Proposal for a Council Decision authorising Denmark to apply a measure derogating from Article 14 (1) (d) of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes .
Date: 2005-01-06
Institutions: European Commission
Subjects: Denmark, VAT, derogation from EU law, publishing, tax avoidance, tax exemption, tax harmonisation, tax system

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 06.01.2005 
COM(2004) 856 final 

. 

Proposal for a 

COUNCIL DECISION 

authorising Denmark to apply a measure derogating from Article 14 (1) (d) of 
the Sixth 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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EXPLANATORY MEMORANDUM 

By  letter  registered  at  the  Commission’s  Secretariat-General  on  17  May  2004,  the  Danish 
authorities requested authorisation, 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 (hereafter referred to as the 
Sixth Directive), to introduce special measures for derogation from Article 14 (1) (d) of the 
Directive, in order to prevent certain types of tax evasion or avoidance. 

In accordance with Article 27(2) of the Sixth Directive, the Commission informed the other 
Member States by letter of 15 October 2004 of the request made by the Danish Government 
and  by  letter  of  19  October  2004  the  Commission  notified  Denmark  that  it  had  all  the 
information it considers necessary for appraisal of the request. 

Article  14  (1)  (d)  of  Directive  77/388/EEC  stipulates  that  Member  States  shall  exempt  the 
final  importation  of  goods  qualifying  for  exemption  from  customs  duties  other  than  as 
provided  for  in  the  Common  Customs  Tariff.  Article  14  (1)  (d)  has  been  implemented  by 
Directive 83/181/EEC2 and in particular by its Article 22 which stipulates that goods of a total 
value  not  exceeding  10  Euro  shall  be  exempt  on  admission.  Member  States  may  grant 
exemption  for  imported  goods  of  a  total  value  of  more  than  10  Euro  but  not  exceeding  22 
Euro. However, Member States may also exclude goods which have been imported on mail 
order from this exemption. 

Denmark  currently  exempts  imports  of  small  consignments  with  a  commercial  nature  from 
outside  the  EU  from  VAT.  The  Danish  limit  for  VAT  exemption  is  DKK 80  (EUR 10). 
However,  the  Danish  authorities  have  discovered  that  publishing  companies  re-route  the 
distribution  of  certain  magazines  and  periodicals  via  territories  not  covered  by  the  Sixth 
Directive. According to the investigation of the Danish authorities in the first nine months of 
2003 some 3.5 million weeklies and magazines were imported from the Åland islands only, 
which meant an estimated loss of revenue to the State of some DKK 47 million (ca. EUR 6.2 
million).  There  is  the  risk  that  the  loss  of  revenue  will  increase  unless  the  VAT  rules  are 
amended  to  prevent  this  tax  avoidance.  Denmark’s  losses  of  VAT  revenue  also  have  a 
negative impact on the Community's own resources. 

Since the introduction of Directive 83/181/EEC, Member States no longer have the option of 
not granting the exemption for these imports on the basis of the first sub-paragraph of Article 
14  (1)  (d)  of  the  Sixth  Directive  and  in  any  event  the  Danish  government  cannot  establish 
whether  these  imports  have  a  serious  effect  on  conditions  of  competition.  The  request  for 
derogation only targets the consignments and scenarios subject to the avoidance scheme and 
does not intend to exclude all mail order consignments on the basis of Article 22 of Directive 
83/181/EEC. 

It therefore appears that the envisaged derogation from Article 14 (1) (d) is in fact the most 
appropriate  solution  in  the  specific  circumstances  and  for  the  particular  tax  avoidance 
scenario to be addressed. The derogation avoids the loss of VAT. 

1 
2 

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. […]. 

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Proposal for a 

COUNCIL DECISION 

authorising Denmark to apply a measure derogating from Article 14 (1) (d) of 
the Sixth 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  the  Sixth  Council  Directive  77/388/CEE  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), and in particular Article 27(1) thereof, 

Having regard to the proposal from the Commission3, 

Whereas: 

(1) 

(2) 

(3) 

In  a  letter  registered  by  the  Commission's  Secretariat-General  on  17  May  2004  the 
Danish  authorities  requested  authorisation 
introduce  special  measures  for 
derogation from Article 14 (1) (d) of the Directive, in order to prevent certain types of 
tax evasion or avoidance. The other Member States were informed of the request on 15 
October 2004, 

to 

The  derogating  measure  is  intended  to  exclude  certain  magazines  and  periodicals 
imported into Denmark from benefiting from the exemption under Article 14 (1) (d) of 
the  Directive  and  apply  VAT  on  them.  Article  14  (1)  (d)  has  been  implemented  by 
Directive 83/181/EEC4 and in particular by its Article 22 which stipulates that goods 
of a total value not exceeding 10 Euro shall be exempt on admission. Member States 
may grant exemption for imported goods of a total value of more than 10 Euro but not 
exceeding  22  Euro.  Denmark  currently  exempts  imports  of  all  small  consignments 
with a commercial nature from outside the EU from VAT. The Danish limit for VAT 
exemption is DKK 80 (EUR 10). 

The  Danish  authorities  have  discovered that  some  publishing  companies  re-route  the 
distribution of their publications to subscribers in Denmark via territories not covered 
by  the  Sixth  Directive,  with  a  loss  in  revenue  for  Denmark  and  consequently  with  a 
negative impact on the Community’s own resources. There is the risk that the loss of 
revenue  will  increase  unless  Denmark  is  authorised  to  prevent  this  type  of  tax 
avoidance. 

3 
4 

OJ C […], […], p. […]. 
OJ C […], […], p. […]. 

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(4) 

Since  the  introduction  of  Directive  83/181/EEC,  Member  States  no  longer  have  the 
option  of  not  granting  the  exemption  for  these  imports  on  the  basis  of  the  first  sub-
paragraph  of  Article  14  (1)  (d)  of  the  Sixth  Directive.  In  any  event  the  Danish 
government cannot establish whether the imports in question have a serious effect on 
conditions  of  competition.  Furthermore  the  request  for  derogation  only  targets  the 
consignments  and  scenarios  subject  to  the  avoidance  scheme  and  does  not  intend  to 
exclude all mail order consignments from the exemption on the basis of Article 22 of 
Directive 83/181/EEC. It therefore appears that the envisaged derogation from Article 
14 (1) (d) is in fact the most appropriate solution in the specific circumstances. 

(5) 

The  derogation  avoids  the  loss  of  VAT  and  will  therefore  not  adversely  affect  the 
Communities' own resources from VAT, 

HAS ADOPTED THIS DECISION:  

Article 1 

By way of derogation from Article 14 (1) (d) of Directive 77/388/EEC Denmark is authorised 
to apply VAT on the importation into Denmark of magazines, periodicals or the like printed 
in the EU and sent to private individuals in Denmark. 

This Decision shall apply until 31 December 2010. 

Article 2 

Article 3 

This Decision is addressed to Denmark. 

Done at Brussels, […] 

For the Council 
The President 

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