Proposal for a Council Decision authorising the Republic of Poland to apply a measure derogating from Article 287 of Council Directive 2006/112/EC on the common system of value added tax
Date: 2009-08-26
Institutions: European Commission
Subjects: Poland, VAT, derogation from EU law, fraud, tax avoidance, tax system

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 26.8.2009 
COM(2009) 435 final 

Proposal for a 

COUNCIL DECISION 

authorising the Republic of Poland to apply a measure derogating from Article 287 of 
Council Directive 2006/112/EC on the common system of value added tax 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Article 395 of Directive 2006/112/EC of 28 November 2006 on the common system 
of value added tax (‘VAT Directive’) provides that the Council, acting unanimously 
on a proposal from the Commission, may authorise any Member State to introduce 
special  measures  derogating  from  the  provisions  of  that  Directive,  in  order  to 
simplify  the  procedure  for  collecting  value  added  tax  (VAT)  or  to  prevent  certain 
forms of tax evasion or avoidance. 

In a letter registered by the Commission’s Secretariat-General on 22 June 2009, the 
Republic  of  Poland  (‘Poland’)  requested  authorisation  to  apply  a  special  measure 
derogating  from  Article 287  of  the  VAT  Directive  in  order  to  exempt,  from 
than 
1 January 2010, 
EUR 30 000. 

taxable  persons  whose  annual 

is  no  higher 

turnover 

In accordance with Article 395(2) of the VAT Directive, by letter dated 22 June 2009 
the Commission informed the other Member States of the request made by Poland. 
By  letter  dated  3 July 2009,  the  Commission  notified  Poland  that  it  had  all  the 
information it considered necessary for appraisal of the request. 

Title XII,  chapter 1  of  the  VAT  Directive  provides  for  the  possibility  of  Member 
States  applying  special  schemes  for  small  enterprises,  including  an  optional 
exemption  scheme  for  taxable  persons  whose  annual  turnover  is  below  a  certain 
ceiling. 

This annual turnover ceiling differs from one Member State to another, particularly 
according to date of its accession. 

Member States which acceded before 1 January 1978 and which have exercised the 
option under Article 14 of Council Directive 67/288/EEC of 11 April 1967 allowing 
them  to  introduce  such  a  scheme  may  retain  it  (cf.  Article 284(1)  of  the  VAT 
Directive). Those Member States which, at 17 May 1977, exempted taxable persons 
whose  annual  turnover  was  less  than  the  equivalent  in  national  currency  of  5 000 
European units of account at the conversion rate on that date, may raise that ceiling 
up  to  EUR  5 000  (cf.  Article 284(2)  of  the  VAT  Directive)  while  Member  States 
which exempted taxable persons whose annual turnover was equal to or higher than 
that amount may raise that ceiling in order to maintain the value of the exemption in 
real terms (cf. Article 286 of the VAT Directive). 

Member  States  which  have  not  exercised  the  option  may  exempt  taxable  persons 
whose  annual  turnover  is  no  higher  than  EUR  5 000  or  the  equivalent  in  national 
currency (cf. Article 285 of the VAT Directive). 

Member  States  which  acceded  after  1 January 1978  may  exempt  taxable  persons 
whose annual turnover is no higher than the amount set on the day of their accession. 
Varying from one Member State to another, this ceiling is equal to the equivalent in 
national currency at the conversion rate on the day of their accession of the amounts 
referred to, for each Member State, in Article 287(1) – (16) of the VAT Directive. 

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Under  Article 287(14)  of  the  VAT  Directive,  Poland  may  exempt  taxable  persons 
whose  annual  turnover  is  no  higher  than  the  equivalent  in  national  currency  of 
EUR 10 000 at the conversion rate on the day of its accession.  

In  support  of  its  request  to  increase  this  ceiling  to  EUR 30 000,  Poland  states,  in 
particular, that such an increase would allow it to simplify administrative procedures 
for  a  larger  number  of  small  enterprises, thus  alleviating  administrative  burdens  on 
more of these enterprises and contributing to their development. It also notes that the 
cost to the State of levying VAT among such taxable persons is high compared with 
the revenue collected.  

It points out that such a measure would have only a negligible effect on the overall 
amount  of  VAT  revenue  collected  at  the  final  consumption  stage.  Of  the  360 000 
taxable persons newly eligible for the scheme, Poland estimates that approximately 
90 000 could opt for it, representing a loss of revenue of some PLN 500 million, or 
0.4% of expected tax revenue from VAT in 2010. 

It should be noted that in its proposal for a Directive simplifying VAT obligations of 
29 October 2004 (COM(2004) 728 final) the Commission included provisions aimed 
at  allowing  the  Member  States  to  exempt  taxable  persons  whose  annual  turnover 
does  not  exceed  a  ceiling  of  EUR 100 000  or  the  equivalent  in  national  currency, 
with the possibility of updating this amount each year. 

Bearing  in  mind  the  provisions  of  Article 395  of  the  VAT  Directive  and  the 
arguments  put  forward  by  Poland,  the  Commission  believes  that  the  derogation 
requested  meets  the  conditions  laid  down  in  that  Article,  and,  in  particular,  that  it 
simplifies the procedure for levying the tax. Consequently, and also bearing in mind 
the background information set out above, the Commission has no objection to this 
request  and  therefore  believes  it  must  present  the  corresponding  proposal  to  the 
Council. 

The  Commission  is  of  the  opinion,  however,  that  the  period  of  application  of  this 
derogation  should  be  limited  in  order  to  assess  regularly,  based  on  the  relevant 
information provided by Poland, whether the grounds for applying it today continue 
to obtain. It also believes that this derogation should in any case cease to apply once 
the harmonised rules proposed by the Commission in this field enter into force. 

2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

The purpose of this proposal for a decision is to extend the application of a measure 
to  simplify  the  levying  of  VAT  to  a  larger  number  of  small  enterprises.  It  would 
therefore  have  a  positive  impact  particularly  on  those  small  enterprises  and  the 
Member  State  in  question.  There  was  no  need  to  consult  external  experts  or 
interested  parties  nor  to  assess  the  impact  of  this  decision.  The  impact  will  in  any 
case be limited because of the narrow scope and limited period of application of the 
derogation. 

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3. 

LEGAL ELEMENTS OF THE PROPOSAL 

The purpose of the proposed decision is to allow Poland to apply a special measure 
derogating  from  Article 287  of  the  VAT  Directive  in  order  to  exempt,  from 
than 
1 January 2010, 
EUR 30 000 instead of EUR 10 000. 

taxable  persons  whose  annual 

is  no  higher 

turnover 

The  legal  basis  of  this  decision  is  Article 395  of  the  VAT  Directive,  which  was 
adopted pursuant to Article 93 of the Treaty establishing the European Community. 
Under  this  Article,  a  Member  State  wishing  to  apply  special  measures  derogating 
from  the  said  Directive  must  obtain  an  authorisation  from  the  Council,  which  will 
take the form of a Council Decision. Since it is an implementing measure involving 
the  harmonisation  of  legislation  on  turnover  taxes,  the  principle  of  subsidiarity  has 
been adhered to. 

The proposal complies with the principle of proportionality and therefore does not go 
beyond  what  is  necessary  to  achieve  the  objective  of  simplification,  because  it 
extends the scope of the tax exemption scheme applicable in Poland to a very limited 
extent  by  involving  only  a  limited  number  of  additional  small  enterprises  which, 
moreover, can opt for this scheme or otherwise. Accordingly, it derogates from the 
principles of the VAT Directive only to a limited and appropriate extent. 

4. 

BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

5. 

ADDITIONAL INFORMATION 

The  proposal  provides  that  the  period  of  application  of  the  decision  shall  expire 
automatically  on  the  date  of  entry  into  force  of  provisions  establishing  harmonised 
rules for all Member States for the tax exemption scheme for small enterprises. 

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Proposal for a 

COUNCIL DECISION 

authorising the Republic of Poland to apply a measure derogating from Article 287 of 
Council Directive 2006/112/EC on the common system of value added tax 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 93 thereof, 

Having  regard  to  Council  Directive  2006/112/EC  of  28 November 2006  on  the  common 
system of value added tax (VAT)1, and in particular Article 395(1) thereof, 

Having regard to the proposal from the Commission2, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

In  a  letter  registered  by  the  Commission’s  Secretariat-General  on  22 June 2009,  the 
Republic of Poland requested authorisation to apply a special measure derogating from 
Article 287  of  Directive  2006/112/EC  in  order  to  exempt,  from  1 January 2010, 
taxable  persons  whose  annual  turnover  is  no  higher  than  the  equivalent  in  national 
currency of EUR 30 000 at the conversion rate on the day of its accession. 

In  accordance  with  Article 395(2)  of  Directive  2006/112/EC,  by  letter  dated 
22 June 2009 the Commission informed the other Member States of the request made 
by  the  Republic  of  Poland.  By  letter  dated  3 July 2009,  the  Commission  notified  the 
Republic of Poland that it had all the information it considered necessary for appraisal 
of the request. 

Title XII, chapter 1 of Directive 2006/112/EC provides for the possibility of Member 
States applying special schemes for small enterprises, including an optional exemption 
scheme for taxable persons whose annual turnover is below a certain ceiling.  

Under Article 287(14) of Directive 2006/112/EC, the Republic of Poland may exempt 
taxable  persons  whose  annual  turnover  is  no  higher  than  the  equivalent  in  national 
currency of EUR 10 000 at the conversion rate on the day of its accession. 

By  increasing  this  ceiling  to  EUR 30 000,  the  Republic  of  Poland  will  be  able  to 
simplify administrative procedures for a larger number of small enterprises, confining 
itself  to  those  enterprises  with  the  lowest  turnover,  and  thus  contributing  to  their 
development. 

1 
2 

OJ L 347, 11.12.2006, p. 1. 
OJ C , p. . 

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(6) 

In  its  proposal  for  a  Directive  simplifying  value  added  tax  obligations  of 
29 October 2004 (COM(2004) 728 final)3 the Commission included provisions aimed 
at allowing the Member States to exempt taxable persons whose annual turnover does 
not exceed a ceiling of EUR 100 000 or the equivalent in national currency, with the 
possibility of updating this amount each year. The request submitted by the Republic 
of Poland is in line with this proposal. 

(7) 

The  derogation  presented  will  have  no  impact  on  the  European  Communities’  own 
resources accruing from value added tax, 

HAS ADOPTED THIS DECISION: 

Article 1 

By way of derogation from Article 287 of Directive 2006/112/EC, the Republic of Poland is 
authorised to exempt taxable persons whose annual turnover is no higher than the equivalent 
in national currency of EUR 30 000 at the conversion rate on the day of its accession. 

Article 2 

This  Decision  shall  apply  from  1 January 2010  until  the  date  of  entry  into  force  of  the 
provisions of a directive amending the amounts of the annual turnover ceilings below which 
taxable  persons  may  qualify  for  exemption,  but  in  any  case  until  31 December 2012  at  the 
latest. 

Article 3 

This Decision is addressed to the Republic of Poland. 

Done at Brussels,  

For the Council 
The President 

3 

OJ C 24, 29.1.2005, p. 10. 

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