PROPOSAL FOR A COUNCIL DECISION AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY TO APPLY A MEASURE DEROGATING FROM ARTICLE 2 ( 1 ) OF THE SIXTH COUNCIL DIRECTIVE ( 77/388/EEC ) OF 17 MAY 1977 ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES RELATING TO TURNOVER TAXES
Date: 1991-03-14
Institutions: European Commission
Subjects: Germany, VAT, credit guarantee, provision of services, tax exemption

COMMISSION  OF  THE  EUROPEAN  COMVIUNITIES 

COM(91)82  final 

Brussels,14  March 1991 

Proposal  for a 
COUNCIL DECISION 

authorizing  the Federal Republic of Germany to apply a 
measure derogating  from Article  2  (1) of the Sixth  Council 
Directive  (77/388/EEC) of 17 May  1977 on the harmonization 
of the laws of the Member  States relating to turnover  taxes 

(presented  by the  Commission) 

^ 

EXPLANATORY  MEMORANDUM 

Subject  to  Article  1(2)(b)  of  the  Eighteenth  Council 
Directive  of  18  July  1989f1',  the  Federal  Republic  of 
Germany was required to abolish, with effect  from  1 January 
1991,  its  exemption  from  tax  of  the  management  of  credit 
and  credit  guarantees  by  a person  or a body  other than  the 
one which granted the credits. 

By  letter  received  by  the  Secretariat-General  of  the 
Commission  on  19  December  1990,  the  Government  of  the 
Federal  Republic  of  Germany  submitted  a  request  for  a 
derogation  based  on  Article  27  of  the  Sixth  Council 
Directive  of  17  May  1977  on  the  common  system  of  value 
added  tax*2',  designed  to  simplify  the  procedure  for 
charging the tax. 

In  accordance  with  Article  27(3)  of  the  Sixth  Directive, 
the  other  Member  States  were  informed  by  letter  dated  18 
January  1991 of the German request. 

The measure  requested by the Federal Republic  of Germany  is 
the  retention  of  the  tax  exemption  for  the  management  of 
credit  and  credit  guarantees  by  a  person  or  a  body  other 
than the one which granted the credits. 

(1) O.J. n*L 226, 3.8.1989 
(2) O.J. n'L  145,  13.6.1977 

In  support  of  its  request  the  Government  of  the  Federal 
Republic  of  Germany  explains  the considerable  difficulties 
that would  be  encountered  as regards  the  establishment  by 
the undertakings  concerned  of the taxable transactions and 
the deductible amounts of input tax relating to them and as 
regards  control  by  the  tax  administration.  Since  the 
amounts  of  tax  are  small  in  very  many  cases  the  burden 
involved  in  adapting  the  system  would  be  unjustified  in 
relation to the tax yield. 

The  Government  of  the  Federal  Republic  of  Germany  points 
out that the derogation would have only a limited effect on 
the VAT  yield,  a  fact  which  has  been  acknowledged  by  the 
Commission  as  regards VAT  own  resources, most  recently  in 
the  Commission  Decision  of  23  March  199u'3',  Article  2, 
point 3. 

The  Commission  is convinced  that  the measure  in question, 
which derogates  from Article 2  (1) of the Sixth Directive, 
read  in  conjunction  with  Article  13  B(d)(1)  and  (2), is 
designed  to  simplify  the  procedure  for the  application  of 
VAT within the meaning of Article 27 of that Directive. 

The  Commission  therefore  considers  it  appropriate  for  the 
Federal Republic  of Germany  to be  authorized  to apply  the 
planned  special  measure.  It  nevertheless  takes  the  view 
that the derogation  should  be  limited  as to  its duration, 
and authorized until 31 December  1995, and that before the 
expiration  of  this  authorization  the  Federal  Republic  of 
Germany  should  endeavour  to  overcome  the  practical 
difficulties giving rise to this derogation. 

(3) O.J. n'L 99, p. 28 

* 

Proposal  for a 

COUNCIL DECISION 

authorizing  the  Federal  Republic  of  Germany  to  apply  a 
measure  derogating  from Article  2  (1) of  the  Sixth  Council 
Directive  (77/388/EEC)  of  17^ May  1977  on  the  harmonization 
of the laws of the Member States relating to turnover taxes 

(presented by/the Commission) 

THE COUNCIL OF THE EUROPEAN COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European 
Economic Community, 

Having  regard  to  the  Sixth  Council  Directive  77/388/EEC  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  ' ' ,  as  last 
amended by  the Eighteenth  Council  Directive  89/465/EEC (2), 
and  in particular Article  27* thereof, 

Having regard to the proposal  from the Commission, 

Whereas  the  Eighteenth  Directive  89/465/EEC  repeals,  as 
from  1  January  1991,  the  transitional  derogation  provided 
for  in  Article  28(3)(b)  of  the  Sixth  Directive  77/388/EEC 
read  in conjunction with point  13 of Annex  F thereto, which 
permitted  Member  States  to  continue  to  exempt  the 
management of credit and credit guarantees by  a person or a 
body other than the one which granted the credits; 

(1) O.J. n"L 145, 13.6.1977, p. 1 
(2) O.J. n'L 226, 3.8.1989, p. 21 

Whereas,  under  Article  27(1)  of  the  afore-mentioned 
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 Federal Republic of Germany, by letter received 
by  the  Commission  on  19  December  1990,  requested 
authorization  to  retain  the  tax  . exemption  for  the 
management of credit and credit guarantees by a person or a 
body  other  than  the one which  granted  the  credit; whereas 
this  measure  constitutes  a  derogation  from  Article 2(1), 
read  in conjunction with Article  13 B  (d)  (1) and  (2) , of 
the  Sixth  Directive  77/388/EEC,  according  to  which  such 
services effected  for consideration within the territory of 
a  country  by  a  taxable  person  acting  as  such  shall  be 
subject to value added tax; 

Whereas  the  other  Member  States  were  informed  of  the 
Federal Republic of Germany's request on 18 January 1991; 

Whereas  arrangements  for  taxing  such  supplies  would  pose 
considerable  technical  difficulties  in  Germany  as  regards 
establishment  by the undertakings  concerned  of the taxable 
transactions  and  the  deductible  amounts  of  input  tax 
relating  to  them  and  as  regards  control  by  the  tax 
administration; 

Whereas  the  authorization  requested  can  be  granted  under 
certain conditions; 

Whereas  the  derogation, shall  be  temporary,  in  order  to 
allow  an  assessment  of  the  effects  of  the  authorization 
granted  by  this  Decision  after  a  certain  period  of 
application; 
this 
before 
authorization  the  Federal  Republic  of  Germany  shall 
endeavour  to  overcome  the  practical 
difficulties 
necessitating this derogation»; 

expiration 

whereas 

of 

Whereas  this  derogation^ will  affect  the  European 
Communitiesown  resources  accruing  from  value  added  tax 
only to a negligible extent; 

HAS ADOPTED THIS DECISION  :^ 

Article 1 

By  way  of  derogation  from  Article  2  (1) ,  read  in 
conjunction with Article 13 B(d)  (1) and  (2), of the Sixth 
Directive  77/388/EEC,  the  Federal  Republic  of  Germany  is 
hereby  authorized  until  31  December  1995  to  exempt  the 
supply of  services  in respect of the management  of credit 
and credit guarantees by a person or a body other than the 
one which granted the credits. 

Article 2 

This  decision  is  addressed  to  the  Federal  Republic  of 
Germany. 

Done at Brussels, 

For the Council 
President 

-  s> 

ISSN 0254-1475 

COM(91) 82 final 

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