2006/389/EC: Council Decision of  15 May 2006  authorising the Republic of Lithuania to apply a measure derogating from Article 11 and Article 28e of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes
Date: 2006-05-15
Institutions: Council of the European Union
Subjects: Lithuania, VAT, delivery, derogation from EU law, provision of services, tax evasion, tax harmonisation

3.6.2006

EN

Official Journal of the European Union

L 150/15

COUNCIL DECISION

of 15 May 2006

authorising the Republic of Lithuania to apply a measure derogating from Article 11 and Article 28e
of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the Member States relating
to turnover taxes

(2006/389/EC)

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 Valued
Added Tax; uniform basis of assessment (1), and in particular
Article 27 thereof,

Having regard to the proposal from the Commission,

Whereas:

(1)

(2)

(3)

(4)

the
Under Article 27(1) of Directive 77/388/EEC,
from the
Council, acting unanimously on a proposal
to
Commission, may authorise
introduce special measures for derogation from that
for
Directive,
to simplify the procedure
charging the tax or to prevent certain types of
tax
evasion or avoidance.

any Member State

in order

In letters dated 3 August 2004 and 16 December 2004
the Republic of Lithuania (hereinafter
referred to as
Lithuania) sought authorisation to introduce a measure
derogating from the provisions of Directive 77/388/EEC
governing the taxable amount for value added tax (VAT)
purposes.

27(2)

accordance with Article

of Directive
In
77/388/EEC,
the Commission informed the other
Member States of the request made by Lithuania in a
In a letter dated 14 June
letter dated 7 June 2005.
2005, the Commission notified Lithuania that it had all
the information it considered necessary for appraisal of
the request.

Article 11(A)(1)(a) of Directive 77/388/EEC establishes
the taxable amount of a supply for VAT purposes to
be everything which constitutes the consideration paid
for the supply. Article 28e(1) of that Directive governs
the taxable amount of intra-Community acquisitions, by
reference to Article 11(A).

(5)

(6)

(7)

(8)

intended to
The measure requiring a derogation is
counter tax losses arising from the manipulation of the
taxable amount of supplies of goods, services and intra-
Community acquisitions subject to VAT where one of
the parties does not have a right to full deduction.

The measure should be targeted so that it applies only in
cases of VAT avoidance or evasion and only when a
number of conditions have been met. The measure is
therefore proportionate to the aim pursued.

Similar derogations have been granted to other Member
States in order to counter tax avoidance or evasion and
have been found to be effective.

Derogations pursuant
to Article 27 of Directive
77/388/EEC which counter VAT avoidance linked to
the taxable amount of supplies between related parties
are included in the Commission proposal of 16 March
the dero-
2005 for a Directive rationalising some of
to that Article (2).
therefore
is
gations pursuant
necessary to bring the application period of this dero-
gation to an end when that Directive enters into force.

It

(9)

This derogation will safeguard the amount of VAT due at
the final consumption stage and has no negative impact
on the Communities' own resources accruing from VAT,

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Article 11(A)(1)(a) and Article 28e
of Directive 77/388/EEC, Lithuania is hereby authorised to
the taxable amount of a supply of goods or
provide that
services or of an intra-Community acquisition of goods shall
be the same as the open-market value, as defined in Article
11(A)(1)(d) of the said Directive,
the following
circumstances:

in either of

(a) where the consideration is significantly lower

than the
open-market value and the recipient of the supply, or in
the case of an intra-Community acquisition, the acquirer,
does not have a right to full deduction under Article 17
of Directive 77/388/EEC;

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

2006/18/EC (OJ L 51, 22.2.2006, p. 12).

(2) OJ C 125, 24.5.2005, p. 12.

L 150/16

EN

Official Journal of the European Union

3.6.2006

(b) where the consideration is significantly higher than the
open-market value and the supplier does not have a right
to full deduction under Article 17 of Directive 77/388/EEC.

counter avoidance or evasion of VAT through the valuation of
supplies between connected persons, or on 31 December 2009,
whichever is the earlier.

to prevent

tax
This measure may only be used in order
avoidance or evasion and when the consideration on which
the taxable amount would otherwise be based has been
influenced by family, management, ownership,
financial or
legal ties as defined in national legislation. For these purposes,
legal ties shall include the formal relationship between employer
and employee.

Article 2

The authorisation granted under Article 1 shall expire on the
date of entry into force of a Directive rationalising the dero-
gations pursuant to Article 27 of Directive 77/388/EEC which

Article 3

This Decision is addressed to the Republic of Lithuania.

Done at Brussels, 15 May 2006.

For the Council
The President

U. PLASSNIK