Proposal for a Council Decision amending Council Decision 1998/161/EC authorising the Kingdom of the Netherlands to apply a measure derogating from Articles 2 and 28a(1) 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: 2004-03-08
Institutions: European Commission
Subjects: Netherlands, VAT, derogation from EU law, metal waste, tax exemption, tax harmonisation, waste recycling

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 08.03.2004 
COM(2004) 149 final 

Proposal for a 

COUNCIL DECISION 

amending Council Decision 1998/161/EC authorising the Kingdom of the Netherlands to 
apply a measure derogating from Articles 2 and 28a(1) 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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EXPLANATORY MEMORANDUM 

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. 

The Dutch authorities contacted the Commission with a request to apply a derogating 
measure to supplies of goods in the recycled waste sector. The derogating measure 
was  needed  because  of  the  difficulty  in  dealing  with  fraud  in  this  sector,  where 
certain operators, mainly small dealers, did not comply with their obligations under 
article 21.1.a) of the Sixth Council Directive to pay to the authorities the tax they had 
charged for their supplies. Enforcing collection of the tax in this sector is especially 
difficult because of the complications of identifying and supervising the activities of 
non-compliant traders. 

Council Decision 1998/161/EC2 authorised the Kingdom of the Netherlands to apply 
a measure derogating from Articles 2 and 28a(1) of the Sixth Council Directive. The 
validity of that Decision (31 December 1999), was extended until 31 December 2003 
by Council Decision 2000/435/EC3. In particular, Decision 1998/161/EC authorised 
the Kingdom of the Netherlands to introduce: 

– 

– 

an exemption for the supply and intracommunity acquisition of used and waste 
materials by firms with an annual turnover of less than NGL 2,5 million. For 
the purposes of calculating that threshold, turnover in non-ferrous metals may 
be disregarded, 

an  exemption  for  the  supply  and  intracommunity  acquisition  of  non-ferrous 
metals. 

According  to  article  4  of  the  Decision,  taxable  persons  carrying  out  transactions 
which  are  exempt  pursuant  to  articles  2  and  3  may  be  authorised  not  to  apply  the 
special measures provided for by the Decision. 

By letter registered by the Secretariat-General on 26 November 2003, the Kingdom 
of the Netherlands requested authorisation to extend application of this measure. 

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,4  the  Commission  undertook  to  rationalise  the  large  number  of 

OJ L 145, 13.6.1977, p.1. Directive last amended by Directive 2004/7/EC (OJ L 27, 30.1.2004, p.44) 
OJ L 53, 24.2.1998, p.19. 
OJ L 172, 12.7.2000, p.24. 
COM(2000)348 final 

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derogations  currently  in  force.  In  some  cases,  however,  this  rationalisation  could 
involve extending certain particularly effective derogations to all Member States. Its 
communication  of  20  October  20035  reiterates  this  compromise.  Doing  so  would 
require amending the Sixth VAT Directive. The Commission intends to propose such 
an amendment. 

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 proposed derogation has no adverse impact on the European Communities' own 
resources acruing from VAT , because it exempts supplies of goods whose recipients 
are not final consumers. For the same reason the derogation does not have an effect 
on the amount of VAT charged at the final stage. 

The  Commission  accepts  that,  pending  more  permanent  changes,  this  derogation 
significantly counters abuse of the VAT system. It also accepts that the situation in 
the Netherlands affecting this particular sector which justified the application of the 
special  measures  has  not  changed.  In  view  of  its  continuing  work  towards  the 
rationalisation  of  Article  27  derogations,  it  considers  that  the  request  made  by  the 
Kingdom  of  the  Netherlands  for  an  extension  of  the  authorisation  contained  in 
Decision  1998/161/EC  should  be  granted  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.  

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COM(2003)614 final 

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Proposal for a 

COUNCIL DECISION 

amending Council Decision 1998/161/EC authorising the Kingdom of the Netherlands to 
apply a measure derogating from Articles 2 and 28a(1) 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,6 and in particular Article 27 thereof, 

Having regard to the proposal from the Commission,7 

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. 

letter 

registered  with 

the  Commission  on 
By 
26 November 2003,  the  Dutch  Government  requested  the  extension  of  Decision 
1998/161/EC8  authorising  it  to  apply  special  tax  measures  to  the  recyclable  waste 
sector. 

the  Secretariat-General  of 

(3) 

The other Member States were informed of the request on 14 January 2004. 

(4) 

Decision  1998/161/EC  as  amended  by  Decision  2000/435/EC9,  authorised  the 
Kingdom  of  the  Netherlands  to  apply,  until  31  December  2003  the  following 
measures: 

– 

an exemption for the supply and intracommunity acquisition of used and waste 
materials by firms with an annual turnover of less than NGL 2,5 million. For 
the purposes of calculating that threshold, turnover in non-ferrous metals may 
be disregarded, 

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9 

OJ L 145, 13.6.1977, p. 1. Directive last amended by Directive 2004/7/EC (OJ L 27, 30.1.2004, p.44) 
OJ C […] […], p. […] 
OJ L 53, 24.2.1998, p. 19. 
OJ L 172, 12.7.2000, p. 24. 

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– 

an  exemption  for  the  supply  and  intracommunity  acquisition  of  non-ferrous 
metals. 

Taxable entities carrying out transactions which are exempt pursuant to Articles 2 and 
3  of  Decision  1998/161/EC  may  be  authorised  not  to  make  supplies  and  intra-
Community  acquisitions  of  used and waste  materials  effected  by  them  subject  to  the 
special measures provided for by that Decision. 

The derogating measure was needed because of the difficulty in dealing with fraud in 
this  sector,  where  certain  operators,  mainly  small  dealers,  did  not  comply  with  their 
obligations under article 21.1.a) of the Sixth Council Directive to pay to the authorities 
the  tax  they  had  charged  for  their  supplies.  Enforcing  collection  of  the  tax  in  this 
sector  is  especially  difficult  because  of  the  complications  of  identifying  and 
supervising  the  activities  of  non-compliant  traders.  Hence  these  arrangements 
constitute an effective fraud-prevention measure. 

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 communication of 20 October 2003 reiterates this compromise. 

The  Kingdom  of  the  Netherlands  should  be  granted  an  extension  for  the  current 
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. 

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

(5) 

(6) 

(7) 

(8) 

(9) 

HAS ADOPTED THIS DECISION:  

Article 1 

In  Article  1  of  Decision  1998/161/EC  as  amended  by  Decision  2000/435/EC,  the  date  31 
December 2003 is replaced by the following wording: "until 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". 

Article 2 

This Decision is addressed to the Kingdom of the Netherlands. 

Done at Brussels,  

For the Council 
The President 

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