Proposal for a COUNCIL DECISION amending Decision 2010/39/EU authorising Portugal to continue to apply a measure derogating from Articles 168, 193 and 250 of Directive 2006/112/EC on the common system of value added tax
Date: 2012-11-14
Institutions: European Commission
Subjects: Portugal, VAT, delivery, derogation from EU law, door-to-door selling, retail trade

EUROPEAN 
COMMISSION 

Brussels, 14.11.2012  
COM(2012) 661 final 

2012/0314 (NLE) 

Proposal for a 

COUNCIL DECISION 

amending Decision 2010/39/EU authorising Portugal to continue to apply a measure 
derogating from Articles 168, 193 and 250 of Directive 2006/112/EC on the common 
system of value added tax 

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EXPLANATORY MEMORANDUM 

1. 

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,  the  Council,  acting  unanimously  on  a  proposal  from  the 
Commission, may authorise any Member State to apply special measures derogating from the 
Directive in order to simplify the procedure for charging the tax or to prevent certain types of 
tax evasion or avoidance. 

By letter registered with the Commission on 18 April 2012 the Portuguese Republic requested 
an authorisation to continue applying a measure derogating from Articles 168, 193 and 250 of 
Directive 2006/112/EC, in order to apply a special optional scheme for doorstep sales. 

In  accordance  with  Article  395(2)  of  Directive  2006/112/EC,  the  Commission  informed  the 
other  Member  States  by  letter  dated  1  June  2012  of  the  request  made  by  the  Portuguese 
Republic. The Commission notified the Portuguese Republic by letter dated 6 June 2012 that 
it had all the information necessary to consider the request. 

General context 

Article 168 of Directive 2006/112/EC provides that a taxable person is entitled to deduct the 
VAT  charged  on  purchases  made  for  the  purpose  of  his  taxed  transactions.  Article  193  of 
Directive 2006/112/EC provides that the VAT shall be payable by any taxable person carrying 
out a taxable supply of goods or services, except where it is payable by another person in the 
cases  referred  to  in  Articles  194  to  199  and  Article  202.  Article  250(1)  of  Directive 
2006/112/EC provides that every taxable person shall submit a VAT return setting out all the 
information needed to calculate the tax that has become chargeable and the deductions to be 
made including, in so far as is necessary for the establishment of the basis of assessment, the 
total value of the transactions relating to such tax and deductions and the value of any exempt 
transactions. 

The measure pursued by the Portuguese Republic however deviates from the abovementioned 
provisions.  This  special  optional  scheme  concerns  firms  active  in  the  doorstep  sales  sector 
who meet specific conditions and are authorised by the competent tax authorities to apply that 
scheme.  The  firms  in  question  make  use  of  interposed  resellers  by  selling  their  products 
directly to those resellers who, in turn, sell the same products directly to the final consumers.  

By way of derogation from Article 193 of Directive 2006/112/EC, those firms to which the 
scheme applies are made liable for the VAT borne on their resellers' supplies of goods to final 
consumers. By way of derogation from Article 168 of Directive 2006/112/EC, those firms are 
given  the  right  to  deduct  the  VAT  payable  or  paid  by  their  resellers  for  the  corresponding 
goods that have been supplied to them. By way of derogation from Article 250 of Directive 
2006/112/EC, the resellers' obligation to submit a VAT return relating to the goods which the 
authorised firms have supplied to them and the supply of those goods to the final consumers, 
is transferred to the authorised firm.  

Only such firms may be authorised to use that special scheme whose total turnover is derived 
from  doorstep  sales  made  by  resellers  acting  in  their  own  name  and  on  their  own  account, 

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provided  that  all  products  sold  by  the  firm  appear  in  a  pre-established  list  of  the  prices 
applicable  at  the  final  consumption  stage  and  the  firm  sells  its  products  directly  to  resellers 
who, in turn, sell it directly to final consumers.  

The  derogating  measure  of  the  Portuguese  Republic  had  initially  been  granted  by  Council 
Decision  2004/738/EC1  for  a  period  until  31  December  2009  and  was  again  granted  by 
Council Decision 2010/39/EU2 until 31 December 2012. 

In  its  current  request,  the  Portuguese  Republic  informed  the  Commission  that  the  reasons 
pursuant to which the Council has taken its Decision 2010/39/EU are still valid and explained 
that the special measure is being applied until now and has proved to be very useful in terms 
of  simplifying  the  VAT  collection  and  maintaining  a  more  effective  VAT  control  in  this 
sector. 

Derogations are in general granted for a limited time as to allow an assessment whether the 
special  measure  is  appropriate  and  effective.  In  this  respect,  based  on  the  information 
provided by the Portuguese Republic, the Commission understands that the special measure in 
question  provides  a  facilitation  to  both  tax  administrations  and  businesses  as  it  mainly 
concerns very small taxpayers without the appropriate structure or organisational capacity to 
comply with the requirements laid down in VAT law. The amount of tax due at the level of 
final  consumption  is  only  affected  to  a  negligible  extent.  An  extension  of  the  derogating 
measure is therefore appropriate. 

However, any extension should be limited in time in order to assess whether the conditions, 
on which the derogations are based, would still be valid. Therefore, it is proposed to extend 
the  derogation  until  the  end  of  2015  and  to  request  the  Portuguese  Republic  to  present, 
together with the extension request, a report by 1 April 2015 at the latest including a review of 
the application of the special measure in case a further extension would be envisaged beyond 
2015. 

Existing provisions in the area of the proposal 

Not applicable. 

Consistency with other policies and objectives of the Union 

Not applicable. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties 

Not relevant. 

Collection and use of expertise 

There was no need for external expertise. 

1 
2 

OJ L 325, 28.10.2004, p. 62 
OJ L 19, 23.1.2010, p. 5 

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Impact assessment 

The  proposal  is  designed  to  simplify  the  procedure  for  charging  tax  and  has,  therefore,  a 
potential  positive  impact  for  both  businesses  and  administrations.  The  solution  has  been 
identified by the Portuguese Republic as a suitable measure. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

The  proposal  aims  to  authorise  the  Portuguese  Republic  to  continue  to  apply  a  measure 
derogating  from  Articles  168,  193  and  250  of  Directive  2006/112/EC  so  as  to  allow  for 
imposing on certain authorised firms the liability for the VAT borne on supplies of goods to 
final  consumers  made  by  interposed  resellers,  granting  those  authorised  firms  the  right  to 
deduct  the  VAT  payable  or  paid  by  the  resellers  for  the  respective  purchase  of  those  goods 
and transferring to the authorised firms the resellers' obligation to submit a VAT return linked 
to the supplies of those goods from the authorised firms to the resellers and from the resellers 
to the final consumers. 

The application and the necessity for the derogating measure are to be reviewed and reported 
on by the Portuguese Republic upon any request for an extension. The Decision will expire on 
the date specified therein. 

Legal basis 

Article  395(1)  of  Council  Directive  2006/112/EC  of  28  November  2006  on  the  common 
system of value added tax. 

Subsidiarity principle 

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

Proportionality principle 

The proposal complies with the proportionality principle for the following reasons: 

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

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

Choice of instruments 

Proposed instruments: Council Decision. 

Other means would not be adequate for the following reasons: 

Under  Article  395  of  Council  Directive  2006/112/EC,  a  derogation  from  the  common  VAT 
rules  is  only  possible  upon  authorization  of  the  Council  acting  unanimously  on  a  proposal 

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from  the  Commission.  A  Council  Decision  is  the  only  suitable  instrument  since  it  can  be 
addressed to an individual Member State. 

4. 

BUDGETARY IMPLICATION 

The proposal will not adversely affect the Union's own resources from VAT. 

5. 

OPTIONAL ELEMENTS 

The proposal includes a review clause and a sunset clause. 

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2012/0314 (NLE) 

Proposal for a 

COUNCIL DECISION 

amending Decision 2010/39/EU authorising Portugal to continue to apply a measure 
derogating from Articles 168, 193 and 250 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 tax3, and in particular Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

By  letter  registered  with  the  Commission  on  18  April  2012,  Portugal  requested 
authorisation  to  continue  to  apply  a  special  measure  that  was  previously  granted  by 
Council  Decision  2010/39/EU4,  derogating  from 
the  provisions  of  Directive 
2006/112/EC governing the right of deduction, the person liable to pay the tax and the 
obligation to submit a VAT return. 

In  accordance  with  the  second  subparagraph  of  Article  395(2)  of  Directive 
2006/112/EC, the Commission informed the other Member States of the request made 
by Portugal by letter dated 1 June 2012. By letter dated 6 June 2012, the Commission 
notified Portugal that it had all the information necessary to consider the request. 

The derogating measure pursued by Portugal deviates from the provisions of Directive 
2006/112/EC as it allows for the application of a special optional scheme concerning 
particular  firms  acting  in  the  doorstep  sales  business  that  fulfil  specific  conditions, 
where  authorised  by  the  competent  tax  authorities.  Those  firms  apply  a  particular 
business model by selling their products directly to interposed resellers who, in turn, 
sell the same products directly to the final consumers. 

The  special  measure  derogates  from  Article  168  of  Directive  2006/112/EC  which 
governs  a  taxable  person's  right  to  deduct  VAT  charged  on  goods  and  services 
supplied to him for the purposes of his taxed transactions by granting those firms the 
right to deduct the VAT payable or paid by their resellers for the corresponding goods 
that have been supplied to them. 

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OJ 347, 11.12.2006, p.1. 
OJ L 19, 23.1.2010, p. 5 

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(5) 

(6) 

(7) 

(8) 

(9) 

The  special  measure  derogates  from  Article  193  of  Directive  2006/112/EC  which 
governs the liability to pay the VAT by establishing those firms to which the scheme 
applies as the person liable for the VAT borne on their resellers' supplies of goods to 
final consumers.  

The  special  measure  derogates  from  Article  250  of  Directive  2006/112/EC  which 
governs the obligation to submit a VAT return by transferring the resellers' obligation 
to submit a VAT return relating to the goods which those firms have supplied to them 
and the supply of those goods to the final consumers. 

The special measure may only be applied to firms whose total turnover is derived from 
doorstep sales made by resellers acting in their own name and on their own account, 
provided that all products sold by the firm appear in a pre-established list of the prices 
applicable at the final consumption stage and the firms sell their products directly to 
resellers who, in turn, sell it directly to final consumers. 

This special scheme has the effect of ensuring 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  provides  facilitation  to  the  tax 
administration  by  simplifying  the  arrangements  for  collecting  VAT  and  reducing  the 
resellers' obligations in relation to VAT. 

According  to  the  information  provided  by  Portugal,  the  legal  and  factual  situation 
which  justified  the  current  application  of  the  special  measure  in  question  has  not 
changed  and  continues  to  exist.  Portugal  should  therefore  be  authorised  to  continue 
applying  this  special  measure  during  a  further  period,  but  limited  in  time  until  31 
December 2015 in order to allow for a review of the necessity and effectiveness of the 
derogating measure. 

(10)  Where Portugal considers a further extension beyond 2015 to be necessary, a report on 
the application of the measure should be submitted to the Commission together with 
the extension request no later than 31 March 2015 in order to reserve sufficient time 
for the Commission to examine the request and, in case the Commission would come 
forward with a proposal, for the Council to adopt it. 

(11)  The  derogation  will  only  have  a  negligible  effect  on  the  overall  amount  of  tax 
collected  at  the  stage  of  final  consumption  and  will  not  adversely  affect  the  Union's 
own resources accruing from value added tax. 

(12)  Decision 2010/39/EU should therefore be amended accordingly, 

HAS ADOPTED THIS DECISION:  

Article 1 

Article 4 of Decision 2010/39/EU is replaced by the following: 

'Article 4 

1. 

This Decision shall expire on 31 December 2015. 

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2. 

Any  request  for  the  extension  of  the  special  measure  provided  for  in  this  Decision 
shall  be  submitted  to  the  Commission  by  31  March  2015  at  the  latest. 

Such  request  shall  be  accompanied  by  a  report  on  the  application  of  the  special 
measure.' 

This Decision shall apply as from 1 January 2013. 

Article 2 

Article 3 

This Decision is addressed to the Portuguese Republic. 

Done at Brussels,  

For the Council 
The President 

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