Proposal for a Council Regulation laying down implementing measures for Directive 2006/112/EC on the common system of value added tax, as regards the treatment of insurance and financial services
Date: 2007-11-28
Institutions: European Commission
Subjects: VAT, application of EU law, financial institution, insurance, provision of services, tax exemption, tax harmonisation, tax relief

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.11.2007 
COM(2007) 746 final 

Proposal for a 

COUNCIL REGULATION 

laying down implementing measures for Directive 2006/112/EC on the common system 
of value added tax, as regards the treatment of insurance and financial services 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

•  Grounds for and objectives of the proposal 

The  proposal  for  a  Regulation  consists  of  provisions  implementing  Article 135(1)(a)  to  (g) 
and  (1a)  and  Article 135a  of  Council  Directive  2006/112/EC  of  28 November  2006  on  the 
common system of value added tax. These Articles clarify the rules governing the exemption 
from value added tax (VAT) for insurance and financial services with the objective to provide 
a more uniform application of the VAT exemption, creating more legal certainty and reducing 
the administrative burden for economic operators and administrations. This concept includes 
the following elements: 

–  it bases the conditions for applying the VAT exemption on objective economic criteria; 

–  it clarifies that the exemption covers the supply of any constituent element of an insurance 
or  financial  service,  which  constitutes  a  distinct  whole  and  has  the  specific  and  essential 
character of the exempt service concerned; 

–  it introduces a common harmonised concept of intermediation for insurance and financial 

services. 

The objective of this proposal is to take this concept and the elements described above to a 
deeper  level  of  detail,  further  increasing  legal  certainty  and  reducing  the  administrative 
burden for operators and administrations. This is achieved by breaking down the concept and 
the conditions stipulated in Article 135(1)(a) to (g) and (1a) and in Article 135a of Directive 
2006/112/EC to specific economic scenarios. This results in non-exhaustive enumerations of 
cases for which the Regulation stipulates that they are either covered by the exemption from 
VAT for insurance and financial services or excluded from it. To give an example: Article 2 
of  the  Regulation  stipulates  that  "insurance  and  reinsurance"  covers  life  insurance,  whether 
individual  or  group  life  policies,  and  insured  pensions  and  annuities  where  the  insurance, 
pensions or annuities cover mortality or longevity risks. The Regulation therefore eliminates 
the potential for litigation because it provides a clear solution in many cases. This increases 
legal certainty. 

The  Regulation  will  also  be  directly  applicable  in  all  Member  States  and  help  reduce  the 
administrative burden of economic operators and tax authorities considerably. In fact, in many 
cases economic operators needed fiscal advice from independent consultants and often had to 
verify in burdensome and lengthy negotiations with national ministries of finance, whether a 
specific  service  supplied  was  or  was  not  covered  by  the  VAT  exemption.  Local  tax 
administrations  also  had  to  bear  high  administrative  charges  for  clarifying  with  the  national 
ministries  of  finance  how  they  should  proceed  in  specific  cases.  In  those  cases  where  the 
Regulation provides a clear solution, economic operators and administrations will be able to 
apply  the  exemption  from  VAT  for  insurance  and  financial  services  correctly  without  this 
burden being involved. 

For intermediation in insurance and financial services the proposal could only provide a clear 
solution in a limited number of cases. This is due to the fact that the concepts and forms of 
intermediation  are  still  very  much  rooted  in  national  civil  laws  and  therefore  vary 

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substantially.  To  improve  legal  certainty  also  in  respect  of  such  services,  the  Regulation 
additionally  specifies  objective  criteria  to  be  applied  in  evaluating  whether  a  service 
represents a distinct act of mediation. 

The  Regulation  has  integrated  the  relevant  jurisprudence  of  the  European  Court  of  Justice, 
thus maintaining well acquired principles of identifying relevant characteristics of insurance 
and financial services. 

•  General context 

The definitions of exempt insurance and financial services are out of date and have led to an 
uneven  interpretation  and  application  of  these  exemptions  by  Member  States.  Stakeholders 
are  confronted  with  a  considerable  legal  complexity  of  varying  administrative  practices 
generating  legal  uncertainty  for  economic  operators  and  fiscal  authorities.  This  legal 
uncertainty  has  led  to  an  increasing  number  of  court  cases  and  increased  the  administrative 
charges  of  operators  and  administrations  for  applying  these  exemptions.  It  is  therefore 
necessary to clarify the rules governing the exemption from VAT for insurance and financial 
services  with  the  objectives  to  create  more  legal  certainty  and  to  reduce  the  administrative 
charges for operators and administrations. A public consultation of stakeholders carried out in 
2006 and an independent "Study to increase the Understanding of the Economic Effects of the 
VAT  Exemption  for  Financial  and  Insurance  Services"  commissioned  by  the  Commission 
confirmed this conclusion. 

•  Existing provisions in the area of the proposal 

Article 135(1)(a) to (g) and (1a) and Article 135a of Council Directive 2006/112/EC, but the 
current  draft  proposal  for  a  Regulation  based  on  Article 397  introduces  for  the  first  time 
implementing  provisions  for  applying  the  exemption  from  VAT  for  insurance  and  financial 
services. 

•  Consistency with the other policies and objectives of the Union 

Where  this  was  possible,  the  new  definitions  also  create  more  consistency  with  internal 
market rules (e.g. investment funds, credit rating, derivatives). 

The  proposal  is  part  of  the  Commission's  Strategy  for  the  Simplification  of  the  Regulatory 
Environment (Section 66 of COM(2006) 690). Both economic operators and Member States' 
tax authorities will benefit from these simplifications. However, it is not possible to quantify 
these benefits. 

The proposal will improve legal certainty and reduce the administrative burden of operators 
and national tax authorities. As it would have a positive impact on costs, it should not have 
negative effects on the cost of retail consumer insurance and financial services. 

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2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

Consultation methods, main sectors targeted and general profile of respondents 

The  Fiscalis  seminar  in  December  2004  in  Dublin  analysed  the  various  problem  areas  for 
economic  operators,  in  particular  the  outsourcing  phenomenon  and  led to  the  conclusion  by 
both, economic  operators and Member States that a legislative initiative  of  the  Commission 
services is required. 

In the follow-up to this seminar the Commission commissioned a study with an independent 
expert  to  increase  the  understanding  of  the  economic  effects  of  the  VAT  exemption  for 
financial and insurance services and undertook a series of bilateral consultations with Member 
States and within the Commission which resulted in the elaborating of an outline of the basic 
problems which were identified as well as possible technical measures to address them. These 
problems  were  discussed  with  stakeholders  and  Member  States  at  the  Tax  Conference  in 
Brussels in May 2006. 

A  second  Fiscalis  seminar  was  held  in  March  2007  with  the  objectives  of  familiarising 
concerned officials from the national tax administrations with the policies driving change in 
the  regulatory  framework,  and  the  economic  drivers  for  cross-border  financial  integration. 
The programme also covered practical implementation issues in the current legislation. 

Summary of responses and how they have been taken into account 

All  responses  confirmed  that  the  legal  uncertainty  and  the  administrative  burden  resulting 
from  it  were  the  main  problem  and  should  be  addressed  with  priority.  The  proposal  for  a 
Regulation fully reflects that priority. 

An open consultation was conducted over the internet from 9 May 2006 to 9 June 2006. The 
Commission received 82 responses. The results are available on 
http://ec.europa.eu/taxation_customs/common/consultations/tax/article_2447_en.htm 

•  Collection and use of expertise 

Scientific/expertise domains concerned 

Study  to  increase  the  understanding  of  the  economic  effects  of  the  VAT  exemption  for 
Financial and Insurance services (Tender no taxud/2005/AO-006) 

Methodology used 

Independent outside study 

Main organisations/experts consulted 

Price Waterhouse Coopers 

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Summary of advice received and used 

The  existence  of  potentially  serious  risks  with  irreversible  consequences  has  not  been 
mentioned. 

There  was  broad  consistency  between  the  conclusions  of  the  study,  the  Commission's  own 
analysis  and  the  reactions  from  stakeholders  in  the  public  consultation,  allowing  the 
Commission  to  impose  the  necessary  priorities  and  focus  its  work  on  the  most  appropriate 
solutions. The proposal for a Regulation is consistent with these priorities. 

Means used to make the expert advice publicly available 

http://ec.europa.eu/taxation_customs/common/publications/studies/index_en.htm 

•  Impact assessment 

The options which were considered, are described extensively in the impact assessment: 

Zero rating (p. 31); extending the scope of exempted services (p. 32); uniform limited input 
tax  deduction  (p. 33);  option  to  tax  (p. 34);  cross  border  VAT  bodies  (p. 37);  single  legal 
entities  and  cross-border 
transactions  (p. 37);  VAT  grouping  (p. 38);  cost  sharing 
arrangements  (p. 41);  reduced  VAT  rate  for  bought-in  service  (p. 44);  and  other  options 
(p. 44). 

The Commission carried out an impact assessment listed in the Work Programme (Report in 
document Taxud 15570). 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

•  Summary of the proposed action 

This proposal consists of two measures: 

–  enumerations of cases covered by the VAT exemption for insurance and financial services 

or excluded from it; 

–  specification of objective criteria to be applied in evaluating whether a service represents a 

distinct act of mediation. 

•  Legal basis 

Article 397 of Council Directive 2006/112/EC 

•  Subsidiarity principle 

The  proposal  falls  under  the  exclusive  competence  of  the  Community.  The  subsidiarity 
principle therefore does not apply. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s). 

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In  the  complex  tax  environment  of  insurance  and  financial  services  there  can  only  be  one 
correct  interpretation  of  the  exemption  of  insurance  and  financial  services  which  applies 
throughout the Community; this objective can only be achieved by introducing the proposed 
implementing  provisions,  because  it  defines  clear  cases  covered  by  the  VAT  exemption  for 
insurance or financial services or excluded from it. 

The  number  of  court  cases,  in  particular  preliminary  proceedings  at  the  ECJ  has  been 
increasing  considerably  over  the  last  decade.  The  majority  of  these  cases  were  about  the 
diverging  application  of  definitions  for  exempt  insurance  and  financial  services.  Clear 
definitions  and  economic  criteria  reduce  the  substance  for  possible  litigation  and  therefore 
generate  an  environment  of  legal  certainty  within  which  the  administrative  charges  for 
agreeing  possibly  with  several  Member  States  on  how  the  rules  are  to  be  applied  are 
considerably reduced. 

•  Choice of instruments 

Proposed instruments: regulation. 

Other means would not be adequate for the following reason(s). 

A regulation is directly applicable and makes it obsolete for economic operator to clarify legal 
questions  on  the  application  of  the  exemption  with  the  ministries  of  finance  in  various 
Member States; where the regulation resolves the case, the appropriate VAT treatment could 
directly be applied by local tax offices. 

4. 

BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

5. 

ADDITIONAL INFORMATION 

•  Simplification 

The  proposal  provides  for  simplification  of  legislation,  simplification  of  administrative 
procedures for public authorities (EU or national), simplification of administrative procedures 
for private parties. 

The  Regulation  will  also  be  directly  applicable  in  all  Member  States,  it  reduces  the 
complexity  of  applying  the  VAT  exemption  for  insurance  and  financial  services  by 
enumerating cases which are covered by the exemption or excluded from it.  

Local  tax  administrations  bear  high  administrative  charges  for  clarifying  with  the  national 
ministries of finance how they should proceed in specific cases. Also the ministries of finance 
allocate  considerable  resources  to  that  sort  of  coordination.  In  many  cases  the  Regulation 
provides a clear solution and administrations will be able to apply the exemption from VAT 
for insurance and financial services correctly without this burden being involved. 

In  many  cases  economic  operators  needed  fiscal  advice  from  independent  consultants  and 
often had to verify in burdensome and lengthy negotiations with national ministries of finance 
whether a specific service supplied was or was not covered by the VAT exemption. In many 

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cases the Regulation provides a clear solution, economic operators will be able to apply the 
exemption from VAT for insurance and financial services correctly without this burden being 
involved. 

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Proposal for a 

COUNCIL REGULATION 

laying down implementing measures for Directive 2006/112/EC on the common system 
of value added tax, as regards the treatment of insurance and financial services 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  Council  Directive  2006/112/EC  of  28 November  2006  on  the  common 
system of value added tax1, and in particular Article 397 thereof, 

Having regard to the proposal from the Commission2, 

Whereas: 

(1) 

(2) 

(3) 

The  existing  rules  governing  the  exemptions  from  VAT  for  financial  and  insurance 
services  laid  down  in  Council  Directive  2006/112/EC  of  28 November  2006  on  the 
common  system  of  value  added  tax3  are  out  of  date  and  have  led  to  uneven 
interpretation  and  application.  The  complexity  of  the  rules  and  the  variation  in 
administrative practices generates legal uncertainty for economic operators and fiscal 
authorities.  This  uncertainty  has  led  to  considerable  litigation  and  has  increased  the 
administrative  burden.  It  is  therefore  necessary  to  clarify  which  insurance  and 
financial services are exempt and thereby create greater legal certainty and reduce the 
administrative burden for operators and authorities. 

Directive 2006/112/EC has been amended by Directive 20XX/XXX/EC as regards the 
treatment  of  insurance  and  financial  services  in  order  to  reflect  developments  in  the 
financial services market. In order to ensure a uniform application of Article 135(1)(a) 
to  (g)  and  Article  135a  of  Directive  2006/112/EC  and  to  develop  a  uniform 
understanding of whether a given supply is exempt under those provisions, it should 
be made clear which services are covered by, and which services are excluded from, 
the categories referred to in points (a) to (g) of Article 135(1) of that Directive. 

It is appropriate to lay down rules in response to specific questions of application in 
order to bring consistency of treatment throughout the Community to those questions. 
Clarification should be provided in respect of services covered by Article 135(1)(a) to 
(g)  and  (1a)  of  Directive  2006/112/EC.  In  light  of  the  complexity  of  the  financial 
services markets and the continued development of new products, the enumeration of 
cases which are covered by or excluded from the exemptions should not be exhaustive. 

1 
2 
3 

OJ L 347, 11.12.2006, p. 1. Directive as last amended by Directive 20XX/XXX/EC (OJ XXX). . 
OJ C, p. 
OJ L 347, 11.12.2006, p. 1. 

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(4) 

(5) 

There is uncertainty as to the VAT treatment of certain services which form a distinct 
whole whilst also being a constituent element of an insurance or financial service. It is 
therefore appropriate to specify certain services which have the specific and essential 
character of the exempt services concerned and others which do not. In the light of the 
criteria  developed  in  the  case-law  of  the  Court  of  Justice  of  the  European 
Communities,  regard  should  be  had  to  whether  the  services  in  question  change  the 
financial  or  legal  situation  of  the  parties  to  an  exempt  transaction  or  whether  by 
contrast they are mere material or technical supplies. 

In accordance with the principle of proportionality, it is necessary and appropriate in 
order  to  achieve  the  objective  of  ensuring  a  more  uniform  application  of  the  current 
value  added  tax  system  to  lay  down  rules  implementing  Article 135(1)(a)  to  (g)  and 
(1a) and Article 135a of Directive 2006/112/EC. This Regulation does not go beyond 
what  is  necessary  in  order  to  achieve  the  objectives  pursued,  in  accordance  with  the 
third paragraph of Article 5 of the Treaty. 

(6) 

It  is  appropriate  and  necessary  that  Directive  20XX/XXX/EC  and  this  Regulation 
apply from the same date, 

HAS ADOPTED THIS REGULATION: 

Chapter I 
Subject-matter 

Article 1 

This  Regulation  lays  down  measures  for  the  implementation  of  Article 135(1)(a)  to  (g)  and 
(1a) and Article 135a of Directive 2006/112/EC. 

Chapter II 
Exempt insurance and financial services 

The  definition  of  "insurance  and  reinsurance"  provided  for  in  point (1)  of  Article 135a  of 
Directive 2006/112/EC shall cover at least the following: 

Article 2 

(1) 

(2) 

(3) 

life  insurance,  whether  individual  or  group  life  policies,  and  insured  pensions  and 
annuities where the insurance, pension or annuity covers mortality or longevity risks, 
including diagnosis of a terminal illness, diagnosis of a critical illness, disability due 
to  ill  health,  permanent  disability,  accidental  death,  and  requirement  for  long  term 
care; 

sickness disability and unemployment insurance; 

health insurance; 

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(4) 

(5) 

(6) 

(7) 

peril insurance, including coverage against fire, flooding, natural disasters, accidents, 
breakdown of machinery, crime and terrorism; 

liability insurance; 

insurance against financial loss; 

retrocession, co-insurance and pooling of insurance or reinsurance. 

Article 3 

The definition of the "granting of credit" provided for in point (2) of Article 135a of 

1. 
Directive 2006/112/EC shall cover the provision of at least the following: 

(a) 

(b) 

(c) 

(d) 

loans, whether syndicated or not, including loans granted as a financing element in 
conjunction with the supply of goods or services  provided  the  financing  element  is 
not an integral part of the consideration; 

loans secured on real property, including mortgage loans; 

loans secured on movable property, including pawn broking; 

credit arrangements under which a person is entitled to dispose of funds up to a fixed 
amount. 

The definition of the "granting of credit" provided for in point (2) of Article 135a of 

2. 
Directive 2006/112/EC shall not cover the following: 

(a) 

(b) 

agreements under which payment by instalments, or an extended period for payment, 
is provided for in respect of the supply of goods or services; 

the grant of credit in connection with hire purchase and lease purchase arrangements 
where  the  consideration  for  that  credit  constitutes  an  integral  part  of  the 
consideration for the hire purchase and lease purchase; 

(c) 

the provision of debit and prepaid card services. 

The definition of the "guaranteeing of debts" provided for in point (3) of Article 135a 

1. 
of Directive 2006/112/EC shall cover the provision of at least the following: 

Article 4 

(a) 

(b) 

credit default swaps; 

customs bonds. 

The definition of the "guaranteeing of debts" provided for in point (3) of Article 135a 

2. 
of Directive 2006/112/EC shall not cover the following: 

(a) 

the provision of warranties for the repair and replacement of faulty goods; 

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(b) 

(c) 

(d) 

(e) 

the handing over of assets to be used as collateral for a debt not resulting from the 
granting of credit; 

the  provision  of  guarantees  as  security  for  any  outstanding  rental  payment  or 
payment resulting from defaults on rental payments; 

the provision of export credit guarantees; 

the assumption of obligations of a non-pecuniary nature. 

Article 5 

The  definition  of  "financial  deposit"  provided  for  in  point (4)  of  Article 135a  of 

1. 
Directive 2006/112/EC shall cover at least the following: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

sight deposits (deposits on call); 

saving deposits; 

time and term deposits; 

deposits in the form of saving certificates; 

saving bonds; 

deposits  made  in  return  for  a  guaranteed  annuity  or  an  accumulated  cash  balance 
upon retirement, including deposits made under a pension saving plan; 

capital redemption bonds; 

insured  pensions  and  annuities  where  the  mortality  or  longevity  risk  covered  is 
merely ancillary. 

The  definition  of  "financial  deposit"  provided  for  in  point (4)  of  Article 135a  of 

2. 
Directive 2006/112/EC shall not cover the following: 

(a) 

the  deposit  for  safekeeping  of  collectors' items  or  of  instruments  evidencing  rights, 
claims or titles; 

(b) 

hiring of security boxes and securitised space and location. 

The  definition  of  "account  operation"  provided  for  in  point (5)  of  Article 135a  of  Directive 
2006/112/EC shall cover at least the following: 

Article 6 

(1) 

(2) 

(3) 

the operation of deposit accounts; 

the operation of current accounts; 

the  deposit,  transfer  and  withdrawal  of  money  to  or  from  a  bank  account,  whether 
electronic or not; 

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(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

(10) 

cheque services related to a specific account; 

standing orders; 

direct debits; 

the access to and the operation of internet and telephone banking; 

debit and smart card services related to a specific account; 

the clearance and the transfer of funds between financial operators; 

the  transfer  of  funds  from  a  specific  account  into  other  money  media  such  as 
telephone cards, credits for mobile phones and other media which allow payment for 
goods and services; 

(11) 

sorting and counting of money related to a specific account; 

(12) 

the arrangement of credit facilities. 

Article 7 

The definition of "exchange of currency" provided for in point (6) of Article 135a of Directive 
2006/112/EC shall not cover the following: 

(1) 

transactions involving collectors' items, such as gold, silver or other metal coins or 
bank notes normally not used as legal tender or coins of numismatic interest; 

(2) 

the exchange of currencies not of legal tender. 

The  "provision  of  cash"  as  referred  to  in  point (d)  of  Article 135(1)  of  Directive 

1. 
2006/112/EC shall cover at least the following: 

Article 8 

(a) 

(b) 

(c) 

(d) 

(e) 

cash dispensing, whether manual or automatic; 

traveller cheque services; 

cheque services not related to a specific account; 

letters of credit; 

the exchange of bank notes and coins within the same currency. 

The  "provision  of  cash"  as  referred  to  in  point (d)  of  Article 135(1)  of  Directive 

2. 
2006/112/EC shall not cover the following: 

(a) 

transactions involving collectors' items, such as gold, silver or other metal coins or 
bank notes normally not used as legal tender or coins of numismatic interest; 

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(b) 

dispensing of currencies not of legal tender. 

Article 9 

The  definition  of  the  "supply  of  securities"  provided  for  in  point (8)  of  Article 135a  of 
Directive 2006/112/EC shall cover the provision of at least the following: 

(1) 

(2) 

(3) 

(4) 

equity securities, including shares; 

instruments  recording  the  promise  of  repayment  of  a  debt,  including  debentures, 
bonds and corporate bonds, promissory notes, euro debt securities and other tradable 
commercial papers; 

hybrid  securities, 
including  preference  shares,  equity  warrants,  convertible 
instruments in the form of bonds or preferred stock which may be converted into the 
common stock of the issuing company; 

instruments recording unit ownership in undertakings for collective investment such 
as open and closed-ended funds, exchange traded funds, mutual and pension funds, 
hedge funds and real estate investment funds. 

Chapter III 
Exempt intermediation and management services 

Article 10 

1. 
For  the  purposes  of  point (9)  of  Article  135a  of  Directive  2006/112/EC,  an  activity 
shall  constitute  a  distinct  act  of  mediation  at  least  where  one  or  more  of  the  following 
conditions is fulfilled: 

(a) 

(b) 

(c) 

the intermediary has the authority to bind the supplier or the customer of the exempt 
insurance or financial service; 

the activity may result in the creation, continuation, alteration or extinction of parties' 
rights and obligations in respect of an exempt insurance or financial service; 

the activity consists in the provision of advice which reflects specialised knowledge 
regarding an exempt insurance or financial service. 

Where in situations other than those covered by paragraph 1, a service is standardised 
2. 
in  such  a  way  that  a  person  may  provide  it  on  the  basis  of  prior  instructions,  it  shall  not 
constitute a distinct act of mediation for the purposes of point (9) of Article 135a of Directive 
2006/112/EC. 

The definition of "intermediation in insurance and financial transactions" provided for 

1. 
in point (9) of Article 135a of Directive 2006/112/EC shall cover at least the following: 

Article 11 

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(a) 

(b) 

the supply of services involving negotiation on the conditions of the product; 

stock and mortgage brokering. 

The definition of "intermediation in insurance and financial transactions" provided for 

2. 
in point (9) of Article 135a of Directive 2006/112/EC shall not cover the following: 

(a) 

(b) 

(c) 

standardised services provided by call-centres; 

brand hosting, web-hosting, other web-services or hosting service; 

advertising and other information services. 

The  definition  of  "management  of  investment  funds"  provided  for  in  point (11)  of 

1. 
Article 135a of Directive 2006/112/EC shall cover at least the following: 

Article 12 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

(k) 

(l) 

strategic and tactical asset management and asset allocation, including currency and 
risk management; 

operational  asset  management,  including  stock  selection,  decision  making  and 
implementation,  decisions  to  buy  and  sell  investments,  netting  of  trades,  pre-trade 
broker  liaison,  administration  and  control  of  trades  and  post-trade  liaison  with 
brokers and custodian; 

guarantee provision, including the operation of a hedging portfolio; 

administration of shares or units, including distribution and trustee liaison; 

arranging and processing loans of stocks and bonds; 

fund order processing, including automated processing; 

market and company analysis; 

performance  measurement,  including  the  provision  of  investment  performance 
reports and attribution analysis of returns; 

the provision of valuations, tax refund claims and management information and the 
calculation of the net asset value; 

safe custody, security safe-keeping and control; 

oversight of the fund by the depositary; 

payment of income to customers and proxy voting. 

The  definition  of  "management  of  investment  funds"  provided  for  in  point (11)  of 

2. 
Article 135a of Directive 2006/112/EC shall not cover the following: 

(a) 

external audit of the fund, marketing and management of fund overheads; 

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(b) 

development  of  systems,  such  as  planning  and  implementation  of  new  technology, 
major enhancements to existing systems and systems maintenance; 

(c) 

services relating to regulatory compliance. 

Chapter IV 
Services which have the specific and essential character of an 
exempt service 

Article 13 

For the purposes of Article 135(1a) of  Directive  2006/112/EC, at least the  following 

1. 
shall be considered to have the specific and essential character of an exempt service: 

(a) 

(b) 

(c) 

(d) 

portfolio management; 

the  issuance  of  contracts  and  certificates  evidencing  the  title  of  the  customer  of  an 
exempt insurance or financial service; 

the  cession,  renewal,  amendment  and  rescission  of  contracts  relating  to  an  exempt 
insurance or financial service; 

credit rating services, including the assessment of the credit worthiness of a supplier 
or customer of insurance or financial services; 

(e) 

valuation of financial collateral. 

For the purposes of Article 135(1a) of Directive 2006/112/EC, the following shall not 

2. 
be considered to have the specific and essential character of an exempt service: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

safekeeping; 

administrative tasks; 

debt collection or recovery; 

legal services, accountancy, audit and bookkeeping; 

services relating to regulatory compliance; 

identity verification, money laundering and anti-fraud checks; 

data collection services for the recycling of banknotes and coins; 

marketing, 
opportunities; 

research, 

identification  and  development  of  new  products  or 

the supply and design of software; 

hire of security boxes and other secured spaces; 

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(k) 

services which grant the right or the option of receiving goods or services. 

Article 14 

The  following  shall  be  considered  to  be  services  having  the  specific  and  essential 
1. 
character of "insurance and reinsurance" as defined in point (1) of Article 135a of Directive 
2006/112/EC: 

(a) 

(b) 

(c) 

(d) 

underwriting of risk; 

risk and investment management; 

claims handling; 

the issuance of non-tradable insurance derivatives. 

2. 
Damage  assessment  shall  not  be  considered  to  be  a  service  having  the  specific  and 
essential  character  of  "insurance  and  reinsurance"  as  defined  in  point (1)  of  Article 135a  of 
Directive 2006/112/EC. 

The following shall be considered to be services having the specific and essential character of 
"granting of credit" as defined in point (2) of Article 135a of Directive 2006/112/EC: 

Article 15 

(1) 

(2) 

(3) 

(4) 

(5) 

the  measurement,  the  prediction  and  the  control  of  credit  risks  and  losses  due  to 
credit risk, including credit strategy; 

underwriting of credits; 

record keeping, arrangement and monitoring of payments made for a credit; 

the issuance of credit derivatives; 

valuation of non-financial collateral. 

Article 16 

1. 
The  following  shall  be  considered  to  be  services  having  the  specific  and  essential 
character  of  "guaranteeing  of  debts"  as  defined  in  point (3)  of  Article 135a  of  Directive 
2006/112/EC: 

(a) 

(b) 

arrangement and monitoring of means for guaranteeing a debt; 

credit guaranteeing derivatives. 

2. 
The sale of repossessions after mortgage default shall not be considered to be a service 
having the specific and essential character of "guaranteeing of debts" as defined in point (3) of 
Article 135a of Directive 2006/112/EC. 

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Article 17 

The following shall be considered to be services having the specific and essential character of 
transactions concerning "financial deposit" as defined in point (4) of Article 135a of Directive 
2006/112/EC: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

sorting and counting of money for the purpose of making a deposit; 

reporting  on  the  balances  of  deposits  and  calculation  of  interest,  production  of 
statements of account and carrying out of commitment overviews; 

calculation of tax and fees with regard to the cancellation of pension saving plans; 

budgeting  of  accounts,  including  economic  feasibility  studies  for  appraisal  of 
customers' requirements; 

safekeeping of certificates for deposits; 

automated acceptance of money for deposits; 

the issuance of deposit derivatives. 

Article 18 

1. 
The  following  shall  be  considered  to  be  services  having  the  specific  and  essential 
character  of  "account  operation"  as  defined  in  point (5)  of  Article 135a  of  Directive 
2006/112/EC: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

services between operators for the transfer of funds between monetary accounts and 
clearing of the transfer; 

membership,  joining  or  subscription  services  for  payment  cards  or  systems  for  an 
account; 

control  services  with  safety  features  for  the  proper  processing  of  transfers  of  funds 
between monetary accounts; 

the issuance of customer and merchant statements; 

verification of payments; 

the issuance of cheque books for a specific account. 

2. 
The following shall not be considered to be services having the specific and essential 
character  of  "account  operation"  as  defined  in  point (5)  of  Article 135a  of  Directive 
2006/112/EC: 

(a) 

(b) 

(c) 

general printing of cheque books; 

the supply of blank cards; 

internet hosting; 

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(d) 

the rental of terminals and other machinery for the processing of card payments. 

Article 19 

The  following  shall  be  considered  to  be  services  having  the  specific  and  essential 
1. 
character  of  "exchange  of  currency"  or  "provision  of  cash"  as  referred  to  in  point (d)  of 
Article 135(1) of Directive 2006/112/EC: 

(a) 

(b) 

(c) 

the  issuance  of  customer  and  merchant  statements  for  the  exchange  and  the 
distribution of bank notes and coins; 

operating services for cash machines supplied between financial institutions; 

the  issuance  of  spots,  forward  transactions,  futures,  currency  swaps,  foreign 
exchange options and forex swaps; 

(d) 

the issuance of exchange derivatives. 

2. 
The following shall not be considered to be services having the specific and essential 
character  of  "exchange  of  currency"  or  "provision  of  cash"  as  referred  to  in  point (d)  of 
Article 135(1) of Directive 2006/112/EC: 

(a) 

(b) 

(c) 

(d) 

safekeeping and storage of money; 

courier and security transport services; 

the publication of information on exchange rates; 

the installation of cash machines. 

Article 20 

The following shall be considered to be services having the specific and essential character of 
the "supply of securities" as defined in point (8) of Article 135a of Directive 2006/112/EC: 

(1) 

(2) 

(3) 

(4) 

(5) 

the issuance of options, futures and forward contracts for securities; 

the issuance of equity swaps and other total return swaps in securities; 

the issuance of tradable debt derivatives, including interest rate swaps; 

performance measurement, rating, prediction and control of securities; 

arrangement and monitoring of transactions under the security agreement, including 
possible voting rights. 

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Chapter V 
Final provisions 

Article 21 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

It shall apply from …. [date when Directive transposed + 1] 

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

Done at Brussels, 

For the Council 
The President 

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