Opinion of the European Economic and Social Committee on the  Proposal for a Council Directive laying down detailed rules for the refund of value added tax, provided for in Directive 77/388/EEC, to taxable persons not established in the territory of the country but established in another Member State (COM(2004) 728 final — 2005/0807 (CNS))
Date: 2005-10-26
Institutions: European Economic and Social Committee
Subjects: EU national, VAT, electronic mail, redemption, simplification of formalities

C 28/86

EN

Official Journal of the European Union

3.2.2006

Opinion of the European Economic and Social Committee on the ‘Proposal for a Council Directive
laying down detailed rules for the refund of value added tax, provided for in Directive
77/388/EEC, to taxable persons not established in the territory of the country but established in
another Member State’

(COM(2004) 728 final — 2005/0807 (CNS))

(2006/C 28/18)

On 20 July 2005 the Council decided to consult the European Economic and Social Committee, under
Article 93 of the Treaty establishing the European Community, on the abovementioned proposal.

Given the urgent nature of the work, the European Economic and Social Committee appointed Mr Burani
as rapporteur-general at its 421st plenary session, held on 26 and 27 October 2005 (meeting of 26
October), and adopted the following opinion nem. con. with 79 votes in favour and 1 abstention.

1. Introduction: the Commission document

In October 2003 the Commission issued a document (1)
1.1
summarising the VAT strategy previously defined in June 2000.
One of the objectives of this strategy was to simplify proce-
dures, by means of three specific initiatives proposed in the
subsequent Commission document of October 2004 (2): two of
these initiatives (3) have already been addressed by an EESC
opinion (4) and the present document discusses the third.

seeks

The Commission proposal

1.2
to accelerate and
simplify VAT refund procedures for taxable persons not estab-
lished in the country in respect of tax charged to them for
goods or services supplied by another taxable person within
the country or in connection with the import of goods into the
country.

1.4
Article 5 of the proposal deals with cutting red tape,
stating that, in order to obtain the refund, the person in ques-
tion only has to submit an application electronically, rather
than on a standardised form supported by original invoices and
customs documentation. The request must, of course, contain
certain information specified in the article to enable the tax
administration to ascertain and verify the legality of transac-
tions.

rule,

As a general

the application must

1.5
relate to
purchases of goods or services invoiced or imports made
during a period of not less than three months and not
more than one calendar year and must be submitted within
six months of the end of the calendar year in which the tax
is
became chargeable. However,
possible for both the reference period and the submission
requirements to be changed.

in certain circumstances it

The general

1.3
rules on the subject remain essentially
unchanged: the real progress lies in the proposal to substan-
tially cut red tape for persons entitled to refunds while, at the
same time, establishing their right to compensation when the
refunding tax administration delays payment beyond a certain
time limit.

(1) COM(2003) 614 final.
(2) COM(2004) 728 final.
(3) Proposal for a Council Directive amending Directive 77/388/EEC
with a view to simplifying value added tax obligations and Proposal
for a Council Regulation amending Regulation (EC) No 1798/2003
as regards the introduction of administrative cooperation arrange-
ments in the context of the one-stop scheme and the refund proce-
dure for value added tax.

(4) EESC Opinion on the Proposal for a Council Directive amending
Directive 77/388/EEC with a view to simplifying value added tax
obligations and the Proposal for a Council Regulation amending
Regulation (EC) No 1798/2003 as regards the introduction of
administrative cooperation arrangements in the context of the one-
stop scheme and the refund procedure for value added tax
COM(2004) 728 final - 2004/0261 (CNS) - 2004/0262 (CNS).

1.6
The tax administration of the Member State where the
value added tax was incurred must make its decision known
to the applicant within three months of the date on which
the application for a refund was submitted and the payment
must also be made before the end of that period. Grounds
must be given for any refusal of an application. Appeals may
be made, subject to the same time limits and conditions as are
laid down for taxable persons established in the Member State.
Additional information may be requested but only within
three months of
the date on which the application was
submitted; in that case, however, the payment deadline shall be
calculated from the date on which the additional information
was requested. If an express refusal
is not forthcoming
within the appropriate time limit, the application will be
deemed to have been granted.

1.7
As stated in point 1.6 above, the payment of sums
owed must take place within three months of the date on
which the application was submitted; where this time period is
exceeded for any reason, the Member State must pay the appli-
cant interest of 1 % of the sum due per month.

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Official Journal of the European Union

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2. The EESC's comments

too,

2.1
The EESC endorses all proposals seeking to cut red tape
for users, particularly when, as in the case in point, this causes
state administrations,
to streamline their methods and
encourages them to organise their work better. The simplifica-
tion proposed here, however, is not just the result of a desire
to streamline procedures but is truly necessary: indeed, as the
EESC has already stressed (5), the Commission itself states in the
explanatory memorandum introducing the three proposals (6)
‘… the present refund procedure … seems to be so
that
burdensome that more than an estimated 53.5 % of
large
companies have not requested refunds to which they were
entitled at some point due to these problems.’

The directive applies, as the title states,

2.2
to ‘taxable
persons not established in the territory of the country but
established in another Member State’, in accordance with the
procedures and with regard to the transactions stipulated by
the provisions currently in force.

an

application

2.3
The key innovation is that laid down in Article 5 of the
proposal, which states that it will no longer be necessary to
submit the refund application in paper form with attached
invoices, original customs certificates and other supporting
documents:
electronically
submitted
the appropriate information for tracing the
containing all
necessary documentation, already in the possession of
the
this
administration, will be accepted. The EESC supports
proposal, of course, but points out that the administrations
would actually be able to apply this procedure now, even
without the help of electronic media, if only their work were
organised better and more effectively.

Member States which should always underpin their relations
with the public, both economic operators and other citizens,
whereby the public administration has a duty always to
reply to the requests submitted to it and to do so swiftly.
The response times set — in particular the period of three
months within which the public administration has to make
the refund or refuse the application — seem appropriate and
reasonable. However, the question arises of whether these time
limits are realistic for all 25 EU Member States: indeed, in some
countries the refund delays are so long that they can only be
the result of intrinsic inefficiency, which may take some time
to eliminate.

Article 8 also follows a principle of

2.6
fairness which
should always be applied in relations between the public
administration and taxpayers, namely that if payment of the
refund has not been made within three months of the date on
which the application or request for further information is
made,
the public administration must pay the applicant
interest on the delayed payment of 1 % per month. The
EESC endorses the principle but feels that the measure laid
down will not easy to apply.
it points out that a
to a yearly
monthly interest
compound rate of 12.68 %. Given that in certain countries
consumer protection laws set limits above which a rate is
deemed to be excessive, in countries where 12.68 % is above
this limit the interest rate applied to the public administration
set by one law would be illegal under another law. The EESC
therefore proposes that Article 8 be amended to the effect that
the interest on the delayed payment should be calculated in
each country on the basis of the rates applied by national
laws to taxpayers who are in arrears.

rate of 1 % is equivalent

Indeed,

2.4
This last point is not as trite as it might seem and
conveys a specific message: if it takes too long to implement
the directive, tax and customs administrations should, in the
meantime, start to streamline their methods, whether paper-
based or electronic, so as to enable the user to submit less
complex documentation.

The EESC fully endorses Article 6 of the proposal (7): it
2.5
welcomes the Commission's endeavours to lay down a rule for

2.7
To sum up, the EESC endorses the principles introduced
by the proposal, particularly those relating to applicants' enti-
tlement to refunds and the — indirect but effective — encour-
agement to improve the way public administrations work. It
merely recommends that the rules laid down be more realistic,
bearing in mind that levels of consumer protection, efficiency
and technological resources continue to differ widely among
the 25 Member States.

Brussels, 26 October 2005

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

(5) OJ C 267 of 27.10.2005
(6) COM(2004) 728 of 29.10.2004, point 1(7).
(7) See points 1.6 and 1.7 of this document.