Proposal for a Council Decision amending Decisions 97/375/EC, 97/510/EC, 98/20/EC, 98/23/EC and 98/161/EC
Date: 2000-02-16
Institutions: European Commission
Subjects: United Kingdom, VAT, tax relief, turnover, type of business

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 16.02.2000
COM(2000) 85 final

Proposal for a

COUNCIL DECISION

amending Decisions 97/375/EC, 97/510/EC, 98/20/EC, 98/23/EC and 98/161/EC

(presented by the Commission)

EXPLANATORY MEMORANDUM

1.

2.

3.

Under Article 27 of
the Sixth Council Directive 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 assessment,1 the Council, acting
unanimously on a proposal from the Commission, may authorise any Member State
to introduce special measures for derogation from the provisions of the Directive, in
order to simplify the procedure for charging the tax or to prevent certain types of tax
evasion or avoidance.

As a rule, such authorisations are given on a temporary basis, so that an assessment
can be made after a few years as to whether the special measures are appropriate and
effective.

Five Decisions taken by the Council under Article 27 of the Sixth Directive expire on
31 December 1999. These are as follows:

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–

–

–

–

Decision 97/375/EC2 authorising the United Kingdom to extend the application
of an optional scheme for enterprises with an annual turnover below a certain
ceiling, whereby tax is assessed on the basis of payments made and received.
This cash accounting scheme, designed to simplify the procedure for charging
the tax, derogates from Article 17 of the Directive;

Decision 97/510/EC3 authorising Ireland to apply a measure derogating from
Article 21 of the Directive to allow it to combat tax evasion and tax fraud in the
real-estate sector;

Decision 98/20/EC4 authorising the Kingdom of the Netherlands to extend the
application in the ready-to-wear clothing industry of a scheme for shifting to
the clothing firm (the contractor) the subcontractor’s obligation to pay VAT to
the tax authorities. This scheme, which should enable the Netherlands to
counter effectively the fraud encountered in this sector, derogates from Article
21 of the Directive;

Decision 98/23/EC5 authorising the United Kingdom to extend application of a
measure allowing the appropriate authorities, under certain conditions, to direct
that the open-market value be taken as the taxable amount for intra-Community
acquisitions of goods where there are family, legal or business links between
the person acquiring the goods and the supplier. This anti-avoidance measure
represents a derogation from Article 28e(1) of the Directive;

Decision 98/161/EC6 authorising the Kingdom of the Netherlands to apply a
special taxation scheme for used and waste materials. This scheme, which
should enable the Netherlands to fight effectively against the fraud encountered
in this sector, derogates from Articles 2 and 28a(1) of the Directive.

1

2

3

4

5

6

OJ L 145, 13.6.1977, p.1. Directive last amended by Directive 99/85/EC (OJ L 277, 28.10.1999, p.34).
OJ L 158, 17.6.1997, p.43.
OJ L 214, 6.8.1997, p.37.
OJ L 8, 14.1.1998, p.16.
OJ L 8, 14.1.1998, p.24.
OJ L 53, 24.2.1998, p.19.

2

4.

5.

6.

7.

8.

9.

By letters received by the Secretariat-General on 11 November 1999, Ireland, the
Netherlands and the United Kingdom requested authorisation to extend application
of these measures by four years.

In addition, as regards Decision 97/375/EC (authorising a derogation from
Article 17(1)), the United Kingdom requested that the ceiling of GBP 400 000 be
raised to GBP 600 000. The measure in question forms part of an optional system of
taxation for firms with an annual turnover not higher than GBP 400 000. Raising the
ceiling for the simplified scheme, and thus also for the derogation which forms an
integral part of it, will allow a greater number of firms to opt for the scheme.

In accordance with Article 27(3) of the Sixth Directive, the Commission informed
the other Member States by letter of 16 December 1999 of the requests made by
Ireland, the Netherlands and the United Kingdom.

In the Commission’s view,
application of the special measures in question have not changed and still pertain.

the matters of law and of fact which justified the

In view of the above, the Commission considers that the requests for extension from
the Member States concerned should be granted and that the Decisions referred to
above should therefore be extended to 31 December 2003.

The Commission believes that a favourable response can also be given to the United
Kingdom’s request to raise the threshold under the derogation, as the aim - to allow a
greater number of taxable firms to opt for the application of a simplified scheme -
satisfies the conditions of Article 27.

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Proposal for a

COUNCIL DECISION

amending Decisions 97/375/EC, 97/510/EC, 98/20/EC, 98/23/EC and 98/161/EC

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 of assessment,7 and in particular Article 27 thereof,

Having regard to the proposal from the Commission,8

Whereas:

(1)

(2)

(3)

(4)

Under Article 27(1) of the Sixth VAT Directive, the Council, acting unanimously on a
proposal from the Commission, may authorise any Member State to introduce special
measures for derogation from the provisions of the Directive, in order to simplify the
procedure for charging the tax or to prevent certain types of tax evasion or avoidance.

by

letters

received

By
on
the Secretariat-General
11 November 1999, Ireland, the Kingdom of the Netherlands and the United Kingdom
requested the extension until 31 December 2003 of several authorisations originally
granted by the Council until 31 December 1999.

the Commission

of

Ireland requested an extension of Decision 97/510/EC9 authorising it
to apply a
measure derogating from Article 21 of the Sixth Directive which enabled it to combat
tax evasion and tax fraud in the real-estate sector.

The Netherlands requested the extension of two Decisions: Decision 98/20/EC 10
allowing the application in the ready-to-wear clothing industry of a scheme for shifting
to the tax authorities to the clothing firm (the contractor) the subcontractor’s obligation
to pay VAT, and Decision 98/161/EC11 allowing the application of a special taxation
scheme for used and waste materials. Both of these measures should allow the
effective combating of fraud in the sectors concerned.

(5)

The United Kingdom asked for the extension of Decision 98/23/EC12 allowing the
appropriate authorities, under certain conditions, to direct that the open-market value

7

8

9

10

11

12

OJ L 145, 13.6.1977, p.1. Directive last amended by Directive 99/85/EC (OJ L 277, 28.10.1999, p.34).
OJ C , p. .
OJ L 214, 6.8.1997, p.37.
OJ L 8, 14.1.1998, p.16.
OJ L 53, 24.2.1998, p.19.
OJ L 8, 14.1.1998, p.24.

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be taken as the taxable amount for intra-Community acquisitions of goods where there
are family, legal or business links between the person acquiring the goods and the
supplier. This special measure is an anti-avoidance measure derogating from
Article 28e(1) of the Sixth Directive.

The United Kingdom also requested an extension of Decision 97/375/EC13 authorising
it to extend the application of an optional cash accounting scheme for enterprises with
an annual turnover below a certain ceiling, whereby tax is assessed on the basis of
payments made and received. In addition, the United Kingdom requests to be able to
raise the ceiling of GBP 400 000 to GBP 600 000. Raising the ceiling for the
simplified scheme, and thus also for the derogation which forms an integral part of it,
will allow a greater number of firms to opt for the scheme.

The matters of law and of fact which justified the application of the special measures
in question have not changed and still pertain.

The authorisations should therefore be extended until 31 December 2003 and the
ceiling of GBP 400 000 in Article 1 of Decision 97/375/EC should be raised to
GBP 600 000.

The derogations in question have no impact on the European Communities’ own
resources from valued added tax,

(6)

(7)

(8)

(9)

HAS ADOPTED THIS DECISION:

Article 1 of Decision 97/375/EC is replaced by the following:

Article 1

“By way of derogation from the provisions of Article 17(1) of Directive 77/388/EEC, the
United Kingdom is hereby authorised, until 31 December 2003, to provide within an optional
scheme that enterprises with an annual turnover not higher than GBP 600 000 must postpone
the right of deduction of tax until it has been paid to the supplier.”

In Article 1 of Decision 97/510/EC,
31 December 2003.

the date 31 December 1999 is replaced by

Article 2

In Article 1 of Decision 98/20/EC,
31 December 2003.

the date 31 December 1999 is

replaced by

Article 3

13

OJ L 158, 17.6.1997, p.43.

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In Article 1 of Decision 98/23/EC,
31 December 2003.

the date 31 December 1999 is

replaced by

Article 4

In Article 1 of Decision 98/161/EC,
31 December 2003.

the date 31 December 1999 is replaced by

Article 5

Article 6

This Decision is addressed to Ireland, the Kingdom of the Netherlands and the United
Kingdom.

Done at Brussels,

For the Council
The President

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