide  and 
occur  at  the  time  the  acquisition  transaction  is  carried  out. 
Accordingly, a supply transaction exempt under  (b) and the matching 
acquisition  transaction  under  (c)  are  transactions  which  are  each 
characterized  by  their  own  chargeable  event  and  chargeability  but 
which,  nevertheless,  are  located  at  the  same moment  in time  since 
the  legal  conditions  necessary  for  tax  to  become  chargeable  are 
identical  for both transactions. 

Point  (d) 

Given the nature of the acquisition transaction,  its taxable amount 
can only be the taxable amount  for the matching  supply  transaction 
in  the  country  of  departure  and,  as  such,  it  is  based  on  the 
concept  of  consideration  defined  in Article 11(A)(1) and  (2).  For 
the  record,  point 4  of  this proposal  defines  the  rate  of  exchange 
applicable  to  those  elements  of  the  taxable  amount  drawn  up  in a 
currency other than that of the country of taxation.  In particular 
this  provision  applies  to  the  taxable  amount  for  acquisition 
transactions.  An additional provision has been  introduced  to cover 

24 

those  cases  in  which  acquisition  has  given  rise  to  a  transport 
operation carried out by the person by whom the goods are acquired 
or for his account and to ancillary services the costs of which are 
borne by the person by whom the goods are acquired and not by the 
seller.  In such cases, the value of the services incidental to the 
acquisition  of  goods must  be  included  in the  taxable  amount  for 
that  acquisition  and  hence  taxed  at  the  rate  and  under  the 
conditions  obtaining  in  the  country  to  which  the  goods  are 
transported.  It is to be noted that this provision has to be taken 
together  with  the  exemption  in the  country  of  departure  for the 
supply of services directly linked to supplies exempt under (b). 

If the costs of those same supplies are borne by the seller, their 
value will form an integral part of the consideration sought by the 
seller from the person by whom the goods are acquired and will, as 
a result, be automatically  included  in the taxable amount  for the 
acquisition  transaction.  In  conformity  with  the  objective  of 
applying  taxation  in the country  of destination,  the  rate of VAT 
applicable to the acquisition transaction will be the same as that 
applied  within  the  territory  of  the  country  of  destination  to a 
supply of the same goods. 

Point (e) 

The  person  liable  for  the  tax  payable  under  the  special 
arrangements  for  mail-order  sales  is,  in  accordance  with  the 
present  provisions  of  Article 21(1)(a),  the  taxable  person  not 
established  in  the Member  State  of  taxation  or  possibly  his tax 
representative or some other person. 
Where tax is payable in respect of an acquisition transaction, the 
person by whom the goods are acquired  is the person liable to pay 
the  tax  and  he  must  comply  with  the  obligations  relating  to 
declaration. 

25 

If the person by whom the goods are acquired is not established in 
the  country  where  the  acquisition  transaction  is  taxable,  it  is 
specifically  laid down that a fiscal representative  of the person 
by  whom  the  goods  are  acquired  may  be  designated  as  the  person 
liable to pay the tax. 
The  person  liable  to  pay  tax  is  required  to  comply  with  the 
obligations  relating  to  declaration  and  payment  in  respect  of 
acquisition transactions on the regular return normally used by him 
to account  for and pay the tax for which he is liable on domestic 
transactions as a taxable person.  As a result, tax payable on an 
acquisition transaction  is treated  in exactly the same way as tax 
payable on a domestic supply transaction.  If the person liable is 
not  a  taxable  person  or  if  he  has  been  released  from  the 
obligations  relating  to declaration which were  incumbent  upon him 
as a taxable person under the arrangements applicable to domestic 
transactions,  it  will  be  for  the  Member  States  to  define  what 
obligations  relating  to  declaration,  settlement  and  payment  are 
incumbent  on him  (inter alia a requirement to declare and pay the 
tax  at  the  time  a  vehicle  acquired  by  a  private  individual  is 
registered). 

Point (f) 

Since  Article 17(2)(a)  of  the  Sixth  Directive  as  amended  by 
document  COM(87) 322  will  take  effect  only  on  expiry  of  the 
transitional  period  (cf. point  (j)), this  provision  reintroduces 
for the duration  of that period  the rules on territoriality  laid 
down in the Sixth Directive for a range of intangible services. 

It will not be possible during the transitional period to provide 
for a right to deduct  input tax payable or paid  in another Member 
State. 

26 

Point(g) 

Provisions which at present allow the right to opt for taxation in 
respect  of  banking  and  financial  activities  exempt  under 
Article l3(B)(d)  of  the  Sixth  Directive,  have  been  reintroduced 
under this point for the duration of the transitional arrangements. 

Point (h) 

This  provision  exempts  the  acquisition  of  goods  the  supply  or 
importation  of  which would  have  been  exempted  in  the  country  of 
destination. 

It  thus  covers  acquisitions  of  goods  the  supply  of  which  for 
domestic transactions would  in any event be exempt,  in particular 
by  the  provisions  of  Article 13  of  the  Sixth  Directive  on 
exemptions on domestic transactions. 

This  also  covers  acquisitions  of  goods  which  if  imported  (from 
third  countries)  would  have  been  exempt  under  the  provisions  of 
Article 14(1)(d) and  (g) of the Sixth Directive. 

Moreover  the  provisions  of  Article 15(4)  to  (9)  of  the  Sixth 
Directive will  be examined  later particulalrly  in the context of 
possible  changes to the proposal  for a directive on  ships stores 
presented by the Commission on 21 January 1980C11). 

Point (i) 

In view of the creation of the acquisition transaction, this point 
takes over the provisions of Article 16(2) of the Sixth Directive 

(ii)proposal  COM(79)794  final,  O.J. E.C.  No C 31  of  8.2.1980, 

page 10 

27 

so  as to  give  traders  who make  export  supplies  the  possibility  of 
benefitting  from  an exemption  from tax  in cases where they are the 
consignee  for  import  transactions,  acquisitions,  supplies  and 
services  linked  to their  export  supplies to other Member  States or 
to third countries. 

Point  (j) 

Under  this  provision,  the  person  by  whom  goods  are  acquired  may 
deduct  VAT  payable  or paid  on goods  that  have been  the  subject  of 
an  acquisition  transaction.  This  right  to  deduct  input  tax  is 
subject  to  the  same  conditions  as the  right  to  deduct  VAT  payable 
or paid on goods that have been supplied.  It should, therefore, be 
noted  that  this  right  to  deduct  input  tax  may  in  principle  be 
exercised  as soon as the person by whom goods are acquired  becomes 
liable  for  the  tax  payable  on  the  acquisition  transaction. 
Naturally,  acquisition  transactions  will  not  be  taken  into 
consideration  in  determining  the  deductible  proportion  for 
partially taxable persons since they are not as such a component  of 
turnover. 

It has  also  been  necessary  to  include  a  special  measure  to  ensure 
that,  in  a  given  Member  State  during  the  transitional  period,  a 
right to deduct VAT payable or paid  in another Member  State  is not 
granted. 

Point  (k) 

In the  interests  of  setting  out  all the obligations  to be  complied 
with  during  the  transitional  period  by  persons  liable  to  pay  the 
tax,  the  text  of  Article 22  of  the  Sixth  Directive  has  been 
reproduced  in  its  entirety.  However,  only  some  of  its  provisions 

28 

have been amended; these are commented  on below: 

First  paragraph  of  Article  22(3)(a): The  obligation  to  issue  an 
invoice,  which  already  covers  any  supply  made  to  another  taxable 
person, is extended to supplies made to a non-taxable person within 
the meaning  of Article 4(5).  This  obligation  applies  irrespective 
of the  country  in which  the  person  by  whom  the  goods  are  acquired 
is  established  and  thus  supplements  the  text  of  Article 22(2)  of 
the  Sixth  Directive  as  regards  the  supporting  documents  to  be 
provided  in respect  of  intra-Community  transactions  where both  the 
supply and acquisition of goods are concerned; 

Second  paragraph  of  Article 22(3)(b): In  the  case  of  supplies  of 
goods  covered  by  the  transitional  tax  arrangements  for  intra-
Community  trade  in  the  country  of  destination,  the  invoice  must 
give the VAT  numbers  of the two traders concerned.  This provision 
makes  it  possible  to  enter  on  the  invoice  one  of  the  factors 
essential  in  determining  the  tax  treatment  to  be  applied  and,  as 
such,  is  a  necessary  item  of  information  for  implementing 
administrative  cooperation and mutual assistance procedures; 

Second  and  third  paragraphs  of  Article  22(4): The  proposed 
provisions  define  the  obligation  to  declare  the  amount  of  intra-
Community supplies of goods by indicating separately  from the total 
amount  of  transactions  the  amount  of  goods  sent  to  other  Member 
States  and  the  amount  of  acquisitions  received  from  other  Member 
States.  This  obligation  applies  only  to  transactions  involving 
tangible  movable  goods  and,  as  a  result,  excludes  transactions 
involving services not linked to a supply of goods; 

29 

Article 22(9): The  obligation  to  issue  an  invoice  in  respect  of 
goods supplied to persons in other Member States is not covered by 
the possibilities  for easing the burden of obligations on persons 
liable  to  pay  the  tax  since  the  invoice  is  important  for 
identification  purposes  and  for checking that the transactions in 
question have been afforded the proper tax treatment; 

Article 22(10): The  exemption  in  the  country  of  departure  for 
supplies  of  goods  referred  to  in  the  second  indent  at  (b)  is 
conditional on the VAT status of the person by whom the goods are 
acquired.  In  order  to  ensure  that  the  seller  possesses  the 
necessary  information to apply that exemption,  the person to whom 
the goods are supplied must be able to produce a statement from the 
competent tax administration certifying his VAT status.  As such a 
statement can be issued only at the request of the person by whom 
the goods  are acquired,  the  latter must  necessarily  submit  a new 
request in the event of any change in his VAT status. 

30 

Proposal for an 

Amendment  to the proposal  for a 

COUNCIL  DIRECTIVE  _ 

SUPPLEMENTING THE COMMON SYSTEM OF VAT 
AND AMENDING  DIRECTIVE  77/388/EEC 

THE COMMISSION AMENDS ITS PROPOSAL0)  AS"FOLLOWS: 

1.  The  following  shall  be  inserted  between  the  second  and  third 

recitals: 

" " 

"Whereas nevertheless the full and definitive abolition of fiscal 
frontiers  presupposes  the  fulfilment  of  conditions  which  cannot 
be satisfied before 31 December 1992; 

Whereas  accordingly,  a  clearly  defined  transitional  period  must 
be provided  for during which transitional  provisions designed  to 
facilitate passage to the definitive taxation arrangements and to 
ensure the irreversibility of the process leading to the complete 
abolition of fiscal frontiers, must be implemented;" 

2.  Article  2 is replaced  by the  following provisions: 

. _ . . 

.  ".Article 2 

Article 28  of  Directive  77/388/EEC  is  hereby  replaced  by  the 
following: 

Article 28 
Notwithstanding  the  other  provisions  of  this  Directive  and 
without  prejudice  to  Article 32, the  following  provisions, shall 
apply until 31 December 1996 at the latest: 

(1)0J  No C 252, 22.9.1987, p.2. 

31 

(a) Where goods  supplied  to a non-taxable  person  or to a taxable 
person  whose  activity  is  fully  exempt,  who  does  not  qualify 
for  the  arrangements  provided  for  in  the  second  indent of point 
(b), are dispatched  or transported they shall be deemed to be 
supplied  at  the  place where  they  are  at  the  time  they  reach 
the person  by whom  the goods  are acquired,  provided  that  the 
following conditions are simultaneously met: 
- the  supplies  comprise  goods  other  than  private  vehicles 
that  have been  dispatched  or transported  to another  Member 
State ; 

- the  supplies  are effected  within  the  context  of  mail-order 
selling.  "Mail-order selling" means a specialized  economic 
activity  involving goods selected  from a catalogue and sold 
on  a  retail  basis.  "Catalogue"  means  any  offer  to  the 
public made using any medium whatsoever which  is reproduced 
in bulk and which lists the articles for sale in such a way 
that the following three criteria are met: 
-the  contract ', is  concluded  on  the  basis  of  a  trader's 
consumer  has  a  proper  opportunity  of 

catalogue which  the 
reading in  the  absence of the trader, 

32 

r there is intended  to be  continuity  of  contact  between  the 
consumer  in  relation  to  that  or  any 

trader and the 
subsequent  transaction, 

- both  the  catalogue  and  the  contract  clearly  inform  the 
consumer  of  his  right to return  goods to the trader within 
a period  of  not 
less  than  seven  days  of  receipt  or 
otherwise  to cancel the contract within that period without 
obligation of any  kind  other  than  to  take  reasonable  care 
of  the goods : 

- the  annual  turnover  exclusive  of value-added  tax  generated 
by  the  seller  in  connection  with  mail-order  selling  to 
Member  States  other  than  that  from  which  the  goods  are 
dispatched  or  transported  exceeds  the  equivalent  in 
national  currency  of  ECU 1 million  at  the  conversion  rate 
ruling  on  the  day  on  which  this  Directive  is 
adopted.  Member  States  shall  grant  to  taxable  persons  not 
satisfying  this condition  the  right  to opt  for the present 
arrangements  governing  mail-order  sales.  The  option  shall 
apply for two calendar years; 

(b) Under conditions which they shall lay down for the purpose of 
ensuring  the  correct  and  straightforward  application  of  the 
exemptions  provided  for below  and  of preventing  any  evasion, 
avoidance  or abuse, Member  States  shall, by  analogy  with  the 
transactions  referred  to  in Article 15, exempt  the  following 
where  they  are  effected  by  taxable  persons  other  than  those 
qualifying  for  the  exemption  from  tax  referred  to  in 
Article  24 or  for the  flat-rate  arrangements  referred  to in 
Article 25: 
- supplies  of  private  vehicles  forming  part  of  the  seller's 
stock  in  trade  and  dispatched  or  transported  to  another 
Member  State  by  the  seller  or  for  his  account  or  by  a 
person  not  established  within  the territory  of the  country 
by whom the goods are acquired or for his account; 

33 

supplies  other  than  those  referred  to  in  (a) to  a  taxable 
person  or  to  a  non-taxable  person  within  the  meaning  of 
Article 4(5)  of  goods  other  than  private  vehicles  as 
referred  to  in  the  first  indent  which  are  dispatched  or 
transported  to  a  taxable  person  or  a  non-taxable  person 
within the meaning of Article 4  (5) in another Member State 
by  the  seller  or  for  his  account  or  by  a  person  not 
established within the territory of the country by whom the 
goods are acquired or for his account. 
However, where the person by whom the goods are acquired  is 
a  taxable  person  whose  activity  is  fully  exempt  or  a  non 
taxable  person  within  the  meaning  of  Article 4(5),  this 
provision  shall  apply  only  from  the  moment  during  the 
calendar  year  when  the  total  amount  of  corresponding 
purchases  exclusive  of  value-added  tax  exceeds  the 
equivalent  value  in national  currency  of ECU 35 000 at the 
conversion  rate  ruling  on  the  day  this  Directive  is 
adopted.  This amount shall be increased to ECU 70 000 with 
effect  from  1 January  1995,  at  the  conversion  rate applicable 
on  that  date.  The  threshold  for  purchases  which  applies 
for the purposes of these provisions consists of the amount 
of  purchases  exclusive  of  value-added  tax  which  have  been 
dispatched  or  transported  from  a  Member  State  other  than 
the  Member  State  of  arrival  of  the  goods,  with  the 
exception of: 

-  purchases  of  private  vehicles  the  supply  of  which  is 

covered  by  the  provisions  of  the  first  indent 

- purchases  of goods the supply  of which  is covered by the 

provisions of point  (a) 

-  purchases  of  goods  the  supply  of which  is effected  by a 
taxable person who benefits  from the  exemption  regime of 
Article 24. 

34 

This  provision  shall  also  apply  where  the  respective 
ceilings  of  ECU 35 000  and  ECU 70 000  have  not  been 
exceeded,  provided  that  the  person  to  whom  the  goods  are 
supplied  has  exercised  this  option.  The  option  shall  be 
valid for two calendar years; 

- supplies  of  services,  including  transport  and  incidental 
transactions  but  excluding  supplies  of  services  exempt 
under  Article 13,  where  they  are  directly  linked  to 
transactions referred to in this  point (b); 

- supplies  of  services made by  intermediaries  acting  for and 
on  behalf  of  others  where  they  intervene  in  transactions 
referred to in the first, second and third  indents  of this point (b); 

(c) VAT  shall  be  charged  on  acquisitions  for  consideration  of 
goods  the  supply  of which  by  taxable  persons  is governed  by 
the  provisions  set  out  in  the  first  and  second  indents of point 
(b).  "Acquisition  of  goods"  means 
process  of 
acquiring  the  right  to  dispose  of  tangible  property  as 
owner.  The  place  where  an  acquisition  is  made  shall  be 
deemed  to  be  the  place  where  the  goods  dispatched  or 
transported  are  at  the  time  they  reach  the  person  by  whom 
they  are  acquired.  The chargeable  event  shall  occur and  the 
tax shall become chargeable when the acquisition  is made. 

the 

35 

The following shall be treated as an acquisition of goods for 
consideration: 
- the acquisition by a taxable person whose activity  is fully 
exempt  or  by  a  non-taxable  person  within  the  meaning  of 
Article 4(5),  for  the  purposes  of  his  activity  in  the 
Member  State  of destination,  of goods  transferred  from  the 
Member State of departure of the goods.  The Member State of 
arrival  of  the  goods  shall  take  the measures  necessary  to 
avoid any double taxation; 

- the  acquisition  by  a  taxable  person,  for  the  purposes  of 
his  activity  in  the  Member  State  of  destination,  of  goods 
not  eligible  for  a  deduction  of  input  tax  in  full  or  in 
part  where  those  goods  have  been  transferred  from  the 
Member State of departure of the goods. The Member State of 
arrival  of  the  goods  shall  take  the measures  necessary  to 
avoid any double taxation; 

By  derogation  from  Article  8(1)(a)  where  the  place  of 
departure  of  the  consignment  or  transport  of  goods  is  in a 
Member  State  other  than  the  country  of  acquisition  of  those 
goods,  the  place  of  the  supply  by  the  person  by  whom  the 
goods  are  acquired  and  the place of any  subsequent  supplies 
shall be deemed  to be  in the  country  of acquisition  of the goods; 

(d) The  taxable  amount  of  the  acquisition  shall  be  the  same  as 
that  which  would  be  applicable  within  the  territory  of  the 
country  to  the  supply  of  the  same  goods  in  accordance  with 
Article 11(A)(1) and  (2)  and  (C) .  To  the  extent  that  they 
have  not  already  been  included,  the  taxable  amount  of  the 
acquisition  shall  include  expenses  incidental  to  the 

36 

acquisition  such  as  commission,  packaging,  transport  and 
insurance  costs  charged up to the point within  the territory 
of  the  country  at  which  the  goods  dispatched  or  transported 
arrive. 

As  regards  the  transfer  of  goods  referred  to  in  the  second 
indent of point (c), the  taxable  amount  shall  be  determined  in 
accordance with Article 11(A)(1)(b). 
The rate of tax  applicable  to the acquisition  of a good  shall 
be  that  applied  to  the  supply  of  the  same  good  within  the 
territory of the country; 

(e) In the  case  referred  to in point (a), the tax  shall  be payable  in 

accordance with Article 21(1)(a). 
In the cases referred  in point (c), the.  person by whom the goods 
are acquired  shall declare  the acquisition  and  shall pay  the 
tax. 
Where  the  taxable  transaction  is  carried  out  by  a 
person  by  whom  the  goods  are  acquired  who  is  established 
abroad, Member  States may  take measures providing  for the tax 
to  be  payable  by  another  person - in  particular  a  fiscal 
representative may be designated  for these purposes. 
Where  the  person  liable  to  pay  the  tax  is  a  non-taxable 
person  or  a  taxable  person  released  from  the  obligation  to 
make  a  tax  return,  Member  States  shall  take  the  measures 
necessary to ensure that he complies with the obligations set 
out  in point (k). To  that  end,  provision  may  be  made  for  the 
simplification  of those obligations and for an annual return; 

(f) The  place  where  services  specified  in  Article 9(2)(e)  are 
supplied when performed  for customers established outside the 

37 

Community  or for taxable persons established  in the  Community 
but  not  in  the  same  country  as  the  supplier  shall  be  the 
place where  the customer has established  his business  or has 
a fixed establishment to which the service is supplied or, in 
the  absence  of  such  a  place,  the  place  where  he  has  his 
permanent address or usually resides; 

(g) Member  States may grant  taxable persons the right to opt  for 
taxation of the transactions referred to in Article  13(B)(d); 

(h) Member  States  shall  exempt  the  acquisition  of  goods  the 
supply of which would  in all circumstances be exempted  within 
the country.  They shall also exempt the acquisition of goods 
the  importation  of  which  would  in  all  circumstances  be 
exempted pursuant to Article 14(1)(d) and (g); 

(i) Subject  to  the  consultation  provided  for  in  Article 29, 
Member  States may  opt  to exempt  acquisition  by,  imports  for, 
and supplies of goods to a taxable person  intending to export 
them  to  another  Member  State  or  to  a  third  country  as  they 
are  or  after  processing,  as  well  as  supplies  of, services 
linked with  his exporting business, up to a maximum  equal to 
the value of his exports during the preceding twelve months; 

(j) The  provisions  governing  deductions  shall  also  apply  to  VAT 

payable  or  paid  on  the  acquisitions  referred  to in point (c). 

38 

However,  the  tax  payable  or  paid  in  a  Member  State  by  a 
taxable person: 
-  in respect  of goods supplied  or to be supplied  to him by a 

-  in  respect  of goods  which  have  been  imported  or have  been 

taxable person; 

subject to an acquisition; 

him by a taxable person; 

- and  in  respect  of  services  supplied  or  to  be  supplied  to 

shall  not  qualify  for  deduction  in  another  Member 
State.  With regard to taxable persons who are established  in 
the territory  of the Community,  the right to refund  shall be 
determined  pursuant  to  Directive  79/1072/EEC  during  the 
transitional period; 

(k) By way of derogation from the provisions of Article 22 the following shall apply: 

1.  Every  taxable person  shall  state when his activity  as a 

taxable person commences, changes or ceases. 

2.  Every  taxable  person  shall  keep  accounts  in  sufficient 
detail  to  permit  application  of  value  added  tax  and 
inspection by the tax authority. 

3.  (a) Every  taxable  person  shall  issue  an  invoice,  or 
other document  serving  as an  invoice,  in respect  of 
all  goods  and  services  supplied  by  him  to  another 
taxable person or to a non-taxable person within the 
meaning  of  Article 4(5)  and  shall  keep  a  copy 
thereof.  This  obligation  shall  apply,  irrespective 
of whether the persons referred to in this paragraph 
are  taxable  persons  or  non-taxable  persons  as 

39 

defined  in Article 4(5) within  the territory  of the 
country or in another Member State. 

Every taxable person shall likewise  issue an invoice 
in  respect  of  payments  on  account  made  to  him  by 
another taxable person before the supply of goods or 
services is effected or completed. 

(b) The  invoice  shall  state  clearly  the price  exclusive 
of  tax  and  the  corresponding  tax  at  each  rate  as 
well as any exemptions. 

The  invoice  shall  also  state  in  respect  of 
transactions  referred to in point (b) of this Article 28 the VAT 
registration  number  of  the  taxable  person  supplying 
the  goods  and  that  of  the  person  by  whom  they  are 
acquired. 

(c) The  Member  States  shall  determine  the  criteria  for 
considering whether a document serves as an invoice. 

Every  taxable  person  shall  submit  a  return  within  an 
interval  to  be  determined  by  each  Member  State.  This 
interval may  not  exceed  two months  following  the end of 
each tax period.  The tax period  may be  fixed  by  Member 
States  as  a  month,  two  months  or  a  quarter.  However, 
Member  States  may  fix  different  periods  provided  that 
these do not exceed a year. 

40 

The  return  must  set  out  all  the  information  needed  to 
calculate  the  tax  that  has  become  chargeable  and  the 
deductions  to  be  made,  as  well  as,  where  appropriate, 
the  total  amount  of  supplies referred to:in point (b) of, this Article 
28, the total amount of acquisitions referred to in point (c) ot^chis Article 28 and, in 
so  far  as  it  seems  necessary  for  the  establishment  of 
the  basis  of  assessment,  the  total  amount  of  the 
transactions  relative  to  such  tax  and  deductions,  and 
the  total  amount  of  the  exempted  supplies. 

5.  Every  taxable  person  shall  pay  the  net  amount  of  value 
added  tax  when  submitting  the  return.  The  Member  States 
may,  however,  fix  a  different  date  for  the  payment  of 
the  amount  or may  demand  an  interim  payment. 

6.  Member  States  may  require  a  taxable  person  to  submit  a 
statement 
in 
paragraph  4  and  concerning  all  transactions  carried  out 
the  preceding  year.  This  statement  shall  also provide all 
the  information  necessary  for any  adjustments. 

information 

specified 

including 

the 

7.  Member  States  shall  take  the  necessary  measures  to 
ensure  that  those  persons  who,  in  accordance  with 
Article  21(1)(a)  and  (b), are  considered  to  be  liable  to 
pay  tax  instead  of  a  taxable  person  established  in 
another  country  and who  are  jointly  and  severally  liable 
for  the  payment  comply  with  the obligations  relating 
to  the  submission  of  a  return  and  payment. 

41 

8.  Without  prejudice  to  the  provisions  to  be  adopted 
pursuant to Article  17(4), Member States may, subject to 
respecting  equality  of  treatment  between  domestic  and 
intra-Community  transactions,  impose  other  obligations 
which  they  deem  necessary  for  the  correct  levying  and 
collection of the tax and for the prevention of fraud. 

9.  With  the  exception  of  the  obligation  to  issue  invoices 
in  respect  of  supplies  specified  in  point  (b), Member 
States may release taxable persons: 
-  from certain other obligations; 
-  from all other obligations where those taxable persons 

carry out only exempt transactions; 

-  from  the  payment  of  the  tax  due  where  the  amount  is 

insignificant. 

for  the 

arrangements 
requests, 

10. Where  a  taxable  person  or  a  non-taxable  person  within 
the  meaning  of  Article 4(5)  or  a  taxable  person 
down 
qualifying 
in 
Articles 24 and 25 
competent 
authorities  in  the  Member  State  in  which  he  is 
established  shall  issue  to  him  a  statement  certifying 
his  VAT  status  provided  the  person  making  the  request 
fulfils  the  conditions  defined  in  the  second  indent  of point 
(b).  However, where the seller already possesses such a 
statement,  the  person  by  whom  the  goods  are  acquired 
shall  not  be  obliged  to  provide  a  new  statement  during 
the  calendar  year  for  which  the  statement  was 

laid 
the 

so 

42 

issued.  That  statement  shall be  in conformity  with  the 
specimen certificate set out in the Annex hereto. 

If  a  statement  certifying  his  VAT  status  has  already 
been  issued  to  him,  the  taxable  person  or  the  non 
taxable  person  within  the meaning  of Article 4(5)  shall 
submit  a  new  request  in the  event  of  any  change  in his 
VAT status." 

3.  Article 3 is replaced by the following provisions : 

"Article 3 

1. The  following  Council  Directives  shall  cease  to  have  effect 

on 31 December 1992: 
Directive 83/183/EEC 
Directive 74/651/EEC 

2. The  following  Council  Directives  shall  cease  to  have  effect 
on  31 December  1992  in  so  far  as  intra-Community  relations 
are concerned: 
Directive 69/169/EEC 
Directive 83/181/EEC 
Directive  85/362/EEC 

3. The  following  Council  Directives  shall  cease  to  have  effect 

on 31 December 1996: 
Directive 79/1072/EEC 
Directive 83/182/EEC." 

4.  A new Article 4b shall be inserted : 

"Article 4b 

Article 11(C)(2)  of  Directive  77/388/EEC  shall  be  replaced  by 

43 

the following provisions : 

(2) Where elements determining the taxable amount are expressed  in a 
currency  other than that  of the Member  State where  evaluation  is 
carried  out,  the  rate  of  exchange  applicable  shall  be  the  last 
rate  of  sale  registered  on  the  most  representative  exchange 
market  or markets  of  the Member  State  concerned  at  the  time  the 
tax  becomes  payable  according  to  procedures  fixed  by  Member 
States." 

Done at Brussels, 

" 

For the Council 

44 

ANNEX 

CERTIFICATE OF VAT STATUS 

(Name and address of competent  authority) 

certifies that 

(Surnames and forenames or name of firm) 

(nature of activity) 

(Address of the establishment) 

is recognised  for VAT purposes under the registration  number 
as an operator entitled to receive supplies of goods 

exempted  from value-added tax by virtue of the application of 
Article 2 of Directive COM(87) 322 as amended by Directive COM  (90) 
182. 

Date 

Official 
Stamp 

(1) If the applicant does not have a VAT registration number, the 
competent  authority shall state the reason for this. 

(Signature, name and grade) 

45 

COMPLIANCE  BURDENS ON FIRMS AND AFTER 1992 
DUE TO VAT AND STATISTICAL  RETURNS 

IMPACT ASSESSMENT 

Present  situation: 

VAT 

Current  customs  based  import/export  procedures  require  that 
goods  consignments  must  stop  at  customs  posts  when  crossing 
borders. 
In  addition  the  goods  have  to  be  declared  to  the 
authorities and  cleared  through  Customs either  at the border or 
Goods  consignments  are  declared  to  the  customs 
elsewhere. 
authorities using the Single Administrative Document  (SAD). 

At present up to 50 boxes approximately on the  (SAD) may have to 
be completed  in respect of each individual consignment, in trade 
between  Member  States I1). 
Additionally  a  further  five  boxes 
must be completed by the administrative authorities. 

No precise  figures are available  for the number  of SAD's  issued 
in any  one year.  However  a reasonable estimate  is that between 
50 to  +/-  60 millions  SAD's are  used  in purely  intra-Community 
trade  each  year. 
This  figure  would  not  include  other 
consignments,  such  as  third-country  goods  transiting  the 
Community. 

Taxable  traders  who  use  the  SAD  for  import  and  export 
transactions  also  have  to  complete  periodic  VAT  returns  in  the 
usual manner. 

Statistics 

The  SAD  is  also  used  as  the  basis  for  the  collection  of 
statistics on trade between Member States. 

Situation  from  1993 onwards 

Under  the  Commission's  proposal,  the  obligations  imposed  on 
Community  firms will be considerably  reduced: 

^  All these boxes may not necessarily be completed by the same 

firm. 

46 

VAT 

No SAD will be required in most intra-Community trade. 

There  will  be  no  stops  or  controls  at  borders  by  customs. 
Custfom clearance formalities will also be dispensed with. 

For  traders  subject  to VAT, the  only  obligations  relating  to 
intra-Community trade will be: 

- an  inclusion  in  their  normal  periodic  VAT-returns  of  two 
global  (import and export) figures for their trade with other 
Member States. 

- the inclusion of the VAT-number of seller and purchaser on the 

invoice documenting the transaction. 

- obtaining  a  declaration  from  the  domestic  VAT-authorities, 
that  they  are  subject  to VAT.  This  documentation  shall  be 
given to the seller in the other country as a precondition for 
the zero-rating of exports. 

Once  completed,  however,  these  requirements  would  involve  no 
further compliance burden transaction-by-transaction.  The only 
other documentary requirement will be to keep the normal common 
records and  documents which  firms are required  to keep  in any 
case. 
Small enterprises(2) VAT exempt can chose between two options: 

- they  simply  buy  in  other  Member  States  at  the  rate  of  VAT 
applicable  in  those  other  Member  States  (rate  of  VAT  in 
country  of  origin),  implying  absolutely  no  subsequent 
relations with VAT-authorities in any countries, subject to an 
annual purchases threshold of 35.000 ecus*3', above which they 
must use the following option; 

- they  can  choose  to  buy  VAT-free,  but  pay  subsequently  the 
domestic  rate  of  VAT  on  the  purchase.  This  presupposes  a 
registration with the VAT-authorities, so that they can prove 
their status to the seller. 

The same regime applies to traders which are exempt from VAT by 
reason of the type of activity they carry on  (banks, insurance, 
some public institutions etc.). 

(*) The Commission has a proposal before the Council which will 
harmonise the VAT exempt thresholds, which  at present vary 
between Member States, to an obligatory level of 10.000 ecus 
per  annum  and  an  optional  level  of  35.000 ecus throughout 
the Community. 

*3' This  threshold  will  be  raised  to  70.000  ecus  with  effect 

from 1 January 1995 

47 

Statistics 

As the SAD document disappears  a new system  is introduced  for 
the  collection  of  trade  statistics  between  Member  States 
implying the following burdens: 

Small enterprises which are VAT exempt are completely  exempted 
from  the  supply  of  any  statistics  on  trade  between  Member 
States. 

- The great  majority  of  other  firms will  only  be  required  to 
complete two extra boxes (value of intra-Community imports and 
exports) on their periodic VAT returns, which would serve both 
VAT and statistical purposes. 

- Only  the  largest  firms  (about  20% of VAT  registered  firms) 
will in addition be required to complete an INTRASTAT monthly 
declaration for statistical purposes on which seven compulsory 
and three optional data items are to be indicated. 

The situation after 1992 

When the regime change towards  the taxation  in the country of 
origin  as  the general  principle, requirements  relating  to the 
documentation  of  the  status  of  the  buyer  will  in  general 
disappear. 

ISSN 0254-1475 

COM(90) 182 final 

DOCUMENTS 

EN 

09 

Catalogue number : CB-CO-90-214-EN-C 
ISBN 92-77-60280.5 

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