Council Regulation (EC) No 1777/2005 of 17 October 2005 laying down implementing measures for Directive 77/388/EEC on the common system of value added tax
Date: 2005-10-17
Institutions: Council of the European Union
Subjects: European Economic Interest Grouping, VAT, delivery, provision of services, single market, tax harmonisation

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I

(Acts whose publication is obligatory)

COUNCIL REGULATION (EC) No 1777/2005

of 17 October 2005

laying down implementing measures for Directive 77/388/EEC on the common system of value
added tax

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
Community,

establishing the European

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 of assessment (1), hereinafter referred
to as ‘Directive 77/388/EEC’, and in particular Article 29a
thereof,

Having regard to the proposal from the Commission,

Whereas:

(1)

(2)

Directive 77/388/EEC contains rules on value added tax
which, in some cases, are subject to interpretation by the
Member States. The adoption of common provisions
implementing Directive 77/388/EEC should ensure that
application of the value added tax system complies more
fully with the objective of the internal market, in cases
where divergences in application have arisen or may arise
which are incompatible with the proper functioning of
the said market. These implementing measures are legally
binding only from the date of the entry into force of this
Regulation and are without prejudice to the validity of
the legislation and interpretation previously adopted by
the Member States.

their supply.

It is necessary for the achievement of the basic objective
of ensuring a more uniform application of the current
value added tax system to lay down rules implementing
Directive 77/388/EEC, in particular in respect of taxable
persons, the supply of goods and services, and the place
In accordance with the principle of
of
proportionality as set out in the third subparagraph of
this Regulation does not go
Article 5 of
beyond what
to achieve the
is binding and directly
objective pursued. Since it
applicable in all Member States, uniformity of application
will be best ensured by a Regulation.

is necessary in order

the Treaty,

(3)

(4)

(5)

(6)

These implementing provisions contain specific rules in
response to selective questions of application and are
designed to bring uniform treatment
the
Community to those specific circumstances only. They
are therefore not conclusive for other cases and,
in
view of their formulation, are to be applied restrictively.

throughout

The further integration of the internal market has led to
an increased need for cooperation by economic operators
established in different Member States across internal
borders and the development of European economic
interest groupings
(EEIGs), constituted in accordance
with Regulation (EEC) No 2137/85 (2),
should
therefore be provided that such EEIGs are also taxable
persons where they supply goods or services for consid-
eration.

it

The sale of an option as a financial instrument should be
treated as a supply of
separate from the
underlying transactions to which the option relates.

services

to establish that a
It is necessary, on the one hand,
transaction which consists
solely of assembling the
various parts of a machine provided by a customer
must be considered as a supply of services, and, on the
other hand, to establish the place of such supply.

(7) Where various services supplied in the framework of
organising a funeral form a part of a single service, the
rule on the place of supply should also be determined.

(8)

transport

and certain electronic

Certain specific services such as the assignment of tele-
vision broadcasting rights in respect of football matches,
the translation of texts, services for claiming value added
tax refunds, certain services as an agent, the hiring of
services
means of
involve cross-border scenarios or even the participation
of economic operators established in third countries. The
place of supply of
these services needs to be clearly
determined in order to create greater legal certainty. It
should be noted that the services identified as electronic
services or otherwise do not constitute a definitive,
exhaustive list.

(1) OJ L 145, 13.6.1977, p. 1. Directive as last amended by Directive

2004/66/EC (OJ L 168, 1.5.2004, p. 35).

(2) OJ L 199, 31.7.1985, p. 1.

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(9)

In certain specific circumstances a credit or debit card
handling fee which is paid in connection with a trans-
action should not reduce the taxable amount for the
latter.

(10)

or

training

retraining

Vocational
include
instruction relating directly to a trade or profession as
well as any instruction aimed at acquiring or updating
knowledge for vocational purposes, regardless of
the
duration of a course.

should

(11)

‘Platinum nobles’ should be treated as being excluded
from the exemptions for currency, bank notes and coins.

(12) Goods

transported outside the Community by the
purchaser thereof and used for the equipping, fuelling
or provisioning of means of transport used for non-
business purposes by persons other
than natural
persons, such as bodies governed by public law and
associations, should be excluded from the exemption
for export transactions.

(13)

To guarantee uniform administrative practices for the
calculation of
the minimum value for exemption on
exportation of goods carried in the personal luggage of
travellers, the provisions on such calculations should be
harmonised.

(14)

Electronic import documents should also be admitted to
exercise the right to deduct, where they fulfil the same
requirements as paper-based documents.

(15) Weights

for

investment gold which are definitely
accepted by the bullion market should be named and a
common date for establishing the value of gold coins be
determined to ensure equal
treatment of economic
operators.

(16)

The special scheme for taxable persons not established in
the Community, supplying electronic services to non-
taxable persons
resident within the
Community is
to certain conditions. Where
those conditions are no longer fulfilled, the consequences
thereof should, in particular, be made clear.

established or

subject

(17)

(18)

In the case of intra-Community acquisition of goods, the
right of the Member State of acquisition to tax the acqui-
sition should remain unaffected by the value added tax
treatment of the transaction in other Member States.

Rules
should be established to ensure the uniform
treatment of supplies of goods once a supplier has
exceeded the distance selling threshold for supplies to
another Member State,

HAS ADOPTED THIS REGULATION:

CHAPTER I

SUBJECT MATTER

Article 1

This Regulation lays down measures for the implementation of
Articles 4, 6, 9, 11, 13, 15, 18, 26b, 26c, 28a and 28b of
Directive 77/388/EEC, and of Annex L thereto.

CHAPTER II

TAXABLE PERSONS AND TAXABLE TRANSACTIONS

SECTION 1

(Article 4 of Directive 77/388/EEC)

Article 2

A European Economic Interest Grouping (EEIG) constituted in
accordance with Regulation (EEC) No 2137/85 which supplies
goods or services for consideration to its members or to third
parties shall be a taxable person within the meaning of Article
4(1) of Directive 77/388/EEC.

SECTION 2

(Article 6 of Directive 77/388/EEC)

Article 3

1.
The sale of an option, where such a sale is a transaction
within the scope of point (5) of Article 13(B)(d) of Directive
77/388/EEC, shall be a supply of services within the meaning of
Article 6(1) of that Directive. That supply of services shall be
distinct from the underlying operations to which the services
relate.

2. Where a taxable person only assembles the different parts
of a machine all of which were provided to him by his
customer, that transaction shall be a supply of services within
the meaning of Article 6(1) of Directive 77/388/EEC.

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CHAPTER III

PLACE OF TAXABLE TRANSACTIONS

SECTION 1

(Article 9(1) of Directive 77/388/EEC)

Article 4

Insofar as they constitute a single service, services supplied in
the framework of organising a funeral shall fall within the scope
of Article 9(1) of Directive 77/388/EEC.

SECTION 2

(Article 9(2) of Directive 77/388/EEC)

Article 5

Except where the goods being assembled become part of
immovable property,
services
specified in Article 3(2) of this Regulation shall be established
in accordance with Article 9(2)(c) or Article 28b(F) of Directive
77/388/EEC.

the supply of

the place of

agents acting in the name and for the account of the provider
of the service procured.

Article 10

Trailers and semi-trailers, as well as railway wagons, shall be
forms of transport for the purposes of the eighth indent of
Article 9(2)(e) of Directive 77/388/EEC.

Article 11

‘Electronically supplied services’ as referred to in the
1.
12th indent of Article 9(2)(e) of Directive 77/388/EEC and in
Annex L to Directive 77/388/EEC shall include services which
are delivered over the Internet or an electronic network and the
nature of which renders their supply essentially automated and
involving minimal human intervention, and in the absence of
information technology is impossible to ensure.

2.
The following services, in particular, shall, where delivered
over the Internet or an electronic network, be covered by
paragraph 1:

Article 6

The service of translation of texts shall be covered by Article
9(2)(e) of Directive 77/388/EEC.

(a)

supply of digitised products generally,

the
software and changes to or upgrades of software;

including

Article 7

Where a body established in a third country assigns television
broadcasting rights in respect of football matches to taxable
persons established in the Community, that transaction shall
be covered by the first indent of Article 9(2)(e) of Directive
77/388/EEC.

Article 8

The supply of services which consist in applying for or receiving
refunds under Directive 79/1072/EEC (1) shall be covered by the
third indent of Article 9(2)(e) of Directive 77/388/EEC.

Article 9

The supply of services of agents as referred to in the seventh
indent of Article 9(2)(e) of Directive 77/388/EEC shall cover the
services of agents acting in the name and for the account of the
recipient of the service procured and services performed by the

(1) Eighth Council Directive 79/1072/EEC of 6 December 1979 on the
harmonisation of the laws of the Member States relating to turnover
taxes — Arrangements for the refund of value added tax to taxable
persons not established in the territory of the country (OJ L 331,
27.12.1979, p. 11). Directive as last amended by the 2003 Act of
Accession.

(b) services providing or supporting a business or personal
presence on an electronic network such as a website or a
webpage;

(c) services automatically generated from a computer via the
in response to specific

Internet or an electronic network,
data input by the recipient;

(d) the transfer for consideration of the right to put goods or
services up for sale on an Internet site operating as an
online market on which potential buyers make their bids
by an automated procedure and on which the parties are
notified of a sale by electronic mail automatically generated
from a computer;

(e)

Internet Service Packages (ISP) of information in which the
telecommunications component
forms an ancillary and
subordinate part (i.e. packages going beyond mere Internet
access and including other elements such as content pages
giving access to news, weather or travel reports; play-
grounds; website hosting; access to online debates etc.);

(f)

the services listed in Annex I.

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Article 12

The following, in particular, shall not be covered by the 12th
indent of Article 9(2)(e) of Directive 77/388/EEC:

1. radio and television broadcasting services as referred to in
the 11th indent of Article 9(2)(e) of Directive 77/388/EEC;

2. telecommunications services, within the meaning of the 10th

indent of Article 9(2)(e) of Directive 77/388/EEC;

3. supplies of the following goods and services:

(a) goods, where the order and processing is done electro-

nically;

(b) CD-ROMs, floppy disks and similar tangible media;

(c) printed matter, such as books, newsletters, newspapers

or journals;

(d) CDs, audio cassettes;

(e) video cassettes, DVDs;

(f)

games on a CD-ROM;

(g)

services of professionals such as lawyers and financial
consultants, who advise clients by e-mail;

(h)

teaching services, where the course content is delivered
by a teacher over the Internet or an electronic network,
(namely via a remote link);

(i)

offline physical repair services of computer equipment;

(j)

offline data warehousing services;

(k) advertising services, in particular as in newspapers, on

posters and on television;

(l)

telephone helpdesk services;

(m) teaching

services purely

involving

correspondence

courses, such as postal courses;

(n) conventional auctioneers’

reliant on direct
human intervention, irrespective of how bids are made;

services

(o)

telephone services with a video component, otherwise
known as videophone services;

(p) access to the Internet and World Wide Web;

(q)

telephone services provided through the Internet.

CHAPTER IV

TAXABLE AMOUNT

(Article 11 of Directive 77/388/EEC)

Article 13

Where a supplier of goods or services, as a condition of
accepting payment by credit or debit card,
the
customer to pay an amount to himself or another undertaking,
and where the total price payable by that customer is unaffected
that amount shall
irrespective of how payment
constitute an integral part of
the
supply of the goods or services, under Article 11 of Directive
77/388/EEC.

the taxable amount

is accepted,

requires

for

CHAPTER V

EXEMPTIONS

SECTION 1

(Article 13 of Directive 77/388/EEC)

Article 14

set

out

in Article 13(A)(1)(i)

Vocational training or retraining services provided under the
conditions
of Directive
77/388/EEC shall
include instruction relating directly to a
trade or profession as well as any instruction aimed at
acquiring or updating knowledge for vocational purposes. The
duration of a vocational training or retraining course shall be
irrelevant for this purpose.

Article 15

The exemption referred to in Article 13(B)(d)(4) of Directive
77/388/EEC shall not apply to platinum nobles.

SECTION 2

(Article 15 of directive 77/388/EEC)

Article 16

‘Means of transport for private use’ as referred to in the first
subparagraph of Article 15(2) of Directive 77/388/EEC shall
include means of transport used for non-business purposes by
persons other than natural persons, such as bodies governed by
public law within the meaning of Article 4(5) of that Directive
and associations.

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Article 17

In order to determine whether the threshold set by a Member
State in accordance with the third indent of the second subpar-
agraph of Article 15(2) of Directive 77/388/EEC has been
exceeded, the calculation shall be based on the invoice value.
The aggregate value of several goods may be used only if all
those goods are included on the same invoice issued by the
same taxable person supplying goods to the same customer.

CHAPTER VI

DEDUCTIONS

(Article 18 of Directive 77/388/EEC)

Article 18

Where the importing Member State has introduced an electronic
system for completing customs
the expression
‘import document’ as
referred to in Article 18(1)(b) of
Directive 77/388/EEC shall cover electronic versions of such
documents, provided that they allow for the exercise of the
right of deduction to be checked.

formalities,

CHAPTER VII

SPECIAL SCHEMES

(Articles 26b and 26c of Directive 77/388/EEC)

Article 19

‘Weights accepted by the bullion markets’ as referred to in
1.
Article 26b(A)(i), first paragraph, of Directive 77/388/EEC shall
at least cover the units and the weights traded as set out in
Annex II to this Regulation.

For the purposes of establishing the list referred to in the
2.
third subparagraph of Article 26b(A) of Directive 77/388/EEC,
‘price’ and ‘open market value’ as referred to in the fourth
indent of point (ii) of the first subparagraph shall be the price
and open market value on 1 April of each year. If 1 April does
not fall on a day on which those values are fixed, the values of
the next day on which they are fixed shall be used.

Article 20

1. Where, in the course of a calendar quarter, a non-estab-
lished taxable person using the special scheme provided for in
Article 26c(B) of Directive 77/388/EEC meets at least one of the
criteria for exclusion laid down in Article 26c(B)(4), the Member
State of identification shall exclude that non-established taxable
person from the special scheme. In such cases the non-estab-
lished taxable person may subsequently be excluded from the
special scheme at any time during that quarter.

In respect of electronic services supplied prior to exclusion but
during the calendar quarter in which exclusion occurs, the non-

established taxable person shall submit a return for the entire
quarter
in accordance with Article 26c(B)(5) of Directive
77/388/EEC. The requirement to submit this return shall have
no effect on the requirement,
to register under the
normal rules in a Member State.

if any,

A Member State of

2.
identification which receives a
payment in excess of that resulting from the return submitted
under Article 26c(B)(5) of Directive 77/388/EEC shall reimburse
the overpaid amount directly to the taxable person concerned.

identification has received an
Where the Member State of
amount pursuant
to a return subsequently found to be
incorrect, and that Member State has already distributed that
those
amount among the Member States of consumption,
to
Member States shall directly reimburse the overpayment
the non-established taxable person and inform the Member
State of identification of the adjustment to be made.

3.
Any return period (quarter) within the meaning of Article
26c(B)(5) of Directive 77/388/EEC shall be a separate return
period.

Once a return under Article 26c(B)(5) of Directive 77/388/EEC
has been rendered, any subsequent changes to the figures
contained therein may be made only by means of an
to a
amendment
subsequent return.

to that return and not by an adjustment

Amounts of value added tax paid under Article 26c(B)(7) of
Directive 77/388/EEC shall be specific to that return. Any
subsequent amendments to the amounts paid may be effected
only by reference to that return and may not be allocated to
another return, or adjusted on a subsequent return.

4.
Amounts on value added tax returns made under the
special scheme provided for in Article 26c(B) of Directive
77/388/EEC shall not be rounded up or down to the nearest
whole monetary unit. The exact amount of value added tax shall
be reported and remitted.

CHAPTER VIII

TRANSITIONAL MEASURES

(Articles 28a and 28b of Directive 77/388/EEC)

Article 21

Where an intra-Community acquisition of goods within the
meaning of Article 28a of Directive 77/388/EEC has taken
place, the Member State in which the dispatch or transport
ends shall exercise its power of taxation irrespective of the
VAT treatment applied to the transaction in the Member State
in which the dispatch or transport began.

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Any request by a supplier of goods for a correction in the tax
invoiced by him and reported by him to the Member State
where the dispatch or transport of the goods began shall be
treated by that State in accordance with its own domestic rules.

Article 22

Where in the course of a calendar year the threshold applied by
a Member State in accordance with Article 28b(B)(2) of
Directive 77/388/EEC is exceeded, Article 28b(B) of
that
Directive shall not modify the place of supplies of goods
other than products subject to excise duty carried out in the
course of the same calendar year which are made before the
threshold applied by the Member State for the calendar year
then current is exceeded provided that the supplier:

(a) has not exercised the option under Article 28b(B)(3) of that

Directive and

However, Article 28b(B) of Directive 77/388/EEC shall modify
the place of the following supplies to the Member State in
which the dispatch or transport ends:

(a)

the supply by which the threshold applied by the Member
State for the calendar year then current was exceeded in the
course of the same calendar year;

(b) any subsequent supplies within that Member State in that

calendar year;

(c) supplies within that Member State in the calendar year
following the calendar year in which the event referred to
in point (a) occurred.

CHAPTER IX

FINAL PROVISIONS

Article 23

(b) did not exceed the threshold in the course of the preceding

calendar year.

Article 13 shall be applicable from 1 January 2006.

This Regulation shall enter into force on 1 July 2006.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Luxembourg, 17 October 2005.

For the Council
The President

M. BECKETT

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ANNEX I

Article 11 of this Regulation

1. Item 1 of Annex L to Directive 77/388/EEC

(a) Website hosting and webpage hosting

(b) Automated, online and distance maintenance of programmes

(c) Remote systems administration

(d) Online data warehousing where specific data is stored and retrieved electronically

(e) Online supply of on-demand disc space.

2. Item 2 of Annex L to Directive 77/388/EEC

(a) Accessing or downloading software (including procurement/accountancy programmes and anti-virus software) plus

updates

(b) Software to block banner adverts showing, otherwise known as Bannerblockers

(c) Download drivers, such as software that interfaces computers with peripheral equipment (such as printers)

(d) Online automated installation of filters on websites

(e) Online automated installation of firewalls.

3. Item 3 of Annex L to Directive 77/388/EEC

(a) Accessing or downloading desktop themes

(b) Accessing or downloading photographic or pictorial images or screensavers

(c) The digitised content of books and other electronic publications

(d) Subscription to online newspapers and journals

(e) Weblogs and website statistics

(f) Online news, traffic information and weather reports

(g) Online information generated automatically by software from specific data input by the customer, such as legal

and financial data, (in particular such data as continually updated stock market data, in real time)

(h) The provision of advertising space including banner ads on a website/web page

(i) Use of search engines and Internet directories.

4. Item 4 of Annex L to Directive 77/388/EEC

(a) Accessing or downloading of music on to computers and mobile phones

(b) Accessing or downloading of jingles, excerpts, ringtones, or other sounds

(c) Accessing or downloading of films

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(d) Downloading of music on to computers and mobile phones

(e) Accessing automated online games which are dependent on the Internet, or other similar electronic networks,

where players are geographically remote from one another.

5. Item 5 of Annex L to Directive 77/388/EEC

(a) Automated distance teaching dependent on the Internet or similar electronic network to function and the supply
of which requires limited or no human intervention, including virtual classrooms, except where the Internet or
similar electronic network is used as a tool simply for communication between the teacher and student

(b) Workbooks completed by pupils online and marked automatically, without human intervention.

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ANNEX II

Article 19 of this Regulation

Unit

Weights traded

Kg
Gram

Ounce (1 oz = 31,1035 g)
Tael (1 tael = 1,193 oz.) (1)
Tola (10 tolas = 3,75 oz.) (2)

12,5/1
500/250/100/50/20/10/5/2,5/2
100/10/5/1/1/2/1/4
10/5/1
10

(1) Tael = a traditional Chinese unit of weight. The nominal fineness of a Hong Kong tael bar is 990 but in Taiwan 5 and 10 tael bars can

be 999,9 fineness.

(2) Tola = a traditional Indian unit of weight for gold. The most popular sized bar is 10 tola, 999 fineness.