Council Directive 1999/85/EC of 22 October 1999 amending Directive 77/388/EEC as regards the possibility of applying on an experiment basis a reduced VAT rate on labour-intensive services
Date: 1999-10-22
Institutions: Council of the European Union
Subjects: VAT, VAT rate, approximation of laws, fight against unemployment, tax harmonisation, testing

L 277/34

EN

Official Journal of the European Communities

28. 10. 1999

COUNCIL DIRECTIVE 1999/85/EC

of 22 October 1999

amending Directive 77/388/EEC as regards the possibility of applying on an experiment basis a
reduced VAT rate on labour-intensive services

THE COUNCIL OF THE EUROPEAN UNION,

(7)

implementation of this Directive does not involve any
amendment of the laws of the Member States,

Having regard to the Treaty establishing the European
Community, and in particular Article 93 thereof,

Having regard to the proposal from the Commission (1),

HAS ADOPTED THIS DIRECTIVE:

Having regard to the opinion of the European Parliament (2),

Having regard to the opinion of the Economic and Social
Committee (3),

Whereas:

(1)

(2)

(3)

(4)

(5)

(6)

Article 12(3)(a) of 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 of assess-
ment (4) provides that the Member States may apply
either one or two reduced rates only to supplies of
goods and services of the categories specified in Annex
H to Directive 77/388/EEC;

however, the problem of unemployment is so serious
that those Member States wishing to do so should be
allowed to experiment with the operation and impact, in
terms of job creation, of a reduction in the VAT rate on
labour-intensive services which are not currently listed
in Annex H;

this reduced VAT rate is likely to reduce the incentive
for the businesses concerned to join or remain in the
black economy;

however, the introduction of a targeted reduction in the
VAT rate could have a negative impact on the smooth
functioning of the internal market and on tax neutrality;
provision should therefore be made for an authorisation
procedure to be introduced for a full and clearly defined
three-year period and for the scope of this measure to be
it remains
made subject
verifiable and limited;

to strict conditions so that

in view of the experimental nature of the measure, a
detailed assessment of its impact in terms of job creation
and efficiency should be carried out by the Member
States which implement it and by the Commission;

the measure should be strictly limited in time and
should end by 31 December 2002 at the latest;

(1) OJ C 102, 13.4.1999, p. 10.
(2) OJ C 279, 1.10.1999, p. 105.
(3) OJ C 209, 22.7.1999, p. 20.
(4) OJ L 145, 13.6.1977, p. 1. Directive as last amended by Directive

1999/59/EC (OJ L 162, 26.6.1999, p. 63).

Article 1

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

1. the following paragraph shall be added to Article 28:

‘6.
The Council, acting unanimously on a proposal from
the Commission, may authorise any Member State to apply
for a maximum period of three years between 1 January
2000 and 31 December 2002 the reduced rates provided
for in the third subparagraph of Article 12(3)(a) to services
listed in as maximum of two of the categories set out in
In exceptional cases a Member State may be
Annex K.
authorised to apply the reduced rate to services in three of
the abovementioned categories.

The services concerned must satisfy the following require-
ments:

(a) they must be labour-intensive;

(b) they must be largely provided direct to final consumers;

(c) they must be mainly local and not

likely to create

distortions of competition;

(d) there must be a close link between the lower prices
resulting from the rate reduction and the foreseeable
increase in demand and employment.

The application of a reduced rate must not prejudice the
smooth functioning of the internal market.

Any Member State wishing to introduce the measure
provided for in the first subparagraph shall
inform the
Commission before 1 November 1999 and shall provide it
before that date with all relevant particulars, and in partic-
ular the following:

(a) scope of the measure and detailed description of the

services concerned;

(b) particulars showing that the conditions laid down in the
second and third subparagraphs have been met;

(c) particulars showing the budgetary cost of the measure

envisaged.

Those Member States authorised to apply the reduced rate
referred to in the first subparagraph shall, before 1 October
2002, draw up a detailed report containing an overall
assessment of the measure's effectiveness in terms notably
of job creation and efficiency.

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Official Journal of the European Communities

L 277/35

Before 31 December 2002 the Commission shall forward a
global evaluation report to the Council and Parliament
accompanied, if necessary, by a proposal for appropriate
measures for a final decision on the VAT rate applicable to
labour-intensive services.’

Article 3

This Directive is addressed to the Member States.

2. A new Annex K shall be added as set out in the Annex to

Done at Luxembourg, 22 October 1999.

this Directive.

Article 2

This Directive shall enter into force on the day of its publica-
tion in the Official Journal of the European Communities.

For the Council

The President

S. MÖNKÄRE

L 277/36

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Official Journal of the European Communities

28. 10. 1999

ANNEX

‘ANNEX K

List of supplies of services referred to in Article 28(6)

1. Small services of repairing:

— bicycles,

— shoes and leather goods,

— clothing and household linen (including mending and alteration).

2. Renovation and repairing of private dwellings, excluding materials which form a significant part of the value of the

supply.

3. Window cleaning and cleaning in private households.

4. Domestic care services (e.g. home help and care of the young, elderly, sick or disabled).

5. Hairdressing’.