Proposal for a Council Decision authorising the Czech Republic and Poland to apply a reduced rate of VAT on certain labour-intensive services in accordance with the procedure provided for in Article 28(6) and (7) of Directive 77/388/EEC
Date: 2004-04-21
Institutions: European Commission
Subjects: Czechia, Poland, VAT, VAT rate, provision of services

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 21.04.2004 
COM(2004) 296 final 

Proposal for a 

COUNCIL DECISION 

authorising the Czech Republic and Poland to apply a reduced rate of VAT on certain 
labour-intensive services in accordance with the procedure provided for in Article 28(6)  
and (7) of Directive 77/388/EEC 

(presented by the Commission) 

EN 

   EN 

 
 
 
  
EXPLANATORY MEMORANDUM 

Article  28(7)  of  the  Sixth  VAT  Directive  provides  that  the  Council  may  authorise  a  new 
Member State that so requests to apply the reduced rates provided for in Article 12(3)(a) to 
certain labour-intensive services from 1 May 2004 to 31 December 2005.  

Under  Article  57  of  the  Act  concerning  the  conditions  of  accession  of  the  10  acceding 
countries  and  the  adjustments  to  the  treaties  on  which  the  EU  is  founded1,  the  Czech 
Republic  and  Poland  requested  authorisation  to  apply  reduced  rates  to  certain  labour-
intensive services. The basis for their request is that without this facility the labour-intensive 
services concerned, which were previously exempt or subject to a reduced rate, would have to 
go over to the normal rate, whereas this would not be the case in the current Member States, 
which can benefit from an extension of the reduced rate up to 31 December 2005 as provided 
for by the Directive of 10 February 20042. 

By  letter  to  the  Commission  dated  3  February  2004,  registered  by  the  SG  under 
No 2004 A/2672,  the  Czech  Republic  requested  authorisation  to  apply,  up  to  31  December 
2005, a reduced rate to window cleaning and cleaning in private households, and to domestic 
care services, listed in Categories 3 and 4 of Annex K.  

The Czech Republic informed the Commission that it currently applies a reduced rate to most 
labour-intensive  services,  including  window  cleaning,  cleaning  in  private  households  and 
domestic care services, and pointed out that if these services had to be taxed at the normal rate 
from  1  May  2004  the  prices  would  rise.  There  was  the  risk  that  an  increase  in  rates  would 
adversely  affect  small  and  medium-sized  enterprises  and  the  employment  market,  since  the 
services  are  often  supplied  by  very  small  enterprises.  According  to  the  Czech  Republic, 
application of the normal rate is a very sensitive issue because often the aim of the services is 
to  assist  elderly  people  and  families  with  children.  The  Czech  Republic  considers  that 
application  of  the  reduced  rate  will  not  create  distortions  of  competition  among  Member 
States. 

By letter dated 31 March 2004, registered by the SG under No 2004 A/3726, Poland wrote to 
the Commission to request authorisation to apply, until 31 December 2005, a reduced rate to 
small repair services for bicycles, shoes and leather goods, and clothing and household linen 
(including mending and alteration), listed in category 1 of Annex K. 

Poland stated that the local market in these services had hitherto generally been supplied by 
small  enterprises.  They  were  exempted  from  VAT  under  the  special  scheme  for  small 
enterprises. Under the reform of VAT legislation in Poland in preparation for accession, the 
exemption  was  to  be  abolished  and  services  would  be  subject  to  the  normal  rate  of  22%. 
Poland considers that the application of a reduced rate rather than the normal rate would have 
a positive impact on employment in the sector and is closely linked to consumer demand for 
this type of services. Poland considers that application of the reduced rate to these small repair 
services would not create distortions of competition in the Internal Market. 

1 
2 

OJ L 236, 23.9.2003. 
Directive 2004/15/EC of 10 February 2004. OJ L 52, 21.2.2004, p. 61. 

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Although  it  has  reservations  as  to  the  impact  of  reduced  rates  on  employment,  the 
Commission considers that the requests are justified, that they were submitted according to 
the  procedure  and  that  they  comply  with  the  limits  and  conditions  provided  for  by  the  new 
paragraph 7 inserted into Directive 77/388/EEC.  

It therefore proposes that the Council authorise the Czech Republic to apply a reduced rate to 
window  cleaning  and  cleaning  in  private  households  and  to  domestic  care  services.  It  also 
proposes  that  Poland  be  authorised  to  apply  a  reduced  rate  to  small  repair  services  for 
bicycles,  shoes  and  leather  goods,  clothing  and  household  linen  (including  mending  and 
alteration). 

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Proposal for a 

COUNCIL DECISION 

authorising the Czech Republic and Poland to apply a reduced rate of VAT on certain 
labour-intensive services in accordance with the procedure provided for in Article 28(6)  
and (7) of Directive 77/388/EEC 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having regard to 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 assessment3, and in particular Article 28(6) and (7) thereof, 

Having regard to the proposal from the Commission4, 

Whereas: 

(1) 

Under Article 28(6) and (7) of Directive 77/388/EEC, the Council, acting unanimously 
on  a  proposal  from  the  Commission,  may  authorise  a  new  Member  State  that  has 
submitted an application in accordance with the procedure and conditions provided for 
in that Article to apply a reduced rate of VAT on certain labour-intensive services. 

(2) 

The Czech Republic and Poland have submitted an application in accordance with the 
procedure and conditions provided for by the Directive. 

(3) 

The other Member States have been notified of the applications. 

(4) 

This Decision has no impact on the Community’s own resources derived from VAT, 

HAS ADOPTED THIS DECISION: 

Article 1 

Under  Article  28(6)  and  (7)  of  Directive  77/388/EEC,  the  Czech  Republic  and  Poland  are 
authorised to apply, from 1 May 2004 to 31 December 2005, the reduced rates provided for 
by  the  third  subparagraph  of  Article  12(3)(a)  to  the  following  services  for  which  they 
submitted an application: 

1) 

3 
4 

The  Czech  Republic  for  the  sectors  specified  in  categories  3  and  4  of  Annex  K  to 
Directive 77/388/EEC: 

OJ L 145, 13.6.1977, p. 1. Directive last amended by Directive [....]. 
OJ C […] […], p.[…] 

4 

 
 
  
 
                                                 
a)  window cleaning and cleaning in private households; 

b) 

domestic care services. 

2) 

Poland for the small repair services specified in category 1 of Annex K to Directive 
77/388/EEC for: 

a) 

bicycles; 

b) 

shoes and leather goods; 

c) 

clothing and household linen (including mending and alteration). 

Article 2 

This  Decision  shall  apply  from  1  May  2004,  subject  to  the  entry  into  force  of  Directive 
2004/...  [amending  Directive  77/388/EEC  by  reason  of  the  accession....],  to  31  December 
2005. 

Article 3 

This Decision is addressed to the Czech Republic and the Republic of Poland.  

Done at Brussels, 

For the Council 
The President 

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