Proposal for a COUNCIL IMPLEMENTING DECISION authorising the Italian Republic to apply a special measure derogating from Article 285 of Directive 2006/112/EC on the common system of value added tax
Date: 2010-07-23
Institutions: European Commission
Subjects: Italy, VAT, basis of tax assessment, distributive trades, provision of services, tax exemption, tax harmonisation, tax on consumption, tax relief

EN 

EN 

   EN 

 
 
EUROPEAN COMMISSION 

Brussels, 23.7.2010 
COM(2010)396 final 

2010/0213 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising the Italian Republic to apply a special measure derogating from Article 285 
of Directive 2006/112/EC on the common system of value added tax 

EN 

   EN 

 
 
 
  
EXPLANATORY MEMORANDUM 

CONTEXT OF THE PROPOSAL 

Grounds for and objectives of the proposal 

Pursuant  to  Article  395(1)  of  Directive  2006/112/EC  of  28  November  2006  on  the 
common  system  of  value  added  tax  (hereafter  ‘the  VAT  Directive’),  the  Council, 
acting  unanimously  on  a  proposal  from  the  Commission,  may  authorise  any  Member 
State to apply special measures for derogation from the provisions of that Directive in 
order to simplify the procedure for collecting VAT or to prevent certain forms of tax 
evasion or avoidance. 

By  letter  registered  with  the  Secretariat-General  of  the  Commission  on  10  December 
2009,  the  Italian  Republic  requested  authorisation  to  continue  to  exempt  taxable 
persons  whose  annual  turnover  is  no  higher  than  EUR  30 000.  In  accordance  with 
Article 395(2) of Directive 2006/112/EC, the Commission informed the other Member 
States by letter dated 11 January 2010 of the request made by the Italian Republic. By 
letter dated 12 January 2010, the Commission notified the Italian Republic that it had 
all the information necessary to consider the request. 

General context 

Chapter  1  of  Title  XII  of  the  VAT  Directive  allows  for  the  possibility  for  Member 
States  to  apply  special  schemes  for  small  enterprises,  including  the  possibility  of 
exempting  taxable  persons  below  a  certain  annual  turnover.  This  exemption  implies 
that a taxable person does not have to charge VAT on his supplies and, consequently, 
he can not deduct the VAT on his input. 

This  measure  was  first  introduced  in  accordance  with  the  provisions  of  Article 14  of 
Council  Directive  67/228/EEC.  However,  those  Member  States  which  did  not  make 
use  of  the  option  provided  for  under  that  provision  could  subsequently,  according  to 
Article  24(2)(b)  of  Directive  77/388/EEC  now  recast  as  the  first  paragraph  of 
Article 285  of  the  VAT  Directive,  only  exempt  taxable  persons  from  VAT  whose 
annual turnover is no higher than EUR 5 000. The Italian Republic did not make use of 
the option provided by Article 14 of Council Directive 67/228/EEC. 

Because  of  a  significant  number  of  taxable  persons  with  a  very  low  annual  turnover, 
the  Italian  Republic  requested  a  derogation  in  2007  in  order  to  simplify  VAT 
obligations  for  small  traders  and  to  ease  the  collection  of  the  tax  for  the  national  tax 
administration. Council Decision 2008/737/EC (OJ L 249, 18.9.2008, p. 13) authorised 
the Italian Republic to exempt, until 31 December 2010, taxable persons whose annual 
turnover is no higher than EUR 30 000 with the possibility to raise that ceiling in order 
to  maintain  that  value  in  real  terms.  The  Italian  Republic  has  now  requested  an 
extension of that measure which is optional for taxable persons. 

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  with  the  possibility  of  updating  this  amount  each  year. 

EN 

2 

   EN 

 
 
 
However, the Council has, as this stage, not yet reached an agreement on that proposal. 

From  information  provided  by  the  Italian  Republic,  it  appears  that  the  application  of 
the  measure  has  lead  to  an  estimated  reduction  of  the  overall  amount  of  tax  revenue 
collected at the final stage of consumption of less than 0,2%, which is in line with the 
estimations made at the time the initial derogation was granted. 

It is therefore proposed to extend the derogation for another period until the earliest of 
31  December  2013  or  the  entry  into  force  of  a  Directive  on  the  annual  turnover 
thresholds below which taxable persons may be exempt from VAT. 

Existing provisions in the area of the proposal 

In  2004,  the  Commission  made  a  proposal  to  increase  the  annual  turnover  threshold 
available  to  Member  States  (COM(2004)  728  final)  for  the  exemption  from  VAT  of 
taxable persons to EUR 100 000.  

Consistency with the other policies and objectives of the Union 

Not applicable. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

Consultation of interested parties 

Not relevant. 

Collection and use of expertise 

There was no need for external expertise. 

Impact assessment 

The decision aims at continuing a simplification measure which removes many of the 
VAT  obligations  for  businesses  operating  with  an  annual  turnover  no  higher  than 
EUR 30 000 and therefore has a potential positive impact. 

Because of the narrow scope of the derogation, and its limited application in time, the 
scope will in any case be limited. 

LEGAL ELEMENTS OF THE PROPOSAL  

Summary of the proposed action 

Authorisation for the Italian Republic to continue to apply a derogating measure from 
Directive  2006/112/EC  as  regards  the  introduction  of  a  simplification  measure  for 
businesses with an annual turnover no higher than EUR 30 000. 

Legal basis 

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

EN 

3 

   EN 

 
 
 
 
 
 
 
 
 
 
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). 

The  Decision  concerns  an  authorisation  granted  to  a  Member  State  upon  its  own 
request and does not constitute any obligation. 

Given the limited scope of the derogation, the special measure is proportionate to the 
aim pursued. 

Choice of instruments 

Proposed instruments: Decision. 

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

Under  Article  395  of  the  VAT  Directive,  derogation  from  the  common  VAT  rules  is 
only possible with the authorisation of the Council acting unanimously on a proposal 
from the Commission. A Council Decision is the most suitable instrument since it can 
be addressed to individual Member States. 

BUDGETARY IMPLICATION 

The proposal has no implication for the Union budget. 

ADDITIONAL INFORMATION 

Review/revision/sunset clause 

The proposal includes a sunset clause. 

EN 

4 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
2010/0213 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

of […] 

authorising the Italian Republic to apply a special measure derogating from Article 285 
of Directive 2006/112/EC on the common system of value added tax 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning 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 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

In a letter registered by the Commission’s Secretariat General on 10 December 2009, 
Italy  requested  authorisation  for  a  measure  derogating  from  Article  285  of  Directive 
2006/112/EC  in  order  to  continue  to  exempt  certain  taxable  persons.  Through  that 
measure, those taxable persons would continue to be exempted from certain or all of 
the obligations in relation to value added tax (VAT) referred to in Chapters 2 to 6 of 
Title XI of Directive 2006/112/EC. 

The Commission informed the other Member States by letter dated 11 January 2010 of 
the request made by Italy. By letter dated 12 January 2010, the Commission notified 
Italy that it had all the information necessary to consider the request. 

A  special  scheme  for  small  enterprises  is  already  available  to  Member  States  under 
Title XII of Directive 2006/112/EC. The extended measure derogates from Article 285 
of that Directive in its application to Italy only insofar as the annual turnover threshold 
for the scheme is higher than the EUR 5 000 threshold. 

By  Council  Decision  2008/737/EC  of  15  September  2008  authorising  the  Italian 
Republic to apply a measure derogating from Article 285 of Directive 2006/112/EC on 
the  common  system  of  value  added  tax2,  Italy  was  authorised,  as  a  derogating 
measure,  to  exempt  taxable  persons  whose  annual  turnover  is  no  higher  than 
EUR 30 000 until 31 December 2010. Given that this higher threshold has resulted in 
reduced VAT obligations for the smallest businesses, whilst taxable persons may still 

1 
2 

OJ L 347, 11.12.2006, p.1. 
OJ L 249, 18.9.2008, p. 13. 

EN 

5 

   EN 

 
                                                 
opt for the normal VAT arrangements, Italy should be authorised to apply the measure 
for a further limited period. 

In its proposal for a Council Directive amending Directive 77/388/EEC with a view to 
simplifying  value  added  tax  obligations  of  29 October 20043,  the  Commission 
included  provisions  aimed  at  allowing  Member  States  to  set  the  annual  turnover 
ceiling  for  the  VAT  exemption  scheme  at  up  to  EUR  100 000  or  the  equivalent  in 
national  currency,  with  the  possibility  of  updating  that  amount  each  year.  The 
extension  request  submitted  by  Italy  is  compatible  with  that  proposal  on  which  the 
Council has not yet been able to reach an agreement. 

From  information  provided  by  Italy,  the  measure  has  already  led  to  a  estimated 
reduction  of  the  overall  amount  of  tax  revenue  collected  at  the  final  stage  of 
consumption of less than 0,2%. 

The  derogation  has  no  impact  on  the  Union’s  own  resources  accruing  from  value 
added tax, 

(5) 

(6) 

(7) 

HAS ADOPTED THIS DECISION:  

Article 1 

By  way  of  derogation  from  Article  285  of  Directive  2006/112/EC,  Italy  is  authorised  to 
exempt from VAT taxable persons whose annual turnover is no higher than EUR 30 000. 

Italy may raise that ceiling in order to maintain the value of the exemption in real terms. 

The scheme referred to in Article 1 shall be optional for taxable persons. 

Article 2 

Article 3 

This Decision shall apply from 1 January 2011 until the date of entry into force of a Directive 
amending the amounts  of  the  annual turnover ceilings below which taxable persons may be 
exempted from VAT, or until 31 December 2013, whichever is the earlier. 

3 

COM(2004) 728 final. 

EN 

6 

   EN 

 
                                                 
Article 4 

This Decision is addressed to the Italian Republic. 

Done at Brussels,  

For the Council 
The President 

EN 

7 

   EN