Proposal for a Council Decision amending Decision 2001/865/EC authorising the Kingdom of Spain to apply a measure derogating from Article 11 of the sixth Council Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes
Date: 2004-10-13
Institutions: European Commission
Subjects: Spain, VAT, approximation of laws, derogation from EU law, gold, jewellery and goldsmith's articles, tax harmonisation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.10.2004 
COM(2004)662 final 

Proposal for a 

COUNCIL DECISION 

amending Decision 2001/865/EC authorising the Kingdom of Spain to apply a measure 
derogating from Article 11 of the sixth Council Directive 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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1. 

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EXPLANATORY MEMORANDUM 

Pursuant  to  Article  27(1)  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  valued  added  tax:  uniform  basis  of  assessment1-,  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. 

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.  

Council  Decision  2001/865/EC2  authorised  the  Kingdom  of  Spain,  by  way  of 
derogation from Article 11(A)(1)(a), to include in the taxable amount of a supply of 
goods  or  a  supply  of  services,  the  value  of  any  gold  used  by  the  supplier  and 
provided by the recipient in the case where the supply of the gold to the recipient was 
exempt in accordance with the provisions in Directive 98/80/EC3. 

This  derogation  has  enabled  Spain  to  counter  a  reduction  in  the  taxable  amount  in 
certain  transactions  in  the  jewellery  sector  in  which  the  client  will  provide  the 
jeweller with gold which he has acquired "for investment purposes" and thus VAT- 
exempt  in  order  for  the  jeweller  to  supply  a  good  (e.g.  supply  a  gold-mounted 
diamond jewel) or a service (e.g. by smelting the gold into a ring). 

By  letter  registered  with  the  Secretariat-General  of  the  Commission  on  4  August 
2004,  the  Spanish  Government  requested  the  extension  of  Decision  2001/865/EC 
authorising  Spain  to  apply  special  tax  measures  regarding  the  taxable  amount  of 
certain supplies of goods and services involving the working of gold. 

In  accordance  with  Article  27(2)  of  the  Sixth  Directive,  the  Commission  informed 
the  other  Member  States  by  letter  on  9  August  2004  of  the  request  made  by  the 
Kingdom of Spain and by a letter dated 10 August 2004 the Commission notified the 
Kingdom of Spain that it had all the information it considered necessary for appraisal 
of the request.  

The Commission accepts that this derogation counters abuse in the VAT system. It 
also  notes  that  two  other  Member  States  have  obtained  similar  derogations.  The 
Commission  has  already  started  its  work  towards  the  rationalisation  of  Article  27 
derogations  and  these  derogations  may  be  included  in  that  exercise.  Therefore,  the 
present request for an extension of the derogation should be granted until the date of 
entry  into  force  of  a  Directive  rationalising  the  Article  27  derogations  which 
currently  counter  these  types  of  VAT  avoidance  linked  to  the  exemption  for 
investment gold but no later than the 31st December 2009. 

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OJ L 145, 13.6.1977, p.1. Directive last amended by Directive 2004/7/EC (OJ L 27 of 30.1.2004, p.44-
45). 
OJ L 323, 7.12.2001, p.24. 
OJ L 281, 17.10.1998, p.31. 

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   EN 

                                                 
Proposal for a 

COUNCIL DECISION 

amending Decision 2001/865/EC authorising the Kingdom of Spain to apply a measure 
derogating from Article 11 of the sixth Council Directive 77/388/EEC 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 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 assessment4, and in particular Article 27(1) thereof, 

Having regard to the proposal from the Commission5, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

By  Decision  2001/865/EC  the  Council  authorised  the  Kingdom  of  Spain,  by  way  of 
derogation from Article 11(A)(1)(a) of Directive 77/388/EEC to include in the taxable 
amount of a supply of goods or a supply of services, the value of any gold used by the 
supplier and provided by the recipient in the case where the supply of the gold to the 
recipient was exempt in accordance with Article 26b of Directive 77/388/EEC. 

The aim of that derogation was to avoid abuse of the exemption for investment gold 
and thus to prevent certain types of tax evasion or avoidance. 

By letter registered with the Secretariat-General of the Commission on 4 August 2004, 
the  Spanish  Government  requested  an  extension  for  the  validity  of  Decision 
2001/865/EC, which expires on 31 December 2004. 

In accordance with Article 27(2) of Directive 77/388/EEC, the Commission informed 
the  other  Member  States  by  letter  dated  9  August  2004  of  the  request  made  by  the 
Kingdom  of  Spain.  By  letter  dated  10  August  2004,  the  Commission  notified  the 
Kingdom of Spain that it had all the information it considered necessary for appraisal 
of the request. 

(5) 

According  to  the  Spanish  authorities,  the  derogation  authorised  by  Decision 
2001/865/EC has been effective in achieving the aims stated above.  

4 

5 

OJ L 145, 13.6.1977, p.1. Directive last amended by Directive 2004/7/EC (OJ L 27 of 30.1.2004, p.44-
45). 
OJ C , , p. . 

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(6) 

(7) 

The derogations pursuant to Article 27 of Directive 77/388/EEC which counter VAT 
avoidance  linked  to  the  exemption  for  investment  gold  may  be  included  in  a  future 
proposal for a directive rationalising some of the derogations pursuant to that article. 

It  is  therefore  necessary  to  extend  the  validity  of  the  derogation  granted  under 
Decision  2001/865/EC  until  the  entry  into  force  of  a  directive  rationalising  the 
derogations  pursuant  to  Article  27  of  Directive  77/388/EEC  which  covers  the 
avoidance of value added tax linked to the exemption for investment gold or until 31st 
December 2009, whichever is the earlier. 

(8) 

The  derogation  will  have  no  negative  impact  on  the  Community's  own  resources 
provided from VAT. 

HAS ADOPTED THIS DECISION:  

Article 1 

Article 2 of Decision 2001/865/EC is replaced by the following: 

"Article 2 

The  authorisation  granted  under  Article  1  shall  expire  on  the  date  of  entry  into  force  of  a 
directive rationalising the derogations pursuant to Article 27 of Directive 77/388/EEC which 
counter avoidance of value added tax linked to the exemption for investment gold or on the 31 
December 2009 whichever is the earlier." 

Article 2 

This Decision is addressed to the Kingdom of Spain. 

Done at Brussels,  

For the Council 
The President 

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