Proposal for a COUNCIL DIRECTIVE AMENDING DIRECTIVE 77/388/EEC AND INTRODUCING TRANSITIONAL MEASURES APPLICABLE IN THE CONTEXT OF THE ENLARGEMENT OF THE EUROPEAN UNION ON 1 JANUARY 1995
Date: 1994-12-12
Institutions: European Commission
Subjects: VAT, approximation of laws, enlargement of the Union, export tax, import tax, transitional period (EU)

COMMISSION OF THE EUROPEAN COMMUNITIES 

COM(94) 603 final 
Brussels, 12.12.1994 

Proposal for a 

COUNCIL DIRECTIVE 

AMENDING DIRECTIVE 77/388/EEC AND INTRODUCING 
TRANSITIONAL MEASURES APPLICABLE IN THE CONTEXT 
OF THE ENLARGEMENT OF THE EUROPEAN UNION 
ON 1 JANUARY 1995 

(presented by the Commission) 

EXPLANATORY  MEMORANDUM 

1. 

INTRODUCTION 

Article 2  of  the  Act  concerning  the  conditions  of  accession  of  the  Kingdom  of  Norway, 
the  Republic  of  Austria,  the  Republic  of  Finland  and  the  Kingdom  of  Sweden  and  the 
adjustments  to  the  Treaties  on  which  the  European Union  is  founded  provides  that 
"From the  date of accession,  the  provisions  of the original  Treaties  and the  acts  adopted 
by the  institutions  before  accession  shall  be binding  on the new  Member States  and  shall 
apply  in those  States  under  the  conditions  laid  down  in those  Treaties  and  in  this  Act. " 
With  the  exception  of  the  cases  specifically  provided  for  in  Annex XV  to  the  Act  of 
Accession,  therefore,  the  new  Member States  will,  on  accession,  apply  the  common 
system of value added tax based on the Sixth VAT Directive.  As  a result, the  provisions 
of Title XVIa  of  that Directive  laying  down  transitional  arrangements for  the  taxation  of 
trade between Member States will apply, from the moment of accession,  to trade between 
the  Community  and  the  new  Member States  as  well  as  to  trade  between  the  new 
Member States themselves. 

In such  trade,  the  accession  of  the  new  Member States  will  have  the effect  of  abolishing 
all tax checks at frontiers.  In other words, on accession, the transitional  arrangements  for 
taxing  trade  between  Member States  will  replace  the  system  of  imposition  of  tax  on 
importation and remission of tax on exportation. 

This  situation  is  similar to  that  which  existed  when  the  internal  market  was  launched  on 
1 January  1993.  Transitional  measures were  then adopted  (Article 28n  incorporated  into 
the  Sixth  VAT  Directive  by  Directive 92/111/EEC  )  with  a  view  to  safeguarding  the 
neutrality  of  the  common  system  of  value  added  tax  and  to  preventing  cases  of  double 
taxation  or non-taxation.  For the  same reason,  measures governing  the  transition  to  the 
enlarged Community,  similar to those referred to above, are now required. 

1 
2 

OJ No C 241, 29.8.1994, p.  21. 
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 lax:  uniform  basis of 
assessment  (OJ No L  145,  13.6.1977,  p.  1), as  last  amended  by Directive 94/5/EC  (OJ No L 60, 
3.3.1994, p. 16). 
OJNoL384,  30.12.1992, p. 47. 

The  nature  of  the  transitional  measures  to  be  taken  depends  principally  on  the  customs 
status  of  the  goods  at  the  time  of  their  removal,  after  the  date  of  accession,  from  the 
customs  regime  under  which  they  were  placed  prior  to  accession.  In  the  customs  field, 
the  mechanisms  are  based  on  proof being  furnished  after  that  date  of  the  goods  being  in 
free  circulation  in  the  current  Community  or  in  one  of  the  new  Member  States.  Thus, 
goods  which,  prior  to  the  date  of  accession,  were  in free  circulation  in  one  of  the  new 
Member States  and which had been placed,  prior to that date, in a customs  warehouse  in 
the  current  Community  will  be  regarded  as  being  in  free  circulation  in  the  enlarged 
Community  when they  leave that warehouse  after  accession.  The  same  applies  to  goods 
in  free  circulation  in  the  current  Community  which  were  placed,  prior  to  the  date  of 
accession,  in a customs  warehouse in one  of the applicant  countries and which  leave that 
warehouse  after  that  date.  The goods being  in free  circulation,  their  removal  from  those 
warehouses  after  accession  cannot  be  subject  to  VAT  under  Article 7(1 )(a)  of  the 
Sixth VAT Directive.  In order to  prevent  non-taxation,  therefore,  it is necessary  to  treat 
that removal  as an import within the meaning of Article 7(1) of the Sixth VAT Directive. 

II. 

DESCRIPTION  OF  HYPOTHETICAL  CASES  NECESSITATING 
TRANSITIONAL  MEASURES 

The need for transitional  measures has been assessed on the basis of the customs  approach 
set  out  in the  final  paragraph  in  Section I.  A  distinction  is  made  between  the  following 
situations: 

1) 

2) 

goods  that  have  been  placed,  prior  to  the  date  of  accession,  in  the  current 
Community  or  in  one  of  the  new  Member States  under  a  temporary  admission 
regime  with  full  exemption  from  import  duties  or  under  one  of  the  suspensive 
the 
customs 
Sixth VAT Directive 
inward 
processing  arrangements).  The  goods  leave  those  regimes  after  the  date  of 
accession; 

in  Article  16(l)(B)(a) 
referred 
(e.g.  customs  warehousing  arrangements  and 

regimes 

(d) 

of 

to 

to 

goods  that  have  been  placed,  prior  to  the  date  of  accession,  in  one  of  the  new 
Member States  or  in  the  current  Community  either  under  the  common  I^M.^U 
procedure  or  another  customs  transit  procedure  or  under  an  export  procedure. 
However,  the goods  leave that procedure after the date of accession  or,  where  they 
are  placed  under  an  export  procedure,  were  not  imported  prior  to  the  date  of 
accession into the current Community or into one of the new Member  States. 

-  3  -

1. 

Termination  of  a  temporary  admission  regime  with  full  exemption  from 
import  duties  or  of  one  of  the  suspensive  customs  regimes  referred  to  in 
Article  16(l)(B)(a) to (d) of the  Sixth  VAT  Directive 

(a) 

Termination  of one of these regimes in the current  Community 

The  goods  in  question  were  imported  from  the  new  Member  States  into  the  current 
Community  prior  to  accession.  After  importation  they  were  placed  under  a  temporary 
admission  regime  with  full  exemption  from  import  duties  or  under  one  of the  suspensive 
customs  regimes  referred  to  in  Article  16(l)(B)(a)  to  (d).  The  chargeable  event  on 
importation  was therefore  deferred  until removal  of the goods  from  one of those  regimes. 
In order to prevent  any hiatus in the conditions for  taxing such transactions,  it is  proposed 
that  the  benefit  of  the  provisions  in  force  prior  to  accession  be  extended  until  the  goods 
leave  those  regimes  (Article  1(2)).  At  the  same  time,  and  in  order  to  prevent  cases  of 
non-taxation,  it  is  proposed  to  treat  the  removal  of  goods  from  those  regimes  after 
accession  as  an  importation  of goods  within  the  meaning  of  Article 7(l)(a)  where,  al  fk 
time of their  removal,  it is clear that  the goods  in question,  prior to  entry  into  the  current 
Community,  were  in  free  circulation  in  one  of  the  new  Member  States  (Article  l(4)(a) 
and  (b)).  This  treatment  as  an  importation  is  necessitated  by  the  absence  of  taxation 
within the meaning  of Article 7(l)(a)  of the  Sixth VAT Directive,  as this provision  applies 
only to goods which  are not  in free  circulation. 

These  measures  will  ensure  that  transactions  carried  out  under  similar  conditions  actually 
receive  equivalent  treatment.  All  goods  imported  into  the  current  Community  from  the 
new  Member  States  prior  to  accession  will be taxed  in the same way,  whether  or  not  the 
chargeable event has been  deferred. 

By  way  of  derogation  from  these  taxation  principles,  special  measures  are  proposed  in 
order  for  tax  not  to  be  applied  where  the  goods  are  re-exported  from  the  enlarged 
Community  (Article  l(7)(a))  or  are  redispatched  to  the  new  Member  State  from  which 
they  were  temporarily  exported  (Article  l(7)(b)).  These  measures  will  also  apply  to 
means  of  transport  where  these  have  been  acquired  or  imported  in  accordance  with  the 
general  tax  conditions  in force  on  the  domestic  market  of  a  new  Member  State  or  where 
they were first  put  into  service  prior  to  1 January  1987 or where the amount  of tax  due  is 
insignificant  (Article  l(7)(c)). 

These  special  measures  will  considerably  simplify  the  arrangements  for  taxing  means  of 
transport  which,  prior  to  accession,  were  placed  in  the  current  Community  under  a 
temporary  admission  regime  with  full  exemption  from  import  duties  and  which  were  not 
removed  from  that  regime by the date of accession. 

-4-

(b) 

Termination  of one of these regimes in the new Member  States 

This involves, firstly,  goods from  the current  Community  which were imported  into  one  of 
the  new  Member  States  prior  to  accession  and,  secondly,  goods  covered  by  such  regimes 
in the  context  of trade between  the new Member  States.  Following  their  importation  into 
one  of  the  new  Member  States,  they  were  placed  under  a  temporary  admission  regime 
with  full  exemption  from  import  duties  or  under  a  suspensive  customs  regime  similar  to 
those referred  to in Article  16(l)(B)(a) to (d). 

For  the  reasons  given  at  1(a)  above,  parallel  transitional  measures  must  also  apply  after 
the  date  of  accession  to  the  removal  of  goods  from  those  regimes  in  one  of  the  new 
Member  States where,  at  the time of removal,  it  is clear that  the goods  in  question  were, 
prior  to  their  importation  into  one  of  the  new  Member  States,  in  free  circulation  in  the 
current  Community  or  in one  of those  States (Article  1(2), (4)(a)  and  (b),  and  7(a),  (b) 
and  (c)). 

2. 

Termination  of  a  common  transit  procedure  or  another  customs  transit 
procedure  or  of  a  procedure  under  which  goods  are  exported  from  the  new 
Member  States to the current Community  or vice versa 

(a) 

Termination  of  a common  transit  procedure  or  another  customs  transit  procedure 
or of an export procedure initiated in one of the new Member  States 

This  involves goods  from  the  new Member  States  which,  prior  to  accession,  were  placed 
under  the  common  transit  procedure  or  another  customs  transit  procedure  (e.g.  the 
procedure  for  the international  transport  of goods under  cover  of TIR  carnets)  in order  to 
be transported  to  the Community  or to  one of the  other  new Member  States.  At  the  time 
of accession,  this  procedure  has  not  yet  been  discharged  by  an  importation.  In  order  to 
prevent  a hiatus in the  conditions for taxing such transactions,  it is proposed  to  extend  the 
benefit  of  the  provisions  in  force  prior  to  accession  until  the  moment  the  goods  are 
removed  from  those procedures  (Article  1(3)).  In order  to  prevent  cases  of  non-taxation, 
it  is  also  proposed  to  treat  the  removal  of  goods  from  those  procedures,  following 
accession,  as  an  importation  of goods  within  the  meaning  of  Article  7(1 )(a)  where,  at  the . 
time of removal  of the goods, it is clear that they were in free  circulation  in one of the  new 
Member  States  and  where  the  time  of the  supply  predates  accession  (Article  l(4)(c)  and 
(d)).  This  treatment  as  an  importation  is  necessitated  by  the  absence  of  taxation  within 
the  meaning  of  Article  7(1 )(a)  of  the  Sixth  VAT  Directive,- as  this  provision  applies  only 
to  goods  which  are  not  in  free  circulation.  Furthermore,  since  the  time  of  the  supply 
predates  accession,  there  is  also  no  intra-Community  acquisition  subject  to  VAT  in  the 
Member  State of arrival  of the goods. 

-5 -

These measures will ensure that transactions carried  out under  similar conditions  actually 
receive equivalent treatment.  All goods imported into the current Community  or into one 
of the new Member States from anew Member State will then be taxed  in the same way, 
whether or not the chargeable event has been deferred. 

By way  of  derogation  from  these  taxation  principles,  special  measures  are  proposed  in 
order  for  tax  not  to  be  applied  where  the  goods  are  re-exported  from  the  enlarged 
Community (Article l(7)(a)). 

In order to prevent cases of non-taxation where the transport or consignment  of goods is 
not carried out under the common transit procedure or another customs transit procedure, 
it is also proposed  to treat  as an importation the use within a Member State by a taxable 
person  or  non-taxable  person of goods supplied  to  him prior  to the  date  of accession  in 
one of the new Member States provided certain conditions are met (Article 1(5)). 

(b) 

Termination of an export procedure initiated in the current Community 

The goods in question  are those from  the current  Community which,  prior  to  accession, 
were placed under the procedure for  exporting goods to one of the new Member States. 
At  the  time  of  accession,  those  goods  had  not  been  imported  into  one  of  the  new 
Member States because they  had  not  arrived  there  prior  to  that  date  or  because,  at  the 
time of their arrival  on the territory  concerned, they were situated  or were  placed  under 
the common transit procedure or another customs transit procedure. 

For the reasons given at 2(a) above, parallel transitional measures must also apply in one 
of the new Member States in this hypothetical  case where, at the time of departure,  it is 
clear  that  the  goods  in  question  were,  prior  to  their  importation  into  one  of  the  new 
Member States,  in  free  circulation  in the  current  Community  or  in  one  of  those  States 
(Article 1(3), (4)(c), (d), (5) and (7)(a)) 

-6 

The  description  of  the  situations  in  which  transitional  measures  are  necessary  in  the 
context  of  the  enlargement  of  the  European  Union  reflects  their  essentially  technical 
nature, which is closely linked to the practical  arrangements for trade between  the current 
Community and the new Member States and between  the new Member  States themselves. 
The  measures  contained  in this proposal  are thus strictly limited,  both  in nature  and  over 
time. 

That is why this proposal  is based on Article  169 of the Act  concerning  the  conditions  of 
accession  of  the  Kingdom  of Norway,  the  Republic  of  Austria,  the  Republic  of  Finland 
and the Kingdom  of  Sweden  and the adjustments  to  the  Treaties  on which  the  European 
Union  is  founded.  That  Article  is  designed  to  permit,  prior  to  accession,  adaptation  of 
acts  of the  Community  institutions  necessitated  by  accession  and not  provided  for  in the 
Act on accession and its annexes. 

PROPOSAL FOR A COUNCIL DIRECTIVE 
AMENDING DIRECTIVE 77/388/EEC AND 
INTRODUCING TRANSITIONAL MEASURES 
APPLICABLE IN THE CONTEXT OF THE 
ENLARGEMENT OF THE EUROPEAN UNION 
ON 1 JANUARY 1995 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  the  Treaty  concerning  the  accession  of the  Kingdom  of  Norway,  the 
Republic of Austria, the Republic of Finland and the Kingdom of Sweden to the European 
Union1  ,  and  in  particular  Articles  2  and  3 thereof,  as  well  as  the  Act  concerning  the 
conditions of accession which is added thereto, and in particular Article  169 thereof, 

Having regard to the Commission proposal2, 

Whereas, subject to the special provisions set out in Chapter IX of Annex XV to that Act, 
the common system of value added tax is to apply to the new Member States as from  the 
date of accession; 

Whereas, as a result of the abolition on that date of the imposition  of tax on  importation 
and  remission  of  tax  on  exportation  in  trade  between  the  Community  in  its  current 
composition  and  the  new  Member  States  and  between  the  new  Member States 
themselves, transitional measures are necessary to safeguard the neutrality ol" 
system of value added tax and to prevent situations of double taxation or non-taxation; 

OJ No C 241, 29.8.1994,  p.  Û. 

Whereas such measures must, in this respect,  meet concerns akin to those that  led to the 
measures  adopted  on  completion  of  the  internal  market  on  1  January  1993,  and  in 
particular Article 28n of Directive 77/388/EEC3, as last amended by Directive 94/5/EC4 ; 

Whereas,  in the  customs  sphere,  goods  will  be  deemed  to  be  in free  circulation  in  the 
enlarged  Community where it  is shown that  they were in free circulation  in the  current 
Community  or  in  one  of  the  new  Member States  at  the  time  of  accession;  whereas 
conclusions  should  be  drawn  from  this,  particularly  for  Article 7(1)  and  (3)  and 
Article 10(3) of Council Directive 77/388/EEC of 17 May 1977; 

Whereas it is necessary in particular to cover situations in which goods have been placed* 
prior to accession, under one of the arrangements referred to in Article 16(l)(B)(a) to (d), 
under a temporary admission procedure with full  exemption from  import duties or under a 
similar procedure in the new Member States; 

Whereas it is also necessary to  lay down specific  arrangements  for  cases where a special 
procedure  (export  or  transit),  initiated  prior  to  the  entry  into  force  of  the  Accession 
Treaty in the framework of trade between  the current  Community  and the new Member 
States  and  between  those Member States for  the  purposes  of  a  supply  effected  pi tor  to 
that  date  by  a  taxable  person  acting  as  such,  is  not  terminated  until  after  the  date  of 
accession; 

HAS ADOPTED THIS DIRECTIVE: 

3  OJ No L  145,  13.6.1977,  p i. 
4  OJ No L 60, 3.3.1994, p. 16. 

Article 1 

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

The following  Title XVIc and  Article 28p are  inserted: 

"Title XVIc 

TRANSITIONAL  MEASURES  APPLICABLE  IN  THE  CONTEXT  OF  THE 
ACCESSION  TO  THE  EUROPEAN  UNION  OF 
THE  REPUBLIC  OF  AUSTRIA,  THE  REPUBLIC  OF  FINLAND  AND  THE 
KINGDOM  OF  SWEDEN 

Article  28p 

1.  For the purposes of applying this Article: 

-  "the  Community"  means the  territory  of  the  Community  as  defined  before  accession 

in Article 3 of this Directive; 

-  "the  new  Member  States"  means  the  territory  of the  Member  States  acceding  to  the 
European  Union  by the  Treaty  signed  on  24  June  1994,  as  defined  for  each  of  those 
Member  States in Article 3 of this Directive; 

-  "the  enlarged  Community"  means  the  territory  of  the  Community  as  defined,  after 

accession, in Article 3 of this Directive. 

2.  When goods: 

-  entered  the  territory  of the  Community  or  of  one  of  the  new  Member  States  before 

the date of accession, 

and 

-  were  placed,  on  entry  into  the  territory  of  the  Community  or  of  one  of  the  new 
Member  States,  under  a  temporary  admission  procedure  with  full  exemption  from 
import  duties,  under  one  of  the  regimes  referred  to  in  Article  16(l)(B)(a)  to  (d)  or 
under  a similar regime in one of the new Member  States, 

and 

-  have not  left  that  regime before  the date of accession, 

the  provisions  in  force  at  the  moment  the  goods  were  placed  under  that  regime  shall 
continue to  apply until the goods  leave this regime, after  the date of  accession. 

3.  When goods: 

- 1 0-

-  were  placed,  before  the date of accession,  under  the common  transit  procedure  or 

under another customs transit procedure, 

and 

-  have not left that procedure before the date of accession, 

the provisions in force at the moment the goods were placed under that procedure shall 
continue to apply until the goods leave this procedure, after the date of accession. 

For the purposes of the first  indent,  "common transit procedure" means the  measures 
for  the transport  of goods in transit between the Community and the countries  of the 
European  Free  Trade  Association  (EFTA)  and  between  the  EFTA  countries 
themselves,  as provided  for  in the  Convention  of  20 May 1987 on a  common  transit 
procedure5. 

4.  The following  shall be  deemed to  be  an  importation  of goods  within  the  meaning  of 
Article 7(1) where it is shown that the goods were in free circulation in one of the new 
Member States or in the Community: 

(a) 

(b) 

(c) 

the  removal,  including  irregular  removal,  of  goods  from  a  temporary  admission 
procedure  under  which  they  were  placed  before  the  date  of  accession  under  the 
conditions set out in paragraph 2; 

the  removal,  including  irregular  removal,  of goods  either  from  one  of  the  regimes 
referred  to  in Article  16(l)(B)(a) to  (d) or from  a similar regime under  which they 
were placed before the date of accession under the conditions set out in paragraph 2; 

the  termination  of  one  of  the  procedures  referred  to  in  paragraph 3  which  was 
started  before  the  date  of  accession  in  one  of  the  new  Member  States  for  the 
purposes  of  a  supply  of  goods  for  consideration  effected  before  that  date  in  that 
Member State by a taxable person acting as such; 

(d)  any irregularity  or  offence  committed  during  one  of  the  procedures  referred  to  in 

paragraph 3 under the conditions set out at (c). 

5  OJ No L226,  13.8.1987,  p,2. 

- 11  -

5.  The use after  the date of accession within a Member State, by a taxable or non-taxable 
person, of goods supplied to him before the date of accession within the Community or 
one  of  the  new Member States  shall  also  be  deemed  to  be  an  importation  of  goods 
within the meaning of Article 7(1) where the following conditions are met: 

-  the supply of those goods has been exempted,  or was likely to be exempted,  either 
under Article 15(1) and (2) or under a similar provision in the new Member States; 

-  the  goods  were  not  imported  into  one  of  the  new  Member States  or  into  the 

Community before the date of accession. 

6.  In  the  cases  referred  to  in  paragraph 4,  the  place  of  import  within  the  meaning  of 
Article 7(3)  shall be the  Member  State  within  whose  territory  the goods  cease  to  be 
covered by the regime under which they were placed before the date of accession. 

7.  By way of derogation from  Article 10(3), the importation of goods within the meaning 
of  paragraphs 4  and  5  of  this  Article  shall  terminate  without  the  occurrence  of  a 
chargeable event when: 

(a) 

the imported goods are dispatched or transported outside the enlarged Community, 

or 

(b) 

the  imported  goods  within the  meaning  of  paragraph 4(a)  are  other  than  means  of 
transport  and are redispatched or transported  to the Member State from  which they 
were exported and to the person who exported them, 

or 

(c) 

the  imported  goods  within  the  meaning  of  paragraph 4(a)  are  means  of  transport 
which were acquired or imported before the date of accession in accordance with the 
general  conditions  of taxation  in  force  on  the  domestic  market  of  one  of  the  new 
Member  States or of one of the Member States of the Community  and/or  have not 
been subject by reason of their exportation to any exemption from  or refund  of value 
added tax. 

This condition  shall be deemed  to  be fulfilled  when the  date  of the first use  of the 
means  of transport  was  before  1  January  1987  or  when  the  amount  of  tax  due  V 
reason of the importation is insignificant." 

12-

Article 2 

1  Subject to the entry into force of the Treaty of Accession to the European Union of the 
Kingdom  of  Norway,  the  Republic  of  Austria,  the  Republic  of  Finland  and  the 
Kingdom  of  Sweden,  Member States  shall  bring  into  force  the  laws,  regulations  and 
administrative  provisions  necessary  to  comply with this Directive  at  the  latest  by  the 
date of entry into force  of the said Treaty  of Accession.  They  shall forthwith  inform 
the Commission thereof. 

When  Member States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive or  shall be  accompanied  by  such  reference  on the  occasion  of their  official 
publication.  The  methods  of  making  such  a  reference  shall  be  laid  down  by  Xh 
Member States. 

2.  Member States  shall  communicate to the Commission the provisions of  domestic  law 

which they adopt in the field covered by this Directive. 

Article 3 

This Directive is addressed to the Member States. 

Done at Brussels,  December 1994 

For the Council 
The President 

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