Proposal for a Council Decision authorising the Kingdom of the Netherlands to apply a measure derogating from Articles 2 and 28A(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: 1997-11-11
Institutions: European Commission
Subjects: Netherlands, VAT, approximation of laws, derogation from EU law, tax harmonisation

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  11.11.1997 
COM(97) 577 final 

Proposal for a 

COUNCIL DECISION 

authorising the Kingdom of the Netherlands to apply 
a measure derogating from Articles 2 and 28a(l) 
of the Sixth Council Directive (77/388/EEC) 
of 17 May 1977 on the harmonisation of the laws 
of the Member States relating to 
turnover taxes 

(presented by the Commission) 

EXPLANATORY  MEMORANDUM 

By letter  registered  with the  Secretariat-General  of the  Commission  on  9 June  1997, the 
Dutch  Government  requested  authorisation -  under  Article 27  of  the  Sixth  Council 
Directive  (77/388/EEC)  of  17 May 1977  on  the  harmonisation  of  the  laws  of  the 
Member States  relating  to  turnover  taxes:  common  system  of  value  added  tax,  uniform 
basis  for  assessment1 -  to  apply  a  special  measure  as  regards  trade  in  used  and  waste 
materials. 

In  accordance  with  Article 27(3)  of the  Sixth  Directive,  the  other  Member States  were 
informed  of the Dutch request by letter dated  10 September 1997. 

The special measure that the Netherlands intends to introduce comprises: 

-  exemption  of the supply and intra-Community  acquisition  of used  and waste  materials 
in the case of taxable entities with an annual turnover of less than HFL 2.5 million.  For 
the purposes  of that  threshold,  turnover  in non-ferrous  metals  can be disregarded.  If 
the  threshold  is  exceeded,  the  exemption  does  not  apply  from  the  start  of  and 
throughout the following calendar year; 

-  exemption  of  the  supply  and  intra-Community  acquisition  of  non-ferrous  metals, 

regardless of turnover; 

- 

these  exemptions  are  accompanied  by  the  option  of  applying  to  the  authorities  for 
authorisation to charge VAT on the supply and acquisition of the materials concerned. 

According to the Dutch Government, the purpose of the measure, which covers trade in a 
number of materials suitable for  recycling such as scrap, waste iron and steel,  non-ferrous 
metals,  glass,  paper  and  cloth,  is  to  simplify  the  charging  of  tax  in  this  sector  and  to 
combat tax fraud. 

In this connection, the Dutch Government would point out that many of the administrative 
provisions  applicable  to  this  sector  are  inadequate,  that  invoicing  is  often  seriously 
deficient,  that  the traders  concerned -  i.e.  smaller  traders,  who  are  difficult  to  trace  and 
investigate - often  do not pay the VAT due and that major practical difficulties  arise in the 
course of collection. 

The first  provision referred  to above means that small traders in used and waste materials 
other than non-ferrous  metals do not have to pay VAT and are not permitted  to issue any 
invoices inclusive of VAT. Nor are they entitled to deduct input tax. 

OJ No L 145, 13.6.1977, p. 1, as last amended by Directive 96/95/EC (OJ No L 338,  28.12.1996, 
p. 89). 

Nor  are  the  taxable  entities  in  question  subject 
in  respect  of  their 
intra-Community  acquisitions,  with  the  result  that  the  corresponding  intra-Community 
supply is taxed in the country of origin. 

to  VAT 

The purpose of the HFL 2.5 million turnover  threshold  is to  prevent  the  exemption  from 
also applying to large traders. 

The  second  provision  means  that  traders  in  non-ferrous  metals  may  make  use  of  the 
exemption  even  if  their  total  turnover  exceeds  HFL 2.5 million,  the  reason  being  that, 
since non-ferrous  metals are normally traded  at  appreciably higher prices than other  used 
and waste materials, the threshold would be reached relatively quickly in the case of trade 
in non-ferrous metals. 

Lastly,  the  third  provision  offers  traders  in  used  and  waste  materials  who  should -  in 
principle - be exempted  the  option  of being  subject  to  VAT  and thus the right to  deduct 
input  tax.  Making that  option  conditional  on  authorisation  being  granted  should  ensure 
that the taxable entities concerned  discharge their tax obligations.  What  is more, the  fact 
that being subject to tax supervision is "rewarded" by way of the right to deduct input tax 
should help to make traders more willing to pay tax. 

The Commission  considers  that  exemption  of  supplies  and  intra-Community  acquisitions 
by  small  firms  both  simplifies  matters  and  helps  to  combat  fraud  since  a  category  of 
taxable  persons  where  checks  and  efforts  at  collection  would  be  disproportionate  to  the 
revenue generated can be excluded from the VAT system. 

The  specific  rules  on  supplies  and  intra-Community  acquisitions  of  non-ferrous  scrap 
metals are justified  because they provide a secure basis for transactions involving a greater 
risk of fraud  on account of the value of the materials in question. 

Giving taxable persons the option of applying to the authorities in order to make their - in 
principle  exempt -  transactions  subject  to  VAT  ensures  improved  monitoring  by  the 
authorities. 

Consequently,  the  Commission  considers  that  the  Kingdom  of  the  Netherlands  may  be 
authorised to apply the proposed derogation until 31 December 1999. 

On  10 July  1996 the Commission adopted a work programme for the phased  introduction 
of a common  system of VAT.2 It therefore  seems appropriate to  allow implementation  of 
the  proposed  measure  only  until  31 December  1999,  so  that  an  assessment  can  then  be 
made of its compatibility  with the  approach  developed  within  the  framework  of the  new 
common system of VAT. 

COM(96) 328 final, 22.7.1996. 

Proposai for a 

COUNCIL  DECISION 

authorising  the Kingdom  of the Netherlands  to apply 
a measure derogating  from  Articles 2 and  28a(l) 
of the Sixth  Counci! Directive (77/388/EEC) 
of 17 May  1977 on the harmonisation  of the laws 
of the Member States relating to 
turnover taxes 

THE COUNCIL OF THE EUROPEAN  UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  the  Sixth  Council  Directive  (77/388/EEC)  of  17 May  1977  on  the 
harmonisation  of  the  laws  of  the  Member States  relating  to  turnover  taxes:  common 
system  of  value  added  tax,  uniform  basis  for  assessment,1  and  in  particular  Article 27 
thereof, 

Having regard to the proposal  from  the Commission, 

Whereas,  pursuant  to  Article 27(1)  of  Directive  77/388/EEC,  the  Council,  acting 
unanimously  on  a  proposal  from  the  Commission,  may  authorise  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 and avoidance, 

Whereas,  by letter  registered  with  the  Commission  on  9 June  1997,  the  Kingdom  of  the 
Netherlands  requested  authorisation  to  introduce  a  measure  derogating  from  Articles 2 
and 28a(l) of Directive 77/388/EEC; 

Whereas,  in  accordance  with  Article 27(3)  of  that  Directive,  the  other  Member States 
were  informed  on  10 September  1997  of  the  request  submitted  by  the  Kingdom  of  the 
Netherlands; 

Whereas  that  special  measure  provides,  firstly,  for  exemption  of  the  supply  and 
intra-Community  acquisition  o(  used  and  waste  materials,  with  the  exception  of 
non-ferrous  metals,  in  the  case  ot^ taxable  entities  with  an  annual  turnover  of  less  than 
HFL 2.5 million  and,  secondly,  for  exemption  of  the  supply  and  intra-Community 
acquisition of non-ferrous  metals; 

Whereas  the  taxable  persons  whose  transactions  are  covered  by  the  above  exemptions 
may, subject  to the conditions laid down by the Kingdom of the Netherlands, be 

O.Ï  No  L  545,  13.6.1977,  p.  !,  as  last  amended  by  Directive  96/95/EC  (OJ  No  L  3.18.  28.12.1996, 

D. K9), 

V 

authorised not to apply that measure to their transactions; 

Whereas the  measure both  simplifies  matters  and  helps to  combat  fraud  since a category 
of taxable persons where checks and efforts  at collection would be disproportionate to the 
revenue generated  can be excluded from the VAT system; 

Whereas,  consequently,  the  special  measure  satisfies  the  conditions  laid  down  in 
Article 27 of the Sixth Directive; 

Whereas  the  Commission  adopted  on  10 July 1996  a work  programme,  together  with  a 
timetable, for the phased introduction of a common system of VAT for the single market;2 

Whereas authorisation is being granted until 31 December  1999 so that  an assessment  can 
then be made  of the  compatibility  of the  measure  with  the  overall  approach  adopted  for 
the new common system of VAT; 

Whereas  this  derogation  will  have  no  impact  on  the  European  Communities'  own 
resources accruing from VAT, 

HAS ADOPTED THIS DECISION: 

COM(96) 328 final, 22.7.1996. 

- 5-

Article J 

The Kingdom  of the Netherlands  is hereby authorised  until 31 December  1999 to  apply a 
special  measure  for  the  taxation  of  used  and  waste  materials  that  contains  provisions 
derogating from the Sixth Council Directive of 17 May 1977. 

The provisions in question are laid down in Articles 2, 3 and 4 below. 

Article 2 

By way of derogation from  Article 2 of the Sixth Directive, the following  shall be exempt 
from  VAT: 

-  the  supply of used  and waste materials by firms  with an annual turnover of less than 
HFL 2.5 million.  For the  purposes  of that  threshold,  turnover  in non-ferrous  metals 
may be disregarded; 

- 

the supply of non-ferrous metals. 

Article 3 

By way of derogation from  Article 28a(l)(a)  of the Sixth Directive, the following  shall be 
exempt from VAT: 

- 

the  intra-Community  acquisition  of used  and  waste  materials  by firms with  an  annual 
turnover  of less than HFL 2.5 million.  For the purposes  of that threshold, turnover in 
non-ferrous metals may be disregarded; 

- 

the intra-Community acquisition of non-ferrous metals. 

Article 4 

Taxable  entities carrying  out transactions  which  are  exempt  pursuant  to  Articles 2 and 3 
above may be authorised  not to  make supplies and  intra-Community  acquisitions  of used 
and  waste  materials  effected  by them  subject  to  the  special  measure provided  for  by this 
Decision. 

This Decision is addressed to the Kingdom of the Netherlands. 

Article 5 

Done at Brussels, 

For the Council, 

The President 

ISSN 0254-1475 

COM(97) 577 final 

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