Proposal for a COUNCIL DECISION on authorising the Kingdom of the Netherlands to apply a measure derogating from Article 193 of Directive 2006/112/EC on the common system of value added tax
Date: 2012-12-17
Institutions: European Commission
Subjects: Netherlands, VAT, automatic game, derogation from EU law, micro-computer, mobile phone, tax evasion

EUROPEAN 
COMMISSION 

Brussels, 17.12.2012  
COM(2012) 766 final 

2012/0355 (NLE) 

Proposal for a 

COUNCIL DECISION 

on authorising the Kingdom of the Netherlands to apply a measure derogating from 
Article 193 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  Council  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  that  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  12  July  2012  and  on  4  October  2012,  the 
Kingdom  of  the  Netherlands  (hereafter  'the  Netherlands')  requested  authorisation  to  apply  a 
measure derogating from Article 193 of the VAT Directive. In accordance with Article 395(2) 
of the VAT Directive, the Commission informed the other Member States by letter dated 17 
October 2012 of the request made by the Netherlands. By letter dated 19 October 2012, the 
Commission  notified  the  Netherlands  that  it  had  all  the  information  it  considered  necessary 
for appraisal of the request. 

General context 

As a general rule, the person liable for the payment of value added tax to the tax authorities 
under  Article  193  of  the  VAT  Directive,  is  the  taxable  person  supplying  the  goods.  The 
purpose of the derogation requested by the Netherlands is to place that liability on the taxable 
person to whom the supplies are made, but only under certain conditions and exclusively in 
the case of particular products, notably mobile telephones and integrated circuit devices, game 
consoles and personal computers for mobile use. 

According to the Netherlands, a number of businesses within these trade sectors engage in tax 
evasion  by  not  paying  VAT  to  the  tax  authorities  after  selling  the  products.  However,  their 
customers, insofar as they are taxable persons with a right of deduction, being in receipt of a 
valid  invoice,  remain  entitled  to  a  tax  deduction.  In  the  most  aggressive  forms  of  this  tax 
evasion, the same goods are, via a 'carousel scheme', supplied several times without payment 
of the VAT to the tax authorities. By designating in those cases the person to whom the goods 
are supplied as the person liable for the VAT, the derogation would remove the opportunity to 
engage in that form of tax evasion. 

The  derogation  request,  as  regards  the  part  on  mobile  telephones  and  integrated  circuit 
devices, is very similar to that which was granted to Austria, Germany, Italy and the UK via 
Council  Implementing  Decision  2010/710/EU  of  22  November  2010.  On  the  basis  of 
inspections  of  the  Dutch  Fiscal  Information  and  Investigation  Service  (Fiscale  Inlichtingen- 
en  Opsporingsdienst  (FIOD)),  the  Netherlands  also  noted  a  shift  of  fraud  towards  game 
consoles,  laptops  and  tablet  PC's  and  they  requested  that  these  products  be  added  to  the 
derogation  authorisation.  A  sufficiently  high  threshold  of  EUR  10  000  should  exclude  a 
shifting of fraud towards the retail sector. 

At  the  same  time,  however,  the  Netherlands  recognises  that  individual  derogations,  with  an 
ever  increasing  scope,  cannot  form  a  satisfactory  long-term  reply  to  EU-wide  fraud 
phenomena.  Therefore,  the  Netherlands  have  accepted  that  the  derogation  would  only  be 

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applicable  for  a  short  period  and  would  end  at  the  same  time  as  the  above-mentioned 
derogation, namely on 31 December 2013, so as to enable an alternative and more harmonised 
VAT fraud policy in the future. 

In this context, reference should be made to the Commission's proposal (COM(2009) 511) to 
amend  the  VAT  Directive  to  allow  all  interested Member  States  to apply a  targeted reverse 
charge in relation to certain fraud-sensitive goods and services without the need to apply for a 
derogation. This proposal was partially adopted through Council Directive 2010/23/EU of 16 
March  2010,  which  is  however  limited  to  allowing  a  reverse  charge  to  greenhouse  gas 
emission  allowances.  Via  a  Council  minute  statement,  the  Council  committed  itself  to 
continue discussions on the other parts of the proposal. 

It is the view of the Commission that the only measure which can be efficient at EU level in 
this field is the adoption of that proposal rather than a piecemeal approach based on individual 
derogations  and  whose  impact  on  other  Member  States  may  not  be  negligible.  The 
Commission therefore calls on the Council to quickly resume these negotiations.  

In  combination  with  the  Quick  Reaction  Mechanism  proposal  (COM(2012)  428),  missing 
trader fraud in VAT would then be tackled both in the short and longer term. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties 

Not applicable. 

Impact assessment 

The  Decision  proposal  aims  at  combating  VAT  evasion  and  will  therefore  have  a  potential 
positive impact on VAT receipts. 

Nevertheless, the measures will have an impact on the business insofar as the arrangements 
will  be  different  from  those  applying  to  normal  supplies  of  goods.  This  will  introduce  a 
complexity in accounting for businesses which do not deal exclusively with the goods which 
are  the  subject  of  the  derogation.  The  control  mechanisms  envisaged  will  also  impose 
additional  obligations  on  the  business  sector  concerned.  It  is  therefore  clear  that  this 
derogation fails the simplification test provided by Article 395, and only falls within the scope 
of preventing evasion. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

Authorisation for the Netherlands to apply a measure derogating from Article 193 of the VAT 
Directive as regards the use of a reverse charge mechanism for domestic supplies of certain 
goods. 

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4. 

BUDGETARY IMPLICATION 

The proposal has no negative impact on the EU budget. 

5. 

OPTIONAL ELEMENTS 

The proposal includes a sunset clause. 

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2012/0355 (NLE) 

Proposal for a 

COUNCIL DECISION 

on authorising the Kingdom of the Netherlands to apply a measure derogating from 
Article 193 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) 

By letters registered with the Commission on 12 July 2012 and on 4 October 2012, the 
Netherlands  requested  authorisation  to  introduce  a  special  measure  for  derogating 
from Article 193 of Directive 2006/112/EC as regards the person liable for payment of 
value added tax (VAT). 

In  accordance  with  Article  395(2)  of  Directive  2006/112/EC,  the  Commission 
informed the other Member States by letter dated 17 October 2012 of the request made 
by  the  Netherlands.  By  letter  dated  19  October  2012,  the  Commission  notified  the 
Netherlands  that  it  had  all  the  information  it  considered  necessary  to  consider  the 
request. 

Article 193 of Directive 2006/112/EC provides that the taxable person supplying the 
goods  or  services  is,  as  a  general  rule,  liable  for  the  payment  of  the  VAT  to  the  tax 
authorities.  The  purpose  of  the  derogation  requested  by  the  Netherlands  is  to  make, 
under  certain  circumstances,  the  recipient  of  supplies  of  certain  goods  liable  for  the 
payment of VAT in relation to particular products, notably mobile phones, integrated 
circuit devices, game consoles and personal computers for mobile use. 

According  to  the  Netherlands,  a  number  of  traders  in  these  sectors  engage  in 
fraudulent activities by selling these products without paying the VAT over to the tax 
authorities.  Their  customers,  however,  are  entitled  to  a  tax  deduction  as  they  are  in 
possession  of  a  valid  invoice.  In  its  most  aggressive  form,  the  goods  are,  via  a 
'carousel' scheme, supplied several times without payment of VAT. In this context, the 
Dutch  investigation  service  has  noted  a  shift  of  fraud  from  mobile  phones  and 
integrated  circuit  devices  towards  game  consoles  and  personal  computers  for  mobile 
use. By designating the person to whom the goods are supplied as the person liable for 

1 

OJ L 347, 11.12.2006, p. 1. 

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(5) 

(6) 

the payment of VAT in such cases, the derogation would eliminate the opportunity to 
engage in that form of tax evasion. 

In order to ensure the effective operation of the derogation and preventing tax evasion 
from being shifted towards the retail stage or to other products, the Netherlands will 
introduce  appropriate  control  and  reporting  obligations.  In  addition,  a  minimum 
threshold should reduce the risk of the fraud shifting to the retail trade. 

The authorisation shall be valid for only a very short period as questions remain on, in 
particular, the possible impact of the reverse charge mechanism on the functioning of 
the VAT systems within Member States who apply it or in other Member States. The 
end  date  coincides  with  the  end  of  similar  derogations  granted  in  relation  to  mobile 
phones  and  integrated  circuit  devices  so  as  to  enable  the  development  of  a  more 
elaborated and more harmonised anti-fraud policy in the future. 

(7) 

The derogation will not have an adverse effect on the Union's own resources accruing 
from VAT, 

HAS ADOPTED THIS DECISION: 

Article 1 

By  way  of  derogation  from  Article  193  of  Directive  2006/112/EC,  the  Netherlands  are 
authorised to designate the taxable person to whom supplies of the following goods are made 
as the person liable for the payment of the tax: 

(a) 

(b) 

(c) 

mobile phones, being devices made or adapted for use in connection with a licensed 
network and operated on specified frequencies, whether or not they have any other 
use; 

integrated circuit devices such as microprocessors and central processing units in a 
state prior to integration into end-user products; 

game consoles, which by virtue of their objective characteristics and principal 
functions, are intended for playing video and other computer games, whether or not 
they have any other use; 

(d) 

laptops and tablet PC's. 

The  derogation  shall  apply  in  respect  of  supplies  of  goods  for  which  the  taxable  amount  is 
equal to or higher than EUR 10 000. 

Article 2 

The derogation provided for in Article 1 is subject to the Netherlands introducing appropriate 
and effective control and reporting obligations on taxable persons who supply goods to which 
the reverse charge applies in accordance with this Decision. 

This Decision shall take effect on the day of its notification. 

Article 3 

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This Decision shall expire on the date of the entry into force of the Union rules allowing all 
Member  States  to  adopt  such  measures  derogating  from  Article  193  of  Directive 
2006/112/EC, but on 31 December 2013 at the latest. 

Article 4 

This Decision is addressed to the Kingdom of the Netherlands. 

Done at Brussels,  

For the Council 
The President 

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