Proposal for a Council Decision authorising Greece to apply a measure derogating from Articles 2 and 28a of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes
Date: 2002-01-22
Institutions: European Commission
Subjects: VAT, approximation of laws, derogation from EU law

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 22.01.2002
COM(2002) 19 final

Proposal for a

COUNCIL DECISION

authorising Greece to apply a measure derogating from Articles 2 and 28a of the Sixth
Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to
turnover taxes

(presented by the Commission)

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EXPLANATORY MEMORANDUM

letter  registered  with 

the  Secretariat-General  of 

the  Commission  on
By 
15 November 2001, 
the  Greek  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 special measures
to trade in used and waste materials.

In  accordance  with  Article  27(3)  of  the  Sixth  Directive,  the  other  Member  States
were informed of the Greek request by letter dated 22 November 2001.

The Greek Government would like to introduce:

–  an exemption for intra-Community acquisitions and supplies of recyclable waste,
such  as  scrap  iron,  waste  of  iron  and  steel,  glass,  paper  and  board,  by  taxable
persons  with  a  turnover  of  less  than  €900,000.  Turnover  for  non-ferrous  metals
can be disregarded when calculating this ceiling;

–  an  exemption  for  intra-Community  acquisitions  and  supplies  of  non-ferrous

metals, regardless of the taxable person's turnover;

–  the possibility, subject to the administration's authorisation, of opting for taxation

of acquisitions and supplies of the goods concerned.

In its request, the Greek government explains that the measure is aimed at countering
tax evasion by operators in the sector, especially smaller dealers, who do not pay the
VAT  they  owe. Collecting  VAT  in  this  sector  is  awkward  because  it  is  difficult  to
identify and supervise activities.

The first measure dispenses small traders dealing in recyclable waste other than non-
ferrous  metals  from  the  obligation  to  pay  and  invoice  VAT  on  sales  of  the  goods
concerned.  The  operators  concerned  are  not  entitled  to  deduct  input  VAT  on  these
transactions.

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.

The €900,000 ceiling is aimed at preventing 
exemption.

larger traders from benefiting from the

The  second  measure  allows  dealers  in  non-ferrous  metals  to  take  advantage  of  the
exemption  even  if  their  turnover  exceeds  €900,000.  This  is  because  non-ferrous
metals  generally  sell  at  a  far  higher  price  than  other  materials  and  waste,  meaning
that the ceiling would be reached quite quickly.

Lastly, the third measure allows dealers in recyclable waste who would normally be
exempt under the special measures to subject their transactions to VAT and so obtain
the right to deduct. Making this exception to the derogation subject to authorisation

OJ L 145, 13.6.1977, p. 1. Directive last amended by Directive 2001/4/EC (OJ L 22, 24.01.2001, p. 17).

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will  provide  adequate  assurance  that  taxable  persons  will  discharge  their  tax
obligations. Furthermore, the fact that being subject to tax supervision is "rewarded"
by the right to deduct input tax should bring more traders into the tax system.

The Commission considers exempting intra-Community acquisitions and supplies by
small businesses to be both a simplification and a fraud-prevention measure in that it
removes from the VAT system a category of taxable person demanding a supervisory
and collection effort disproportionate to the revenue generated.

The specific rules on intra-Community acquisitions and supplies 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
normally  exempt  transactions  subject  to  VAT  ensures  improved  monitoring  by  the
authorities.

Several other Member States, namely France, Spain, Italy and the Netherlands, have
already obtained Council decisions authorising them to apply special tax measures in
the sector concerned.

In its communication of 7 June 2000 to the Council and the European Parliament on
a  strategy  to  improve  the  operation  of  the  VAT  system  within  the  context  of  the
internal  market2,  the  Commission  undertook  to  rationalise  the  large  number  of
derogations  currently  in  force.  In  some  cases,  however,  this  rationalisation  could
involve extending certain particularly effective derogations to all Member States.

The  Commission's  recent  contacts  with  certain  national  administrations  and
representatives  of  the  sector  suggest  that  special  rules  specifically  adapted  to  the
sector might be necessary to ensure fairer taxation of the traders concerned across the
Community.  Such  rules  require  a  firm  and  permanent  legal  basis  far  beyond  the
scope of a derogation under Article 27 of the Sixth VAT Directive.

The  Commission  accepts  that,  pending  more  permanent  changes,  this  derogation
significantly counters abuse of the VAT system. It therefore considers it appropriate
to grant the derogation until 31 December 2003.

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COM(2000) 348 final.

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Proposal for a

COUNCIL DECISION

authorising Greece to apply a measure derogating from Articles 2 and 28a of the Sixth
Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to
turnover taxes

(The Greek language text takes precedence over others)

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,3 and in particular Article 27 (1) thereof,

Having regard to the proposal from the Commission,4

Whereas:

(1)

(2)

(3)

(4)

(5)

(6)

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letter 

registered  with 

By 
the  Commission  on
15 November 2001,  the  Greek  Government  requested  authorisation  to  apply  special
tax measures to the recyclable waste sector with the aim of countering tax evasion in
that sector.

the  Secretariat-General  of 

The other Member States were informed of Greece's request on 22 November 2001.

The derogation in question is to exempt intra-Community acquisitions and supplies of
recyclable waste, such as scrap iron, waste of iron and steel, glass, paper and board, by
taxable  persons  whose  sales  of  such  products  in  the  previous  year  amounted  to  less
than €900,000. In addition, it is intended to ex empt intra-Community acquisitions and
supplies of non-ferrous metal waste, regardless of the trader's gross turnover.

Taxable persons whose transactions are covered by the above exemptions may, subject
to the conditions laid down by  Greece,  be  authorised not  to apply  the  exemptions to
their transactions.

These  arrangements  constitute  an  effective  fraud-prevention  measure  in  a  sector  in
which collecting VAT is rendered particularly awkward by the difficulty of identifying
and supervising activities.

These special arrangements therefore satisfy the conditions laid down in Article 27 of
Directive 77/388/EEC.

OJ L 145, 13.6.1977, p. 1. Directive last amended by Directive 2001/4/EC (OJ L 22, 24.01.2001, p. 17).
OJ C No ...

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(7)

(8)

(9)

In its communication of 7 June 2000 to the European Parliament and the Council, the
Commission published a strategy to improve the operation of the VAT system in the
short term including a  rationalisation of the large number of derogations currently in
force. In some cases, however, this rationalisation could involve extending particularly
effective derogations to all Member States.

It therefore seems advisable to grant the derogation until 31 December 2003, thereby
permitting an assessment of its compatibility with the overall approach to the system
of VAT, and in particular the rationalisation of derogations.

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

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Directive 77/388/EEC, Greece is hereby authorised to apply until
31 December 2003 special measures for the taxation of recyclable waste (hereafter called "the
special regime") in accordance with this decision.

Article 2

By way of derogation from Article 2 of Directive 77/388/EEC, the following shall be exempt
from VAT:

–  a) supplies of recyclable waste, such as scrap iron, waste of iron and steel, glass, paper and

board, by traders with a turnover of less than €900,000;

–  b) supplies of non-ferrous metals.

Article 3

By way of derogation from Article 28a(1)(a) of Directive 77/388/EEC, the following shall be
exempt from VAT:

–  a) intra-Community acquisitions of recyclable waste, such as scrap iron, waste of iron and

steel, glass, paper and board, by traders with a turnover of less than €900,000;

–  b) intra-Community acquisitions of non-ferrous metals.

In  order  to  calculate  the  ceiling  of  €900,000  under  Articles  2  and  3,  the  turnover  for  non
ferrous metals may be disregarded.

Article 4

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Article 5

Greece shall allow those taxable persons who so request it, to be authorised not to apply the
special regime to their supplies and intra-Community acquisitions, under such conditions as it
may see fit to ensure that the VAT obligations of the taxable person are properly met.

Article 6

This Decision is addressed to the Hellenic Republic.

Done at Brussels,

For the Council
The President

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