Proposal for a COUNCIL IMPLEMENTING DECISION authorising the Republic of Romania to continue to apply a special measure derogating from Article 193 of Directive 2006/112/EC on the common system of value added tax
Date: 2013-08-12
Institutions: European Commission
Subjects: Romania, VAT, administrative formalities, delivery, derogation from EU law, tax avoidance, tax collection, tax evasion, wood product













EUR-Lex - 52013PC0585 - EN











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52013PC0585

Proposal for a COUNCIL IMPLEMENTING DECISION authorising the Republic of Romania to continue to apply a special measure derogating from Article 193 of Directive 2006/112/EC on the common system of value added tax /* COM/2013/0585 final - 2013/0284 (NLE) */









EXPLANATORY MEMORANDUM
1.           CONTEXT 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 Commission on
13 March 2013, Romania has requested an extension of the derogation from
Article 193 of the VAT Directive in order to apply reverse charge to timber and
wood products. In accordance with Article 395(2) of the VAT Directive, the
Commission informed the other Member States by letter dated 17 June 2013 of the
request made by Romania. By letter dated 18 June 2013, the Commission notified Romania that it had all the information necessary to consider the request.
General context
As a general rule, Article 193 of the VAT
Directive stipulates that the taxable person supplying goods or services is
normally liable to pay value added tax (VAT). 
In 2009, the Romanian Government requested
a derogation pursuant to Article 395 of the VAT Directive to apply a reverse
charge procedure, whereby the taxable person, to whom the supplies of goods or
services are made, becomes liable for the payment of the VAT in the following
situations:
- supplies of goods and provision of
services by taxable persons while under an insolvency procedure, excluding
retailers.
- supplies of wood products by taxable
persons – specifically, standing timber, round or cleft working wood, fuel
wood, timber products, as well as square-edged or chipped wood and wood in the
rough, processed or semi-manufactured wood.
The request was approved by Council and Romania was authorised to apply the reverse charge to the abovementioned supplies until 31
December 2013. Romania has now asked for an extension of the derogation
regarding the application of reverse charge to supplies of wood products. Romania has however not requested any extension of the derogation as far as insolvent
businesses are concerned.
The forestry sector in Romania consists of a large number of small resellers and intermediaries which have proved
to be very difficult to control for the tax authorities. The supplies are often
made to larger, well established businesses, which are therefore easier to
control. This type of sector is therefore very similar to the ones covered in Article
199 of the VAT Directive and for which the reverse charge has proved to be an
effective instrument without any adverse impact on fraud at the retail sector
or fraud in other Member States or sectors.
From the information provided by the
Romanian Government, a prolongation of the derogation seems justifiable. 
An extension should be limited in time in
order to assess whether the conditions on which it is based would still be
valid. It is therefore proposed that the request will be granted until 31 December
2016 and that the Romanian Government shall present a report which includes a
review of the efficiency of the measure and an evaluation of the risk of fraud
in the wood sector if a new extension request would be envisaged beyond that
end date.
2.           RESULTS OF CONSULTATIONS
WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS
Consultations of interested parties
Not relevant.
Collection and use of expertise
There was no need for external expertise.
Impact assessment
The proposal implies continuing a measure which
aims to prevent VAT evasion or avoidance and has therefore a potential positive
economic impact.
The derogation has a specific and narrow
scope and will therefore only have limited impact.
3.           LEGAL ELEMENTS OF THE
PROPOSAL
Summary of the proposed action
Authorisation for Romania to continue to apply a derogating measure from Directive 2006/112/EC as regards the
application of a reverse charge mechanism to supplies of wood products.
Legal basis
Article 395 of the VAT 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 reason(s):
This Decision concerns an authorisation
granted to one Member State upon their 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: other.
Other means would not be adequate for the
following reason(s):
Under Article 395 of the Directive
2006/112/EC of 28 November 2006 on the common system of value added tax,
derogation from the common VAT rules is only possible on the authority of the
Council acting unanimously on a proposal 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 has no implication for the
budget of the Union.
5.           OPTIONAL ELEMENTS
The proposal includes a sunset clause.
2013/0284 (NLE)
Proposal for a
COUNCIL IMPLEMENTING DECISION
authorising the Republic of Romania to continue to apply a special 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 tax , and
in particular Article 395 (1) thereof,
Having regard to the proposal from the
European Commission,
Whereas:
(1)       By letter registered within
the Commission on 13 March 2013, Romania requested authorisation for extension
of a special measure derogating from Article 193 of Directive 2006/112/EC in
relation to supplies of wood products.
(2)       In accordance with the
second subparagraph of article 395(2) of Directive 2006/112/EC, the Commission
informed the other Member States by letter dated 17 June 2013 of the request
made by Romania. By letter dated 18 June 2013 the Commission notified Romania that it had all the information it considered necessary for appraisal of the
request.
(3)       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 value added tax (VAT) to
the tax authorities.
(4)       Council Decision
2010/583/EU of 27 September 2010 authorised Romania to apply a derogating
measure pursuant to Article 395 of Directive 2006/112/EC in order to designate
the recipient as the person liable for the payment of the VAT on supplies of
wood products.
(5)       Prior to the former
authorisation to apply reverse charge to the supplies of wood, Romania had encountered problems in the timber market because of the nature of the market
and the businesses involved. There are a large number of small enterprises in
this sector which the Romanian authorities have found difficult to control.
Designating the recipient as the person liable for payment of VAT has,
according to the Romanian authorities, had the effect of preventing tax evasion
and avoidance in this sector and remains justified.
(6)       The measure is
proportionate to the objectives pursued since it is not intended to apply
generally, but only to very specific operations in a sector which poses
considerable problems of tax evasion or avoidance.
(7)       The measure should not, in
the Commission's view, have any adverse impact on fraud at the retail level or
in other sectors or Member States.
(8)       The authorisation should
be limited in time until 31 December 2016.
(9)       Where Romania requires a further extension beyond 2016, a report shall be submitted to the Commission
together with the extension request no later than 1 April 2016. In light of the
experience gained up to that date an assessment shall be made on whether or not
the derogation remains justified.
(10)     The derogation has no
adverse impact on the Union's own resources accruing from value added tax,
HAS ADOPTED THIS DECISION: 
Article 1
By way of derogation from Article 193 of
Directive 2006/112/EC, the Republic of Romania is hereby authorised until 31
December 2016 to designate the taxable person to whom the supplies of goods or
services referred to in Article 2 of this Decision are made as the person
liable for the payment of the tax.
Article 2
The derogation provided for in Article 1
shall apply to supplies of wood products by taxable persons including standing
timber, round or cleft working wood, fuel wood, timber products, as well as
square edged or chipped wood and wood in the rough, processed or
semi-manufactured wood.
Article 3
Any request for the extension of the
measure provided for in this Decision shall be submitted to the Commission no
later than 1 April 2016, and shall be accompanied by a report which includes an
assessment of the efficiency of the measure and an evaluation of the risk of
fraud in the wood sector.
Article 4
This Decision is addressed to the Republic of   Romania.
Done at Brussels, 
                                                                       For
the Council
                                                                       The
President