Amended proposal for a Council Directive amending Directive 77/388/EEC as regards value added tax on services provided in the postal sector (presented by the Commission pursuant to Article 250 (2) of the EC Treaty)
Date: 2004-07-08
Institutions: European Commission
Subjects: VAT, postal service, provision of services, public service, tax exemption, tax harmonisation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.7.2004 
COM(2004) 468 final 

2003/0091 (CNS) 

Amended proposal for a 

COUNCIL DIRECTIVE 

amending Directive 77/388/EEC 
as regards value added tax on services provided in the postal sector 

(presented by the Commission pursuant to Article 250 (2) of the EC Treaty) 

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EXPLANATORY MEMORANDUM 

1. 

PURPOSE OF THE PROPOSAL 

The Sixth VAT Directive contains provisions exempting certain supplies of services effected 
by the public postal services and the supply of goods incidental thereto. It also exempts the 
supply of stamps valid for use for postal services. Those provisions were adopted in 1977 and 
have  not  been  updated  since.  In  the  meantime  however,  postal  services  in  Europe  are  now 
increasingly  open  to  competition  and  since  current  rules  provide  for  different  taxation  of 
similar services depending on the nature of the provider, they are no longer compatible with 
the neutrality principle.  

2. 

BACKGROUND 

– 

– 

The Commission adopted its initial proposal [COM (2003) 234 final] on 5 May 
2003. 

In  the  course  of  the  consultation  procedure  mandated  in  article  93  of  the 
Treaty, the European Parliament delivered its opinion on 11 March 2004. In the 
opinion, it requested that the Commission adopt 12 amendments. 

3. 

THE COMMISSION'S OPINION ON THE EUROPEAN PARLIAMENT'S AMENDMENTS 

3.1 

General assessment 

Some  of  the  amendments  approved  by  the  European  Parliament  in  its  plenary  session  on 
March 11th are consistent with the Commission's objectives of re-establishing a level playing 
field  in  the  European  postal  market  while  protecting  certain  postal  users  from  higher  postal 
prices.  The  Commission  therefore  accepts  those  amendments  and  modifies  its  proposal 
accordingly. 

3.2 

Examination of the relevant amendments  

- Scope of the new place of supply rule [Article 1 point 1] 

Parliament  proposes  to  widen  the  scope  of  the  special  place  of  supply  rule  contained  in  the 
Commission's proposal so as to make it applicable to standard postal services relating to any 
addressed envelopes of packages, of ordinary correspondence, direct mail, books, catalogues 
and newspapers, which individually weigh no more than 10 kg. This amendment would align 
the weight in question with that mentioned in article 3 paragraph 4 of Directive 97/67, and is a 
natural borderline in the sector. The amendment is acceptable to the Commission. 

-  Supplies  of  services  which  are  exempt  due  to  their  connection  with  the  export  of  goods 
[Article 1 point 3] 

The  current  text  of  article  15.13  of  the  Sixth  VAT  Directive  excludes  from  the  exemption 
provided  for  services  connected  with  the  export  of  goods,  those  which  are  exempted  in 
accordance  with  article  13.  The  Commission's  proposal  amends  article  15.13  so  as  to  also 

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exclude from the exemption the services covered by the new place of supply rule in Article 1 
point 1. Given the amendments to Article 1 point 1, Article 1 point 3 must also be amended. 

- List of goods and services which may be subject to reduced rates of VAT [Article 1 point 6] 

The  Commission’s  original  proposal,  allowed  Member  States  to  apply  a  reduced  rate  to 
certain postal services, namely those covered by the provisions contained in points 1 and 3 of 
Article  1.  The  amendments  introduced  to  those  two  articles  require  a  corresponding 
amendment to Article 1 point 6. 

-  Deadline  for  the  implementation  of  the  proposed  Directive  [New  Recital  10  and  Article  2 
paragraph 1] 

Both  public  and  private  postal  operators  may  require  some  time  in  order  to  adapt  their 
systems  to  the  new  tax  liabilities  resulting  from  this  Directive.  Parliament  has  shown  its 
concern in this respect and has requested that Member States and operators be given enough 
time to prepare for the changes. It has proposed that the deadline for the implementation of 
the  Directive  be  set  on  1  January  2007.  This  amendment  to  Article  2  is  acceptable  to  the 
Commission. 

4. 

CONCLUSION 

In accordance with Article 250(2) of the EC Treaty the Commission amends its proposal as 
set out above. 

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2003/0091 (CNS) 

Amended proposal for a 

COUNCIL DIRECTIVE 

amending Directive 77/388/EEC 
as regards value added tax on services provided in the postal sector 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 93 thereof, 

Having regard to the proposal from the Commission1, 

Having regard to the opinion of the European Parliament2, 

Having regard to the opinion of the European Economic and Social Committee3, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

1  
2  
3  
4  

5  

The  existing  value  added  tax  (VAT)  exemption  of  postal  services  under  the  Sixth 
Directive  77/388/EEC  of  the  Council  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 assessment4, is limited solely to public postal operators, and the 
resulting  discrepancy,  whereby  those  services  are  exempt  if  they  are  supplied  by 
public operators but taxed if supplied by private operators, gives rise to distortions of 
competition. 

The  proper  functioning  of  the  internal  market  requires  that  wherever  possible,  such 
distortions be eliminated. 

The  Commission  is  committed  to  a  strategy  of  modernising  and  simplifying  the 
operation of the VAT system within the context of the internal market5. 

As  regards  to  the  application  of  VAT  to  postal  services  all  such  services  should  be 
made  taxable  by  treating  them  as  goods  transport  services,  thereby  allowing  postal 
operators to deduct input tax incurred on purchases. In consequence, overall net prices 
should decrease and any overall price increase arising from the introduction of VAT 

OJ C …, …, p. 
OJ C …, …, p. … 
OJ C 80, 30.3.2004, p.135 
OJ  L 145,  13.6.1977,  p.1.  Directive  as  last  amended  by  Directive  2004/7/EC  (OJ  L  27.  30.1.2004.  p. 
44). 
COM(2000) 348 final. 

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(5) 

(6) 

(7) 

(8) 

(9) 

would be unlikely to be equal to the standard rate percentage applying in each Member 
State. 

In  order  to  counter  gross  price  increases  in  certain  limited  areas,  for  private 
consumers, it is appropriate to apply a reduced rate, which produces the same revenue 
effect as the current exemption. However, a reduced rate across the sector should not 
be introduced, since it would lead to greater instances of distortion. 

The  place-of-supply-rules  for  letter  post  should  be  amended  in  order  to  reduce  the 
possibilities for error or fraud, provide simplification and ensure that the Community 
system is comparable to other similar systems. 

In  order  to  enhance  the  efficiency  of  a  simplified  accounting  scheme  for  postal 
operators, it should be possible to treat postage stamps as goods but ignore them for 
tax purposes when they are supplied for the purpose of obtaining postal services. 

Given the differing levels of technology used by national postal operators, it should be 
left to Member States to design the most appropriate special accounting system. 

In  principle,  a  refund  of  VAT  would  be  available  to  postal  operators  established  in 
third  countries,  under  the  Thirteenth  Council  Directive 86/560/EEC  of 17 November 
1986 on the harmonisation of laws of the Member States relating to turnover taxes – 
Arrangements for the refund of value added tax to taxable persons not established in 
the  Community  Territory.6  However,  given  that  the  activities  of  some  state  owned 
postal  operators  might  not  be  considered  to  be  economic  activities,  thus  preventing 
such  refund,  exemption  with  the  right  of  deduction  should  be  provided  for  any 
terminal  dues  within  the  meaning  of  Article 2(15)  of  Directive 97/67/EC  of  the 
European Parliament and of the Council of 15 December 1997 on common rules for 
the  development  of  the  internal  market  of  Community  postal  services  and  the 
improvement  of  quality  of  service7,  in  respect  of  the  distribution  of  incoming  cross-
border mail from third countries. 

(10) 

In order to allow postal operators to adapt their systems, Member States shall be 
given sufficient time to bring into force the laws, regulations and administrative 
provisions necessary to comply with this Directive. 

(11)  Since the objectives of this Directive cannot be sufficiently achieved by the Member 
States  for  the  above  mentioned  reasons  and  can  therefore  be  better  achieved  at 
Community  level,  the  Community  may  adopt  measures,  in  accordance  with  the 
principle of subsidiarity as set out in Article 5 of  the Treaty. In  accordance with the 
principle  of  proportionality,  as  set  out  in  that  Article,  this  Directive  does  not  go 
beyond what is necessary in order to achieve those objectives. 

(12)  Directive 77/388/EEC should therefore be amended accordingly, 

6  
7  

OJ L 326, 21.11.1986, p. 40 
OJ L 15, 21.1.1998, p. 14. 

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HAS ADOPTED THIS DIRECTIVE: 

Article 1 

Directive 77/388/EEC is amended as follows: 

(1) 

In Article 9 the following paragraph 2a is inserted: 

“By way of derogation from paragraph 2(b), the standard postal services relating to 
any  addressed  envelopes  or  packages,  of  ordinary  correspondence,  direct  mail, 
books,  catalogues  and  newspapers,  which  individually  weigh  no  more  than  10  kg, 
shall  be  deemed  to  be  supplied  within  the  country  in  which  transport  commences, 
save  where  the  collection  and  delivery  are  paid  for  by  the  recipient,  in  which  case 
any such item shall be deemed to be supplied at the place of delivery. 

For  the  purposes  of  this  Directive,  “standard  postal  services”  means  the  traditional 
basic  service  supplied  to  the  sender  of  the  mail,  including  deliveries  in  the  fastest 
standard  category,  where  more  than  one  category  exists,  and  the  delivery  of  items 
registered or recorded, but not any express delivery services or services provided by 
sub  contractors,  or  any  services  relating  to  terminal  dues  within  the  meaning  of 
Article 2(15) of Directive 97/67/EC of the European Parliament and of the Council8. 
An addressed envelope or package is one on which is marked a named person at a 
given address.” 

(2) 

Article 13 is amended as follows: 

a) In Title A, paragraph 1(a) is deleted; 

b) In Title B, point (e) is replaced by the following: 

“e)  the  supply  at  face  value  of  fiscal  stamps  and  other  similar  stamps  other  than 
postage stamps;” 

(3) 

In Article 15, point (13) is replaced by the following: 

“13.  the  supply  of  services,  including  transport  and  ancillary  operations,  but 
excluding  the  supply  of  services  exempted  in  accordance  with  Article  13  and 
standard postal services relating to any addressed envelopes or packages, of ordinary 
correspondence,  direct  mail,  books,  catalogues  and  newspapers,  which  individually 
weigh no more than 10 kg, where they are directly linked to the export of goods or 
the import of goods covered by Article 7(3) or Article 16(1), Title A.” 

(4) 

In Title XIV the following Article 26d shall be added: 

“Article 26d Special Scheme for Postal Operators 

Where  Member  States  apply  a  reduced  rate  for  postal  services  in  accordance  with 
Article  12(3)(a)  and  Annex  H,  category  18,  they  may,  without  prejudice  to  other 

8  

OJ L 15, 21.1.1998, p. 14. 

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Community provisions and under conditions which  they  may determine in order to 
prevent any possible evasion, avoidance or abuse, allow the amount of tax due to be 
determined on the basis of the numbers of items transported.  

In order to avoid double taxation, Member States adopting such a scheme may vary 
the  treatment of  postage stamps to  such an extent as they see fit in order to ensure 
that only the postal services are taxed.  

Where such a regime is adopted, Member States shall include suitable provision for 
any taxable person who, as a customer of the postal service provider, has a right of 
deduction under Article 17.” 

(5) 

In Annex F, Category 5 is deleted. 

(6) 

In Annex H, the following category is added: 

“18.  Standard  postal  services  relating  to  any  addressed  envelopes  or  packages,  of 
ordinary correspondence, direct mail, books, catalogues and newspapers, where that 
item  individually  weighs  no  more  than  10  Kg,  that  being  a  fixed  ceiling  for  the 
purposes of exercising this option.” 

Article 2 

Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative  provisions 
necessary to comply with this Directive by 1 January 2007 at the latest. They shall forthwith 
inform the Commission thereof. 

When Member States adopt those provisions, they shall contain a reference to this Directive 
or be accompanied by such a reference on the occasion of their official publication. Member 
States shall determine how such reference is to be made. 

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 3 

Article 4 

This Directive is addressed to the Member States. 

Done at Brussels, … 

For the Council 
The President 

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