WRITTEN QUESTION P-2861/99 by Michel Hansenne (PPE-DE) to the Commission. Common VAT system ‐ eighth directive.
Date: 2000-01-07
Institutions: European Parliament, Provisional data
Subjects: United Kingdom, VAT, financial equalisation, public authorities, tax relief

8.8.2000

EN

Official Journal of the European Communities

C 225 E/211

The Commission is currently examining the question of including large hydroelectric power stations within
the scope of a proposal for a directive on the promotion of electricity from renewable energy sources in
the internal market in electricity.

(2000/C 225 E/241)

WRITTEN QUESTION P-2861/99

by Michel Hansenne (PPE-DE) to the Commission

Subject: Common VAT system (cid:129) eighth directive

(7 January 2000)

In Question No 2083/90 (1), Mr Fernand Herman put the following question to the Commission: (cid:145)In the
United Kingdom, the Crown, local authorities and similar bodies can obtain VAT refunds on supplies of
goods and services which they purchase, as well as the VAT paid on imported goods, provided these
supplies or imports are not intended for activities which are subject to VAT (non-business purposes) or are
partially exempt from VAT. This procedure, known as the (cid:145)refund scheme(cid:146)
is applied irrespective of
whether or not the bodies concerned are liable to the tax. Does this procedure comply with the sixth VAT
Directive?(cid:146)

Why has the Commission only given a provisional and incomplete reply, without ever providing a
definitive answer to the question?

Following on from my predecessor(cid:146)s question, does the Commission consider that public bodies in other
Member States can also benefit from this procedure and could ask HM Customs and Excise to refund VAT
on the basis of the eighth directive for goods and services obtained in the UK on which local VAT may
have been charged?

(1) OJ C 164, 24.6.1991, p. 10.

Answer given by Mr Bolkestein on behalf of the Commission

(1 February 2000)

The common VAT system provides that the Member States, regions, counties, municipalities and other
bodies governed by public law are not normally considered liable to VAT on activities or operations they
engage in as public authorities. Accordingly, no VAT is due on those activities or operations.

However, goods and services supplied by taxable persons to Member States, regions, counties, munici-
palities and other bodies governed by public law, as well as goods imported by them, are subject to VAT.

As they are not liable to VAT on activities or operations engaged in by them as public authorities, Member
States, local authorities and other bodies governed by public law are not entitled to deduction of VAT paid
on the purchase of goods and services. Of course, their non-taxable status also makes them ineligible for
the refund, under the procedure provided for by the eighth Directive (1), of VAT paid in a Member State
other than that of establishment.

To prevent VAT considerations influencing whether public authorities carry out certain operations
themselves or privatise them, several Member States, including the UK, have introduced a scheme of total
or partial refund of VAT paid by public bodies on purchases of goods and services. It is important to note
that this entails a purely financial operation between different public bodies and is governed by the
respective national policy for the financing of public authorities.

Consequently, such a scheme does not conflict with the sixth VAT Directive (2).

(1) OJ L 331, 27.12.1979.
(2) OJ L 145, 13.6.1977.