Proposal for a Council Decision authorising Portugal to apply a measure derogating from Articles 21(1)(a) and 22 of the Sixth Directive of 17 May 1977 (77/388/EEC) on the harmonisation of the laws of the Member States relating to turnover taxes
Date: 2004-06-21
Institutions: European Commission
Subjects: Portugal, VAT, derogation from EU law, door-to-door selling

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 21.06.2004 
COM(2004)436 final 

Proposal for a  

COUNCIL DECISION 

authorising Portugal to apply a measure derogating from Articles 21(1)(a) and 22 of the 
Sixth Directive of 17 May 1977 (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 

By  letter  registered  at  the  Commission’s  Secretariat-General  on  19  February  2004,  Portugal 
requested  authorisation  to  introduce  a  measure  in  respect  of  the  doorstep  sales  sector  under 
Article 27 of 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 assessment1 (hereinafter referred to as the Sixth Directive). 

In accordance with the said Article 27(2), in the form adopted in Council Directive 2004/7/EC 
of 20 January 2004,2 the other Member States were informed of this request in a letter dated 
26.03.2004 and Portugal was notified on 30.03.2004 that the Commission was in possession 
of all the information it needed to take a decision on the matter. 

The special arrangement submitted to the Commission by Portugal is as follows: 

- Certain firms engaged in doorstep selling will be allowed to request authorisation from their 
tax  administration  to  pay  on  behalf  of  their  resellers  the  VAT  due  on  the  prices  of  the 
products the resellers sell to their customers, provided the following conditions are met:  

1.  the  entire  turnover  of  the  firms  is  obtained  from  doorstep  sales  by  resellers 
working in their own name and on their own account; 

2.  price  lists  setting  out  the  selling  price  charged  to  the  public  for  all  the  firms’ 
products are established in advance and adhered to.  

- The arrangement so requested requires two successive transfers of the products, i.e. first by 
the selling firm to the reseller and then by the reseller to the consumer. 

- Firms fulfilling the above conditions and authorised to apply the derogation must pay to the 
treasury the tax due on the retail selling price set out in the pre-established price lists. 

- The resellers will no longer be liable for VAT on the goods supplied to them and, therefore, 
may not deduct the proportion of their buying price for these goods that is accounted for by 
VAT.  

According  to  the  Portuguese  authorities  the  purpose  of  the  arrangement  is  to  simplify 
collection  of  the  tax  for  the  large  numbers  of  doorstep  salesmen  who  do  not  have  the 
organisational capacities or structures to enable them to meet the various obligations arising 
out of their tax status and whose particular form of operation increases the risk of prejudicing 
tax  revenues.  A  further  advantage  of  the  measures  under  consideration  is  that  they  would 
make it easier to keep track of VAT matters in this sector. 

The  arrangement  was  authorised  by  the  earlier  Council  Decision  1999/82/EC  of  18 January 
1999,3 which was applicable from 1 January 1999 to 31 December 2000. Portugal considers 
that  the  reasons  for  granting  the  original  derogation  still  apply  and  that  this  request  is 
therefore justified. 

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3 

JO L 145 of 13.6.1977, p. 1, as last amended by Directive 2004/15/CE (JO L 52 of 21.2.2004, p. 61). 
OJ L 27 of 30.01.2004, p. 44. 
OJ L 27 of 02.02.1999, p. 27. 

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The  Commission  considers  that  the  payment  of  VAT  -  calculated  on  the  basis  of  the  prices 
charged to end consumers - by the firm supplying the goods to the resellers simplifies the tax 
regime  for  the  doorstep  selling  sector  which  is  characterised  by  the  large  number  of  small-
scale retailers whose resources do not allow them to fulfil the obligations involved. 

Similarly, given the large number and small scale of the resellers, this derogation will make it 
easier to check up on the sector, which would otherwise be difficult. 

The Commission considers that the tax administration must first establish a system of issuing 
prior authorisations so as to guarantee the effective control of the sector in question. 

The  Commission  considers  that  the  reasons  for  granting  the  original  derogation  remain 
unchanged. 

It  therefore  considers  that  this  derogation  fulfils  the  conditions  set  out  in  Article  27  of  the 
Sixth Directive. 

The arrangement represents a derogation from Article 21(1)(a) in that wholesalers are deemed 
to be liable for the tax payable on goods sold to final consumers by their resellers.  

Consequently  wholesalers  are  required  to  fulfil  the  obligations  regarding  tax  returns,  tax 
invoicing and payment of tax, etc., in respect of the goods their sellers sell to final consumers. 
By  derogation  from  Article  22,  resellers  supplied  by  the  wholesaler  are  therefore  exempted 
from these obligations in respect of the goods they supply to final consumers.  

To  allow  evaluation  of  how  effective  the  derogation  has  been,  it  should  not  remain  valid 
beyond 31 December 2008. 

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Proposal for a  

COUNCIL DECISION 

authorising Portugal to apply a measure derogating from Articles 21(1)(a) and 22 of the 
Sixth Directive of 17 May 1977 (77/388/EEC) on the harmonisation of the laws of the 
Member States relating to turnover taxes 

(Only the Portuguese version is authentic) 

THE COUNCIL OF THE EUROPEAN UNION, 

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 for assessment,4 and in particular Article 27(1) thereof, 

Having regard to the proposal from the Commission,5 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

By  letter  logged  in  at  the  Commission’s  Secretariat-General  on  19  February  2004 
Portugal  requested  authorisation  to  introduce  a  derogating  measure  in  respect  of  the 
doorstep sales sector. 

The other Member States were informed thereof on 26 March 2004. 

Portugal was notified on 30 March 2004 that the Commission was in possession of all 
the information it needed to take a decision on the matter. 

The measure is intended to enable certain firms engaged in doorstep selling to pay on 
behalf of their resellers the VAT due on the prices of the products the resellers sell to 
their  customers,  provided  that  the  entire  turnover  of  the  firms  is  obtained  from 
doorstep sales by resellers working in their own name and on their own account and 
that  price  lists  setting  out  the  selling  price  charged  to  the  public  for  all  the  firms’ 
products are drawn up in advance and adhered to. 

The  derogation  will  apply  solely  to  cases  where  the  firm  sells  its  products  direct  to 
resellers who, in turn, sell direct to final consumers. 

Firms  which  fulfil  the  above  conditions  and  have  been  duly  authorised  by  the  tax 
administration will pay to the treasury the amount of VAT due on the pre-established 
retail selling price. 

4 
5 

JO L 145 of 13.6.1977, p. 1, as last amended by Directive 2004/15/CE (OJ L 52 of 21.2.2004, p. 61). 
OJ C of , p. 

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(7) 

(8) 

The resellers concerned will no longer be required to pay tax on their sales and will 
therefore not benefit from the right to deduct. 

This arrangement constitutes a derogation from Article 21(1)(a) of the Sixth Directive 
in that the wholesaler will be deemed liable for the tax on goods sold to end consumers 
by his resellers. 

(9)  Wholesalers  are  therefore  required  to  fulfil  the  obligations  regarding  tax  returns,  tax 
invoicing and payment of tax, etc., in respect of the goods their resellers sell to final 
consumers  and,  by  derogation  from  Article  22,  their  resellers  are  exempt  from  these 
obligations in respect of the goods they supply to final consumers. 

(10)  The  arrangement  was  authorised  by  the  earlier  Council  Decision  1999/82/EC  of 

18 January 1999, which was applicable from 1 January 1999 to 31 December 2000. 

(11)  The  Commission  considers  that  this  derogation  fulfils  the  conditions  set  out  in 

Article 27 of the Sixth Directive. 

(12)  The derogation should be authorised until 31 December 2008. 

(13)  The  derogation  will  not  alter  the  amount  of  VAT  collected  at  the  stage  of  final 
consumption and will not have a negative effect on the European Communities’ own 
resources obtained from value added tax, 

HAS ADOPTED THIS DECISION: 

Article 1 

Portugal  is  hereby  authorised  to  apply  until  31  December  2008  a  special  measure  for  the 
taxation  of  doorstep  sales  that  contains  provisions  derogating  from  Council  Directive 
77/388/EEC of 17 May 1977. 

A  business  whose  total  turnover  is  derived  from  doorstep  sales  made  by  resellers  acting  in 
their own name and on their own account may request the administration for authorisation to 
apply the provisions of Articles 2 and 3 below on condition that: 

all  products  sold  by  the  firm  are  contained  in  a  pre-established  price  list 

- 
applicable at the final consumption stage; 

the  firm  sells  its  products  direct  to  resellers  who,  in  turn,  sell  direct  to  final 

- 
consumers.  

Article 2 

By  way  of  derogation  from  Article  21(1)(a)  of  the  Sixth  Directive  77/388/EEC,  any  firm 
which has been authorised to apply this special measure shall be liable for the tax payable on 
goods supplied by its resellers to final consumers. 

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Article 3 

Any reseller supplied by a business authorised to apply this special measure shall be exempt 
from  the  obligations  laid  down  in  Article  22  of  Directive  77/388/EEC  regarding  goods  it 
supplies to final consumers. 

Article 4 

This Decision is addressed to Portugal. 

Done at Brussels,  

For the Council 
The President 

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