Proposal for a Council Decision authorising Spain to apply a measure derogating from Article 21 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
Date: 2004-01-08
Institutions: European Commission
Subjects: Spain, VAT, approximation of laws, derogation from EU law, tax harmonisation, waste recycling

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 8.1.2004
COM(2003) 853 final

Proposal for a

COUNCIL DECISION

authorising Spain to apply a measure derogating from Article 21 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

(presented by the Commission)

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  EN

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EXPLANATORY MEMORANDUM

On  March  2001,  the  Council  adopted  Decision  2001/243/EC  amending  article  1  of
Decision  1999/81/EC  in  order  to  extend  its  validity  until  31st  December  2003.
Decision 1999/81/EC authorizes Spain to apply until that date a measure derogating
from  Articles  2  and  28a(1)  of  the  Sixth  Council  Directive  (77/388/EC)  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) in order to
exempt  the  supply  and  intracommunity  acquisition  of  certain  waste  materials
effected  by  taxable  persons  whose  sales  of  such  products  did  not  exceed  certain
amounts.  Taxable  persons  who  were  in  principle  covered  by  the  scope  of  the
exemption  could  however  be  authorized  by  the  authorities  not  to  apply  these
particular arrangements.

In the last few years, the services of the Commission have been contacted repeatedly
by both the traders active in this sector and the Spanish Administration regarding the
persistence of fraud. Both insist that only a solution which assures equal treatment to
all operators active in the sector and avoids the risk of non-payment of VAT charged
by these operators will be effective in the long run to prevent tax avoidance and the
resulting distortion of competition affecting honest traders.

letter  registered  with 

By 
the  Commission  on
27 October 2003, the Spanish Government requested authorisation - under Article 27
of  the  Sixth  Directive  -  to  apply  special  measures  to  certain  supplies  of  goods  and
services relating to waste materials.

the  Secretariat-General  of 

In  accordance  with  Article  27(3)  of  the  Sixth  Directive,  the  other  Member  States
were informed of the Spanish request by letter dated 7 November 2003.

The  Spanish  Government  would  like  to  apply  a  "reverse  charge"  procedure  to  the
following supplies of goods and services:

–  the  supply  of  waste  metalic  materials  of  both  ferrous  and  non  ferrous  nature  as
well  as  to  the  supplies  of  services  consisting  on  their  selection,  cutting  and
pressing;

–  the supply of waste materials consisting on glass, paper and board;

–  the  supply  of  semi-finished  products  resulting  from  the  transformation  of  the

metals.

In  its  request,  the  Spanish  government  explains  that  the  measure  is  aimed  at
countering  tax  evasion  by  operators  in  the  sector,  especially  small  dealers,  who
despite charging VAT, often do not pay the tax to the authorities and hence are able
to offer lower prices displacing compliant operators. The number and small size of
non-compliant operators,  creates  particular  difficulties for  their  effective  control  by
the tax authorities.

OJ  L  145,  13.6.1977,  p.  1.  Directive  last  amended  by  Directive  2003/92/EC  (OJ  L  260,  11.10.2003,
p. 8).

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The  requested  measure  would  enable  Spain  to  designate  the  recipient  of  the  waste
materials  (and  services  relating  to  them)  as  the  person  liable  to  pay  tax.  In
accordance with article 17.2.a) of Directive 77/388/EEC, the recipient of the supplies
of waste will be able to deduct the tax due for such supplies The scope of the reverse
charge  procedure  would  be  determined  by  the  nature  of  the  goods  that  are  being
supplied.

The requested measure is to be considered first and foremost as a measure to prevent
certain types of tax evasion in the waste recycling sector, such as the non-payment of
invoiced VAT by traders engaged in the collection, sorting and basic transformation
of waste material, who subsequently become untraceable. The measure also has the
effect  of  simplifying  the  work  of  the  tax  authorities,  which  very  frequently  have
major problems collecting the VAT due in that sector.

The  measure  is  proportionate  to  the  objectives  pursued,  since  it  is  not  intended  to
apply to all taxable operations in the sector concerned but only to specific operations
which pose considerable problems of tax evasion.

This  measure  does  not  adversely  effect  the  VAT  Communities'  own  resources,  nor
does it have any effect on the amount of tax due at the final stage of consumption.

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  market,2  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.  The  Commission  intends  to  prepare  a  proposal  for  a  special  scheme
applying to the waste recycling sector.

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 the date of entry into force of a special scheme for the
application  of  VAT  to  the  recycled  waste  sector,  but  not  later  than  31  December
2005.

2

COM(2000) 348 final.

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Proposal for a

COUNCIL DECISION

authorising Spain to apply a measure derogating from Article 21 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

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 thereof,

Having regard to the proposal from the Commission,4

Whereas:

(1)

(2)

(3)

(4)

(5)

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4

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.

letter 

registered  with 

By 
the  Commission  on
27 October 2003, the Spanish Government requested authorisation to apply special tax
measures to the waste sector.

the  Secretariat-General  of 

The other Member States were informed of Spain's request on 7 November 2003.

The  derogation  in  question  is  intended  to  allow  Spain  to  designate  the  recipient  of
specific  types  of  supplies  in  the  waste  sector,  as  the  person  liable  to  pay  the  tax.  In
accordance with article 17.2.a) of Directive 77/388/EEC, the recipient of the supplies
of waste will be able to deduct the tax due for such supplies. This will minimise the
problems faced by tax authorities in collecting the VAT due in that sector.

The requested measure is to be considered first and foremost as a measure to prevent
certain types of tax evasion in the waste recycling sector, such as the non-payment of
invoiced VAT by traders engaged in the collection, sorting and basic transformation of
waste material, who subsequently become untraceable. The measure also has the effect
of simplifying the work of the tax authorities.

OJ  L  145,  13.6.1977,  p.  1.  Directive  last  amended  by  Directive  2003/92/EC  (OJ  L  260,  11.10.2003.,
p. 8).
OJ C No ...

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(6)

(7)

(8)

(9)

(10)

The  measure  is  proportionate  to  the  objectives  pursued,  since  it  is  not  intended  to
apply to all taxable operations in the sector concerned but only to specific operations
which pose considerable problems of tax evasion.

On 7 June 2000 the Commission published a strategy to improve the operation of the
VAT system in the short term, in which it 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.  The  Commission  intends  to  prepare  a  proposal  for  a  special  scheme
applying to the waste recycling sector.

Consequently, this derogation should expire on the date of entry into force of a special
scheme  for  the  application  of  VAT  to  the  reclycled  waste  sector,  but  not  later  than
31 December 2005.

The derogation has no adverse impact on  the  European  Communities'  own resources
accruing from VAT, nor does it have any effect on the amount of VAT charged at the
final stage of consumption.

HAS ADOPTED THIS DECISION:

Article 1

By  way  of  derogation  from  Article  21(1)(a)  of  Directive  77/388/EEC,  as  worded  in  Article
28(g) thereof, Spain is hereby authorised, to designate the recipient of the supplies of  goods
and services referred to in Article 2 of this Decision as the person liable to pay VAT.

The recipient of the supply of goods or services may be designated as the person liable to pay
VAT in the following instances:

Article 2

–  supplies of industrial waste, ferrous waste and scrap, residues and other recyclable
materials consisting of ferrous and non-ferrous metals, their alloys, slag, ash and
industrial  residues containing metals or their  alloys,  and  the  supply  of  selection,
cutting, fragmenting and pressing services for these products.

–  supplies of waste material consisting of paper, paperboard or glass.

–  supplies  of  semi-finished  products  (e.g.  ingots,  blocks,  sheets,  bars,  grains,
granules,  wire  rod,  etc)  resulting  from  the  processing,  manufacturing  or  melting
down of non-ferrous metals, except those containing nickel.

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Article 3

This  decision  shall  expire  on  the  date  of  entry  into  force  of  a  special  scheme  for  the
application  of  VAT  to  the  recycled  waste  sector  amending  Directive  77/388/EEC,  but  not
later than 31 December 2005.

This Decision is addressed to Spain.

Done at Brussels,

Article 4

For the Council
The President

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