Proposal for a Council Decision amending Article 1 of Council decision 1999/80/EC of 18 January 1999
Date: 2000-12-15
Institutions: European Commission
Subjects: Italy, derogation from EU law, tax, tax exemption, waste

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 15.12.2000
COM(2000) 851 final

Proposal for a

COUNCIL DECISION

amending Article 1 of Council decision 1999/80/EC of 18 January 1999

(presented by the Commission)

1.

2.

3.

EXPLANATORY MEMORANDUM

the

letter

Commission’s

registered with

Secretariat-General

By
on
19 September 2000, the Government of the Italian Republic requested authorisation,
pursuant to Article 27 of the Sixth Council Directive (77/388/EEC) of 17 May 19771
on the harmonisation of the laws of the Member States relating to turnover
taxes - Common system of value added tax: uniform basis of assessment, to extend
the
by
Council Decision 1999/80/EC2 of 18 January 1999 to apply a special measure in
respect of trade in used and waste materials.

application

derogation

originally

granted

the

of

to

it

In accordance with the aforementioned Article 27, the other Member States were
informed of the Italian Republic’s request by letter dated 17 October 2000.

The Italian Republic was authorised by the above Decision to apply the following
special provisions:

• The exemption (without the right to deduct input tax) of supplies of scrap metal
and other recyclable materials (in particular waste paper, rags etc) made by firms
which either:

i)

have a fixed establishment and a generated turnover net of tax for the
preceding year of not more than ITL 2 billion; or

ii)

do not have a fixed establishment.

• The possibility of opting for the normal taxation arrangements for firms with a
fixed establishment, which generated a turnover net of tax of more than
ITL 150 million (but less than ITL 2 billion) during the previous year, subject to
the provision of an appropriate guarantee;

• Mandatory application of the normal taxation arrangements to firms with a fixed
establishment, which generated a turnover, excluding tax, of more than
ITL 2 billion during the previous year;

• Suspension of payment of tax, with the right to deduct input tax, on supplies of
non-ferrous scrap (including scrap which has undergone rudimentary initial
processing reducing it to the primary state with the aid of minimal elementary
technical facilities) irrespective of the turnover of the firm concerned.

4.

The current authorisation expires on 31 December 2000.

1

2

OJ L 145, 13.6.1977, p. 1. Directive last amended by Directive 2000/17/EC (OJ L 84, 5.4.2000, p. 24).
OJ L 27, 2.2.1999, p. 24.

2

5.

6.

7.

According to the Italian Government, the legislation emerging from this derogation
has been targeted exclusively at combating fraud in the sector concerned. Previously
this contained many fictitious companies which charged VAT but failed to pass this
on to the Government while at the same time, the purchasers were able to deduct the
VAT. The suspension of VAT on these supplies has, they say, eliminated at source
the motive for fraud and has proved a suitable and effective method of rooting out
the bad practice.

The Italian government has requested an extension of
31 December 2003.

this derogation until

Recent contacts between the Commission and national administrations, and with
representatives of the trade, have indicated that, in order to ensure fairer taxation of
all traders involved in this activity across the Community, a special regime adapted
to the particular character of the sector might be necessary. Such a regime would
require a firm and permanent legal basis far beyond the scope of a derogation under
Article 27 of the Sixth VAT Directive. As part of the action programme for its new
strategy published on 7 June 20003, the Commission hopes to examine these issues in
greater depth and, in due course, make proposals for improvement, simplification
and modernisation. In this context the Commission accepts that, pending more
permanent change, this measure significantly counters abuse of the VAT system. It
therefore considers a renewal of the existing derogation until 31 December 2003
appropriate.

3

COM(2000)348 final.

3

Proposal for a

COUNCIL DECISION

amending Article 1 of Council decision 1999/80/EC of 18 January 1999

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 19774 on the
harmonisation of the laws of the Member States relating to turnover taxes - Common system
of value added tax: uniform basis of assessment, and in particular Article 27 thereof,

Having regard to the proposal from the Commission

Whereas:

(1)

(2)

Pursuant to 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 or
extend 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 or avoidance.

By letter registered with the Commission’s Secretariat-General on 19 September 2000,
the Italian Republic Government requested authorisation to extend the application of
the derogation previously granted to it by Council Decision 1999/80/EC of
18 January 1999.

(3)

The other Member States were informed on 17 October 2000 of the Italian Republic’s
request.

(4)

The derogation in question is designed:

(a)

(b)

(c)

to exempt, without granting a right to deduction of input tax, supplies of scrap
metal and other recyclable materials made either by firms which have a fixed
establishment and a generated turnover excluding tax of not more than
ITL 2 billion during the previous year or by firms which do not have a fixed
establishment;

to grant to firms which have a fixed establishment and a generated turnover
excluding tax of between ITL 150 million and ITL 2 billion during the
previous year, the right to opt for the normal taxation arrangements;

to apply the VAT suspension arrangements with the right to deduct input tax,
to supplies of non-ferrous scrap, irrespective of the turnover excluding VAT of
the firm making them.

4

OJ L 145, 13.6.1977, p. 1. Directive last amended by Directive 2000/17/EC (OJ L 84, 5.4.2000, p. 24).

4

(5)

(6)

(7)

(8)

(9)

This measure has proven to be an effective means of combating the evasion or fraud
and the legal and factual circumstances which justified granting authorisation to apply
a derogation have not changed and still obtain.

On the 7 June 2000 the Commission published a strategy to improve the operation of
the VAT system in the short term, including the modernisation, simplification and the
countering of abuse of the current rules while moving towards greater uniform
application.

In the context of this strategy the Commission would expect fewer derogations but
pending reflection on this area, the Commission accepts that this measure significantly
counters abuse of the VAT system.

It is appropriate, therefore, to extend the period of the authorisation granted until
31 December 2003 pending an assessment of the compatibility of this measure with
the overall approach to the system of VAT.

The derogation has no adverse impact on the European Communities’ own resources
accruing from VAT,

HAS ADOPTED THIS DECISION:

Article 1 of Decision 1999/80/EC is replaced by the following:

Article 1

"The Italian Republic is hereby authorised until 31 December 2003 to apply a special measure
for 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 and 3 below."

Article2

This Decision is addressed to the Italian Republic.

Done at Brussels,

For the Council
The President

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