Proposal for a Council Decision authorising the Portuguese Republic to apply a measure derogating from Articles 168, 193 and 250 of Council Directive 2006/112/EC on the common system of value added tax
Date: 2009-11-24
Institutions: European Commission
Subjects: VAT, basis of tax assessment, delivery, derogation from EU law, door-to-door selling, tax evasion, tax exemption, tax harmonisation, tax relief

EN 

EN 

   EN 

 
 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 24.11.2009 
COM(2009)641 final 

Proposal for a 

COUNCIL DECISION 

authorising the Portuguese Republic to apply a measure derogating from Articles 168, 
193 and 250 of Council Directive 2006/112/EC on the common system of value added tax 

EN 

   EN 

 
 
 
  
EXPLANATORY MEMORANDUM 

1. 

BACKGROUND TO THE PROPOSAL 

Article 395 of Directive 2006/112/EC of 28 November 2006 on the common system 
of  value  added  tax  (‘the  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. 

The  Portuguese  Republic  ('Portugal')  was  authorised  by  Council  Decision 
2004/738/EC  to  apply  until  31  December  2009  a  special  optional  scheme  for 
doorstep  sales  whereby,  firstly,  by  way  of  derogation  from  Article  21(1)(a)  of  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, any firm operating in this sector which has 
been  authorised  to  apply  this  scheme  will  be  liable  for  the  VAT  payable  on  goods 
supplied  by  its  resellers  to  final  consumers.  Secondly,  by  way  of  derogation  from 
Article  22  of  the  Directive,  the  resellers  will  be  exempt  from  the  obligations  laid 
down in that Article for those supplies. In order to obtain such an authorisation, the 
firm must derive its entire turnover from doorstep sales by resellers working in their 
own name and on their own account. Moreover, all products sold by the firm must 
appear in a pre-established list of the prices applicable at the final consumption stage, 
and the firm must sell its products direct to resellers who, in turn, sell direct to final 
consumers. 

By letter registered by the Secretariat-General of the Commission on 30 June 2009, 
Portugal  requested  an  extension  of  this  special  scheme  for  derogating  from 
Articles 193 and 250 of the VAT Directive and, by additional letter registered by the 
Secretariat-General  of  the  Commission  on  9  September  2009,  requested  that 
resellers, by way of derogation from Article 168 of the VAT Directive, should not be 
allowed to deduct the VAT payable on the goods covered by the measure. 

In accordance with Article 395(2) of the VAT Directive, the Commission informed 
the other Member States of Portugal's request, by letter of 27 October 2009. By letter 
of 29 October 2009, the Commission notified Portugal that it had all the information 
it considered necessary for appraisal of the request. 

In support of its request for an extension, Portugal stated that the  provisions of the 
VAT Directive imposed a liability for VAT on taxable persons who do not have an 
adequate structure for fulfilling the various obligations connected with its application 
and  who  conduct  their  business  under  special  conditions  that  have  the  effect  of 
significantly increasing the risks of fraud. They include taxable persons working on 
their  own  account  who  engage  in  direct  doorstep  sales  to  their  clients  of  products 
supplied  by  firms  that  have  chosen  this  specific  channel  for  promoting  and  selling 
their goods. Portugal considers it necessary to maintain the above measures in order 
to simplify the collection of VAT from taxable persons operating in this sector and to 
ensure more effective control. 

EN 

2 

   EN 

 
Portugal  states  that  these  measures  do  not  affect  the  amount  of  VAT  revenue 
collected at the stage of final consumption and do not, therefore, have any effect on 
the European Communities' own resources obtained from VAT. 

The  special  optional  scheme  which  is  the  subject  of  this  request  has  the  effect  of 
exempting  resellers  from  the  obligation  to  submit  a  VAT  return  and  pay  VAT  on 
supplies to final consumers of goods which they have received from the authorised 
firm.  This  simplifies  the  practicalities  of  collecting  VAT,  to  the  benefit  of  these 
taxable  persons.  By  making  the  authorised  firm  liable  for  VAT  instead  of  the 
numerous  travelling  salesmen,  and  by  making  it  therefore  responsible  for  fulfilling 
the corresponding requirement to submit a VAT return and pay the tax, this scheme 
also ensures that the VAT collected at the retail stage on the sale of goods coming 
from the authorised firm is actually paid to the Treasury, thus preventing tax fraud. It 
also  simplifies  the  practicalities  of  collecting  VAT,  to  the  benefit  of  the 
administration. 

In so far as the resellers who obtain their supplies from an authorised firm are exempt 
from the obligation to submit a VAT return and pay the VAT payable on the supply 
to final consumers of the goods they have received from that firm, it is legitimate, in 
the interests of simplification, that they should not exercise their right to deduct VAT 
on  these  purchases  of  goods  and  that  they  should  also  be  exempt  from  the 
requirement  to  submit  the  VAT  return  required  for  determining  the  amount  to  be 
deducted. Consequently this right should instead be exercised by the authorised firm, 
which will then take responsibility for complying with the corresponding obligation 
to submit a VAT return. This measure does not affect any right to deduct VAT which 
the  resellers  might  have  for  other  purchases  of  goods  and  services,  which  will  be 
exercised according to the ordinary rules. 

Bearing  in  mind  the  provisions  of  Article  395  of  the  VAT  Directive  and  the 
arguments  put  forward  by  Portugal,  the  Commission  believes  that  the  derogation 
requested  meets  the  conditions  laid  down  in  that  Article  and,  in  particular,  that  it 
simplifies the procedure for collecting the tax and helps to prevent tax fraud, without 
affecting  the  amount  of  tax  revenue  collected  at  the  stage  of  final  consumption. 
Consequently,  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 so that a regular assessment may be made, based on the 
relevant  information  provided  by  Portugal,  of  whether  the  grounds  that  justify  the 
measure today continue to obtain.  

2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

The  proposal  for  a  decision  is  intended  to  extend  the  application  of  a  measure  to 
simplify the collection of VAT and prevent tax fraud in a specific, limited economic 
sector. It would therefore have a positive impact, particularly on the taxable persons 
operating  in  that  sector  and  the  Member  State  in  question.  There  was  no  need  to 
consult external experts or interested parties or 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. 

EN 

3 

   EN 

 
3. 

LEGAL ELEMENTS OF THE PROPOSAL 

The purpose of the proposed decision is to allow Portugal to apply a special measure 
derogating from Articles 168, 193 and 250 of the VAT Directive in order to maintain 
and amend a special, optional scheme in the doorstep sales sector, whereby firms that 
satisfy certain conditions and are authorised to apply the scheme will, firstly, by way 
of  derogation  from  Article  193  of  the  Directive,  be  made  liable  for  VAT  on  the 
supplies  of  goods  to  final  consumers  by  their  resellers,  and  secondly,  by  way  of 
derogation  from  Article  168  of  the  Directive,  be  given  the  right  to  deduct  the  tax 
payable or paid by their resellers for the corresponding goods that have been supplied 
to  them.  Finally,  the  system  is  intended,  by  way  of  derogation  from  Article  250  of 
the  Directive,  to  exempt  resellers  from  the  obligation  to  submit  a  VAT  return,  laid 
down in that Article, in respect of the goods which the authorised firm has supplied 
to them and the supply of the same goods to the final consumers, and consequently to 
transfer that obligation to the firm in question. 

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 and prevention of 
tax  fraud,  because  it  involves  only  a  specific,  limited  economic  sector  and  a  small 
number of taxable persons for whom, moreover, adoption of this scheme is optional. 
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  for  the  period  of  application  of  the  decision  to  expire  on 
31 December 2012. 

EN 

4 

   EN 

 
Proposal for a 

COUNCIL DECISION 

authorising the Portuguese Republic to apply a measure derogating from Articles 168, 
193 and 250 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) 

('Portugal')  was  authorised  by  Council  Decision 
The  Portuguese  Republic 
2004/738/EC3  to  apply  until  31  December  2009  a  special  optional  scheme  for  the 
taxation of doorstep sales, whereby, firstly, by way of derogation from Article 21(1)(a) 
of 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  assessment4, any firm operating in this sector which has 
been  authorised  to  apply  this  scheme  will  be  liable  for  the  VAT  payable  on  goods 
supplied  by  its  resellers  to  final  consumers.  Secondly,  by  way  of  derogation  from 
Article 22 of the Directive, the resellers will be exempt from the obligations laid down 
in that Article for those goods supplied. In order to obtain such an authorisation, the 
firm must derive its entire turnover from doorstep sales by resellers working in their 
own  name  and  on  their  own  account.  Moreover,  all  products  sold  by  the  firm  must 
appear in a pre-established list of the prices applicable at the final consumption stage 
and the firm must sell its products direct to resellers who, in turn, sell direct to final 
consumers. 

(2) 

By  letter  registered  by  the  Secretariat-General  of  the  Commission  on  30  June  2009, 
Portugal  requested  an  extension  of  this  special  scheme  for  derogating  from  Articles 
193  and  250  of  Directive  2006/112/EC  and,  by  additional  letter  registered  by  the 
Secretariat-General of the Commission on 9 September 2009, requested that resellers, 
by  way  of  derogation  from  Article  168  of  Directive  2006/112/EC,  should  not  be 
allowed to deduct the VAT payable on the goods covered by the measure. 

1 
2 
3 
4 

OJ L 347, 11.12.2006, p. 1. 
OJ C , p. . 
OJ L 325, 28.10.2004, p. 62. 
OJ L 145, 13.6.1977, p. 1. Directive repealed by Directive 2006/112/EC. 

EN 

5 

   EN 

 
                                                 
(3) 

(4) 

(5) 

(6) 

In  accordance  with  Article 395(2)  of  Directive  2006/112/EC,  the  Commission 
informed the other Member States of Portugal's request, by letter of 27 October 2009. 
By  letter  of  29 October 2009,  the  Commission  notified  Portugal  that  it  had  all  the 
information it considered necessary for appraisal of the request. 

This special scheme has the effect of conferring on duly authorised firms, rather than 
numerous  travelling  salesmen,  the  right  to  deduct  VAT  payable  or  paid  by  these 
resellers on the goods these firms have supplied to them, and making the firms liable 
for  the  VAT  payable  on  the  supply  of  these  goods  to  the  final  consumers  by  the 
resellers.  These  authorised  firms  are  also  responsible  for  fulfilling  the  corresponding 
obligations  to  submit  a  VAT  return  and  pay  VAT,  from  which  their  resellers  are 
exempt. 

This scheme therefore ensures that the VAT collected at the retail sale stage on sales 
of products coming from these firms is actually paid to the Treasury, thereby helping 
to  prevent  tax  fraud.  It  also  benefits  the  administration  by  simplifying  the 
arrangements  for  collecting  VAT  and  reduces  the  resellers'  obligations  in  relation  to 
VAT. 

The  derogation  will  not  alter  the  amount  of  VAT  collected  at  the  stage  of  final 
consumption and will not have a negative effect on the European Communities' own 
resources obtained from VAT, 

HAS ADOPTED THIS DECISION:  

Article 1 

Portugal is hereby authorised to apply a special scheme for the taxation of doorstep sales that 
contains provisions derogating from Directive 2006/112/EC. 

Firms  whose  total  turnover  is  derived  from  doorstep  sales  made  by  resellers  acting  in  their 
own  name  and  on  their  own  account  may  request  authorisation  from  the  administration  to 
apply the special scheme provided the following conditions are met: 

(a) all products sold by the firm appear in a pre-established list of the prices applicable at the 
final consumption stage; 

(b) the firm sells its products direct to resellers who, in turn, sell direct to final consumers. 

Article 2 

The firms authorised to apply this special scheme shall be entitled, by way of derogation from 
Article 168 of Directive 2006/112/EC, to deduct the VAT payable or paid by their resellers 
for the goods which they have supplied to them and shall be liable, by way of derogation from 
Article 193 of the said Directive, to the VAT payable on the supply of these goods to the final 
consumers by their resellers. 

EN 

6 

   EN 

 
Article 3 

The  resellers  who  obtain  their  supplies  from  a  firm  authorised  to  apply  this  special  scheme 
shall  be  exempt  from  the  obligation  to  submit  a  VAT  return,  set  out  in  Article  250  of 
Directive 2006/112/EC, in relation to the goods which they have received from that firm and 
the  supply  of  those  goods  to  final  consumers.  That  obligation  shall  be  fulfilled  by  the 
authorised firm. 

This Decision shall apply from 1 January 2010 until 31 December 2012. 

Article 4 

Article 5 

This Decision is addressed to the Portuguese Republic. 

Done at Brussels,  

For the Council 
The President 

EN 

7 

   EN