Proposal for a COUNCIL IMPLEMENTING DECISION authorising the Republic of Latvia to apply a measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax
Date: 2014-10-13
Institutions: European Commission
Subjects: Latvia, VAT, derogation from EU law, small business, tax collection, tax exemption













EUR-Lex - 52014PC0626 - EN











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52014PC0626

Proposal for a COUNCIL IMPLEMENTING DECISION authorising the Republic of Latvia to apply a measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax /* COM/2014/0626 final - 2014/0290 (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
1 July 2014, Latvia requested authorisation to exempt taxable persons whose
annual turnover is no higher than EUR 50 000. In accordance with Article 395(2)
of the VAT Directive, the Commission informed the other Member States by letter
dated 7 August 2014 of the request made by Latvia. By letter dated 11 August
2014, the Commission notified Latvia 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 cannot deduct VAT on
his inputs.
Latvia was first
granted the same exemption by Council Implementing Decision 2010/584/EU[1] which had expired on 31
December 2013. The measure derogated from Title XII of the VAT Directive only
in so far as the taxable person’s annual turnover threshold for the special
scheme was higher than that currently allowed for Latvia under Article 287(10)
of the VAT Directive, which is EUR 17 200.
Based on this experience, Latvia has now requested to be authorised again to apply the measure, which would anyhow be
optional for taxable persons.
From information provided by Latvia, it appears that the impact of the measure on tax revenue collected at the final
consumption stage is negligible. 
It is therefore proposed to provide the
derogation for a limited period until 31 December 2017. 
Existing provisions in the area of the
proposal
Similar derogations have been granted to
other Member States.
Consistency with the other policies and
objectives of the Union.
The measure is in line with the Union's
objectives for small businesses, as laid out in Commission Communication
"Think small first" – a "Small Business Act" for
Europe" (COM(2008) 394 of 25 June 2008).
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 decision aims at providing a
simplification measure which removes many of the VAT obligations for businesses
operating below an annual turnover.
Because of the narrow scope of the
derogation, and its limited application in time, the scope will in any case be
limited.
3.           LEGAL ELEMENTS OF THE
PROPOSAL
Summary of the proposed action
Authorisation for Latvia to apply a
derogating measure from the VAT Directive as regards the application of a
simplification measure for businesses with an annual turnover no higher than
EUR 50 000.
Legal basis
Article 395 of the VAT Directive.
Subsidiarity principle
Considering the provision of the VAT
Directive on which the proposal is based, 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 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 instrument: Council Implementing
Decision.
Other means would not be adequate for the
following reasons:
Under Article 395 of the VAT Directive,
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
Implementing 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 because Latvia will carry out a compensation calculation in
accordance with Article 6 of Council Regulation (EEC, EURATOM) No 1553/89. 
5.           OPTIONAL ELEMENTS 
The proposal is limited in time.
2014/0290 (NLE)
Proposal for a
COUNCIL IMPLEMENTING DECISION
authorising the Republic of Latvia to apply a measure derogating from Article 287 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 ([2]) (the VAT Directive),
and in particular Article 395(1) thereof,
Having regard to the proposal from the
European Commission,
Whereas:
(1)       In a letter registered by
the Commission on 1 July 2014, the Republic of Latvia requested authorisation
for a measure derogating from Article 287(10) of the VAT Directive in order to
exempt certain taxable persons whose annual turnover is no higher than EUR 50
000. Through that measure, those taxable persons would be exempt 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 the VAT Directive. Such measure had already been
granted to the Republic of Latvia by Council Implementing Decision 2010/584/EU[3] which expired on 31
December 2013.
(2)       The Commission informed
the other Member States by letter dated 7 August 2014 of the request made by Latvia. By letter dated 11 August 2014, the Commission notified Latvia that it had all the
information necessary to consider the request.
(3)       A special scheme for small
enterprises is already available to Member States under Title XII of the VAT
Directive. The measure derogates from Title XII of the VAT Directive only in so
far as the taxable person’s annual turnover threshold for the special scheme is
higher than that allowed for Latvia under Article 287(10) of the VAT Directive,
which is EUR 17 200.
(4)       A higher threshold for the
special scheme is a simplification measure as it may significantly reduce the
VAT obligations of the smallest businesses, whilst that special scheme is
optional for taxable persons and allows businesses to opt for the normal VAT
arrangements.
(5)       From information provided
by Latvia, the derogation will only have a negligible impact on the overall
amount of tax revenue collected at the final stage of consumption.
(6)       The derogation has no
impact on the Union's own resources accruing from value added tax,
HAS ADOPTED THIS DECISION: 
Article 1
By way of derogation from Article 287(10) of
Directive 2006/112/EC, the Republic of Latvia is authorised to exempt from VAT
taxable persons whose annual turnover is no higher than EUR 50 000. 
Article 2
This Decision shall apply until 31 December
2017.
Article 3
This Decision is addressed to the Republic of   Latvia.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 256, 30.9.2010, p. 29.
[2]               OJ L 347, 11.12.2006, p. 1.
[3]               OJ L 256, 30.9.2010, p. 29.