Proposal for a COUNCIL IMPLEMENTING DECISION authorising Luxembourg to introduce a special measure derogating from Article 285 of Directive 2006/112/EC on the common system of value added tax
Date: 2013-08-29
Institutions: European Commission
Subjects: Luxembourg, VAT, derogation from EU law, small business, tax exemption













EUR-Lex - 52013PC0608 - EN











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52013PC0608

Proposal for a COUNCIL IMPLEMENTING DECISION authorising Luxembourg to introduce a special measure derogating from Article 285 of Directive 2006/112/EC on the common system of value added tax /* COM/2013/0608 final - 2013/0296 (NLE) */









EXPLANATORY MEMORANDUM
1.           CONTEXT OF THE PROPOSAL
Grounds for and objectives of the
proposal
Pursuant to paragraph 1 of Article 395
of Directive 2006/112/EC[1]
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
24 October 2012, Luxembourg requested an authorisation to apply a measure
derogating from Article 285 of Directive 2006/112/EC, allowing it to
exempt from VAT taxable persons whose annual turnover is no higher than EUR 25 000.
In accordance with paragraph 2 of
Article 395 of Directive 2006/112/EC, the Commission informed the other
Member States by letter dated 9 November 2012 of the request made
by Luxembourg. The Commission notified Luxembourg by letter dated 12 November
2012 that it had all the information necessary to consider the request.
General context
Chapter 1 of Title XII of Directive
2006/112/EC allows 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 cannot deduct the VAT on his
purchases.
Under the first paragraph of
Article 285 of Directive 2006/112/EC, Member States, which did not
exercise the option under Article 14 of Directive 67/228/EEC to introduce
exemptions or graduated tax relief, may exempt taxable persons whose annual
turnover is no higher than EUR 5 000 or the equivalent in national
currency. Pursuant to the second paragraph of Article 285 of Directive
2006/112/EC, those Member States may also grant graduated tax relief to taxable
persons whose annual turnover exceeds the ceiling fixed by them for its
application.
According to the information submitted to
the Commission, Luxembourg currently exempts from VAT taxable persons whose
annual turnover is no higher than EUR 10 000. Furthermore, Luxembourg
informed the Commission that it makes use of the option pursuant to the second
paragraph of Article 285 of Directive 2006/112/EC by granting graduated
tax relief to taxable persons whose annual turnover is between
EUR 10 000 and EUR 25 000.
Luxembourg has the
objective to apply a turnover threshold of EUR 25 000 as regards the
exemption scheme for small businesses whilst at the same time abolish the
application of the graduated tax relief. It considers that, as part of an
economic recovery programme and also to take account of the monetary
depreciation since the introduction of the exemption scheme in Luxembourg, increasing
the current exemption scheme ceiling for small enterprises to EUR 25 000
should enable the VAT administrative burden to be significantly lightened for
enterprises with a low turnover and should foster the creation of new
opportunities for this type of businesses.
The application of the increased exemption
threshold is in its view appropriate to simplify the VAT system for small
enterprises by significantly reducing the burdens on those businesses eligible
for the scheme by releasing them from many of the VAT obligations under the
normal VAT arrangements. Moreover, the measure pursued would have the
additional effect to reduce the administrative burden for businesses currently
subject to the graduated tax relief scheme, which will be removed at the same
time. The system would be optional for taxable persons. According to the Luxembourg authorities, the special measure pursued would only have a negligible effect on
the overall amount of VAT revenue collected (not more than 0.10%).
Existing provisions in the area of the
proposal
In 2004, the Commission made a proposal to -
inter alia - increase the annual turnover threshold available to Member States
(COM(2004) 728 final[2])
for the exemption from VAT of taxable persons to EUR 100 000. That
proposal is still on the table of the Council.
In the medium term, the Commission
considers that the adoption of that proposal would be a more appropriate way
forward than having a piecemeal approach based on individual derogations. The
Commission therefore calls on the Council to resume the negotiations on that
proposal.
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.
Impact assessment
The proposal for a Council Decision aims at
applying a simplification measure which removes many of the VAT obligations for
businesses operating with an annual turnover no higher than
EUR 25 000 and therefore has a potential positive impact.
Because of the narrow scope of the
derogation, and its limited application in time, the impact will in any case be
limited.
3.           LEGAL ELEMENTS OF THE
PROPOSAL
Summary of the proposed action
The proposal aims to authorise Luxembourg
to apply a simplification measure derogating from Article 285 of Directive
2006/112/EC so as to allow for the exemption from VAT of taxable persons with
an annual turnover no higher than EUR 25 000. Taxable persons may
still opt for the normal VAT arrangements.
Legal basis
Article 395 of Council Directive
2006/112/EC.
Subsidiarity principle
The proposal falls under the exclusive
competence of the European Union. The subsidiarity principle therefore does not
apply.
Proportionality principle
The proposal complies with the
proportionality principle as 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 instrument: 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 from the
Commission. A Council Decision is the most 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 because Luxembourg will carry out a compensation
calculation in accordance with Article 6 of Council Regulation (EEC,
EURATOM) No 1553/89.
5.           OPTIONAL ELEMENTS
The proposal includes a sunset clause.
2013/0296 (NLE)
Proposal for a
COUNCIL IMPLEMENTING DECISION
authorising Luxembourg to introduce 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 tax[3], and in particular Article
395(1) thereof,
Having regard to the proposal from the
European Commission,
Whereas:
(1)       By letter registered with
the Commission on 24 October 2012, Luxembourg requested authorisation to apply
a measure derogating from Article 285 of Directive 2006/112/EC, allowing Luxembourg
to exempt from VAT taxable persons whose annual turnover is no higher than EUR 25 000.
Through that measure, those taxable persons would be exempted from all or some
of the obligations in relation to VAT referred to in Chapters 2 to 6 of Title
XI of Directive 2006/112/EC.
(2)       In accordance with Article
395(2) of Directive 2006/112/EC, the Commission informed the other Member
States of the request made by Luxembourg by letter dated 9 November 2012.
By letter dated 12 November 2012, the Commission notified Luxembourg that it had all the information necessary to consider the request.
(3)       Under Article 285 of
Directive 2006/112/EC, Member States, which have not exercised the option under
Article 14 of Second Council Directive 67/228/EEC of 11 April 1967 on
the harmonization of legislation of Member States concerning turnover taxes,
structure and procedures for application of the common system of value added
tax[4], may exempt from VAT taxable
persons whose annual turnover is no higher than EUR 5 000 or the
equivalent in national currency and may also grant graduated tax relief to
taxable persons whose annual turnover exceeds the ceiling fixed by them for its
application.
(4)       Luxembourg has informed
the Commission that it currently exempts from VAT taxable persons whose annual
turnover is no higher than EUR 10 000 and that it makes use of the
option of granting graduated tax relief with respect to taxable persons whose
annual turnover is between EUR 10 000 and EUR 25 000. Luxembourg has requested the authorisation, as a derogating measure, to exempt from VAT
taxable persons whose annual turnover is no higher than EUR 25 000.
(5)       A higher threshold for the
special scheme is a simplification measure, insofar as it may significantly
reduce the VAT obligations of small businesses and would enable Luxembourg to cease applying the graduated tax relief scheme that is burdensome for
businesses. Taxable persons may still opt for the normal VAT arrangements.
(6)       In its proposal for a
Directive amending Directive 77/388/EEC with a view to simplifying valued added
tax obligations dated 29 October 2004[5],
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. This Decision is in line with that proposal.
(7)       The derogating measure
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,
HAS ADOPTED THIS DECISION: 
Article 1
By way of derogation from Article 285
of Directive 2006/112/EC, Luxembourg is authorised to exempt from VAT taxable
persons whose annual turnover is no higher than EUR 25 000.
Article 2
This Decision shall take effect on the day
of its notification.
This Decision shall apply until the date of
entry into force of Union rules amending the amounts of the annual turnover
ceilings below which taxable persons may qualify for VAT exemption or until
31 December 2016, whichever date is earlier.
Article 3 
This
Decision is addressed to the Grand Duchy of Luxembourg.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ 347, 11.12.2006, p.1.
[2]               http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2004:0728:FIN:EN:PDF
[3]               OJ 347, 11.12.2006, p.1.
[4]               OJ 71, 14.4.1967, p. 1303/67
[5]               COM(2004) 728 final.