Proposal for a Council Decision authorising the Kingdom of Spain 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 harmonisation of the laws of the Member States relating to turnover taxes
Date: 1998-03-25
Institutions: European Commission
Subjects: Spain, VAT, derogation from EU law, tax harmonisation, waste

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 26.03.1998 

COM(1998) 184  final 

Proposal for a 

COUNCIL DECISION 

authorising the Kingdom of Spain 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 23 January 1998, 
the  Spanish  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 Spanish request by letter dated  18 February  1998. 

The special measure that  Spain intends to introduce contains the following provisions. 

-  exemption from value added tax of the supply and intra-Community  acquisition  of used 
and  waste  materials,  in the case only of taxable persons whose  sales  of ferrous  metals 
in  the  previous  year  were  worth  not  more  than  PTA 200 million  or  whose  sales  of 
waste paper, board or glass were worth not more than PTA 50 million.  In addition, the 
exemption  for non-ferrous  metals would apply regardless of the quantities involved.  If 
the  above  limits  are  exceeded  during  the  current  year,  the  exemption  ceases  to  apply 
from the time when the limits are exceeded; 

- 

taxable  persons  whose  transactions  are  exempt  under  the  above  paragraph  can  be 
authorised  to pay the VAT on their  supplies and intra-Community  acquisitions of used 
and waste materials. 

According  to  the  Spanish Government,  the  purpose  of  the  measure  is  to  simplify  the 
charging of tax in this sector and to combat tax fraud. 

In  this  connection,  the  Spanish 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. 

Under the first provision referred  to above, small traders in used and waste materials other 
than non-ferrous  metals, whose turnover does not exceed  the thresholds laid down on the 
basis  of  goods  sold,  need  not  pay value  added  tax  on  sales  of  the  goods  in  question  or 
show it on their invoices. 

1  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). 

The  purpose  of  determining  the  thresholds  on  the  basis  of  products  is  to  prevent  the 
exemption from also applying to large traders. 

Traders in non-ferrous  metals may qualify  for the exemption  even if their total  turnover 
exceeds  PTA 200 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. 

The  taxable  persons  concerned  will  not  have  to  pay  VAT  on  their  intra-Community 
acquisitions,  which means that the corresponding  intra-Community  supplies will  have to 
be taxed in the country of origin. 

Traders are not entitled to deduct input tax in respect of the transactions exempted under 
this measure. 

Under the  second provision,  traders in used and waste materials who in principle  should 
be exempt may seek authorisation for making their transactions subject to VAT and hence 
for  exercising  the  right  to  deduct  input  tax.  Making  this  exception  subject  to 
authorisation  will  provide  a strong  enough guarantee that taxable  persons  will  discharge 
their  tax  obligations.  What  is  more,  the  fact  that  being  subject  to  tax  supervision  is 
'rewarded" by the right to deduct  input tax should help to  make traders more willing to 
pay the tax. 

The  Commission  considers  that  exemption  of  the  supplies  and  intra-Community 
acquisitions effected 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 Spain may be authorised to 
apply the proposed derogation until 31 December 2000. 

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  2000,  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. 

Proposal for a 

COUNCIL DECISION 

authorising the Kingdom of Spain 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 

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,3  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  Secretariat-General  of  the  Commission  on 
23 January  1998,  the  Kingdom  of  Spain  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  18 February  1998 of the request submitted by the Kingdom of Spain; 

Whereas  the  first  purpose  of  the  special  measure  is  to  exempt  the  supply  and 
intra-Community  acquisition  of  used  and  waste  materials  consisting  of  glass,  paper  and 
board,  in the  case  of taxable  persons whose  sales of  such  products  in the  previous  year 
were worth not more than PTA 50 million; 

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). 

Whereas the second purpose of the measure is to exempt the supply and  intra-Community 
acquisition  of used  and waste material  consisting  of ferrous  metals, in the  case of taxable 
persons  whose  sales  of  such  products  in  the  previous  year  were  worth  not  more  than 
PTA 200 million; 

Whereas  the  third  purpose  of the measure  is to  exempt  the  supply  and  intra-Community 
acquisition of non-ferrous metals, irrespective of the turnover for sales of such goods; 

Whereas traders are not entitled to deduct VAT in respect of transactions exempted  under 
these special measures; 

Whereas  the  taxable  persons  whose  transactions  are  covered  by  the  above  exemptions 
may,  subject  to  the  conditions  laid  down  by the  Kingdom  of  Spain,  be authorised  not  to 
apply that measure to their transactions; 

Whereas this 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;4 

Whereas authorisation is being granted until 31 December 2000 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. 

Article J 

The Kingdom  of  Spain is  hereby  authorised  until  31  December  2000  to  apply  a special 
measure for the taxation of used and waste materials that contains provisions derogating 
from the Sixth Council Directive (77/388/EEC) 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(1)  of  the  Sixth  Directive  (77/388/EEC),  the 
following shall be exempt from VAT: 

-  the supply of used and waste materials consisting of paper, board or glass, in the case 
of taxable persons whose  sales of such products in the previous year were worth not 
more than PTA 50 million 

-  the  supply  of  used  and waste  materials  consisting  of  ferrous  metals,  in  the  case  of 
taxable persons whose sales of such products in the previous year were worth not more 
than PTA 200 million; 

-  the supply of non-ferrous metals. 

Article 3 

By  way  of  derogation  from  Article 28a(l)(a)  of  the  Sixth  Directive  (77/388/EEC),  the 
following shall be exempt from VAT: 

-  the intra-Community acquisition of used and waste materials consisting of paper, board 
or glass,  in the case  of taxable persons whose  sales of  such products in the previous 
year were worth not more than PTA 50 million; 

-  the  intra-Community  acquisition  of  used  and  waste  materials  consisting  of  ferrous 
metals, in the case of taxable persons whose sales of such products in the previous year 
were worth not more than PTA 200 million; 

-  the intra-Community acquisition of non-ferrous metals. 

Article 4 

Taxable  persons  whose  transactions  are  covered  by  the  exemptions  laid  down  by  the 
special  measure  may,  subject to  the  conditions laid down by the Kingdom  of  Spain, be 
authorised not to apply that measure to their transactions. 

This Decision is addressed to the Kingdom of Spain. 

Article 5 

Done at Brussels, 

For the Council, 

The President 

ISSN 0254-1475 

COM(98) 184 final 

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