Proposal for a COUNCIL IMPLEMENTING DECISION extending the application of Council Implementing Decision 2011/335/EU authorising the Republic of Lithuania to continue to apply a special 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: Lithuania, VAT, derogation from EU law, small business, tax collection, tax exemption













EUR-Lex - 52014PC0625 - EN











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52014PC0625

Proposal for a COUNCIL IMPLEMENTING DECISION extending the application of Council Implementing Decision 2011/335/EU authorising the Republic of Lithuania to continue to apply a special measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax /* COM/2014/0625 final - 2014/0289 (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
16 May 2014, Lithuania requested authorisation to continue to exempt taxable
persons whose annual turnover is no higher than the equivalent in national
currency of EUR 45 000 turnover threshold at the conversion rate on the day of
its accession. In accordance with Article 395(2) of the VAT Directive, the
Commission informed the other Member States by letter dated 6 June 2014 of the
request made by Lithuania. By letter dated 12 June 2014, the Commission
notified Lithuania 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.
Lithuania was first
granted the measure by Council Implementing Decision 2011/335/EU[1] which will expire on 31
December 2014. 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 currently allowed for Lithuania under Article
287(11) of the VAT Directive, which is EUR 29 000.
Lithuania has now
requested that the measure, which is optional for taxable persons, be extended
for a further limited period.
From information provided by Lithuania, it appears that the impact of the measure on tax revenue collected at the final
consumption stage is negligible. However, the analysis provided by Lithuania shows that the majority of taxable persons who have registered for VAT purposes
(approximately 82 %) during years 2012-2013 did it on the basis of this
measure. 
It is therefore proposed to extend the
derogation for another 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 continuing 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 Lithuania to continue to
apply a derogating measure from the VAT Directive as regards the introduction
of a simplification measure for businesses with an annual turnover no higher
than EUR 45 000.
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 instruments: 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 Lithuania will carry out a compensation calculation
in accordance with Article 6 of Council Regulation (EEC EURATOM) 1553/89. 
5.           OPTIONAL ELEMENTS 
The proposal includes a sunset clause.
2014/0289 (NLE)
Proposal for a
COUNCIL IMPLEMENTING DECISION
extending the application of Council
Implementing Decision 2011/335/EU authorising the Republic of Lithuania to continue to apply a special 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 16 May 2014, the Republic of Lithuania requested
authorisation for a measure derogating from Article 287(11) of the VAT
Directive in order to continue to exempt certain taxable persons whose annual
turnover is no higher than the equivalent in national currency of EUR 45 000 at
the conversion rate on the day of its accession to the European Union. 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.
(2)       The Commission informed
the other Member States by letter dated 6 June 2014 of the request made by Lithuania. By letter dated 12 June 2014, the Commission notified Lithuania 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 extended 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 Lithuania under Article 287(11) of the
VAT Directive, which is EUR 29 000.
(4)       By Council Implementing
Decision 2011/335/EU of 30 May 2011,[3]
  Lithuania was authorised, as a derogating measure, to exempt taxable persons
whose annual turnover is no higher than EUR 45 000 until 31 December 2014.
Given that this threshold has resulted in reduced VAT obligations for smaller
businesses, Lithuania should be authorised to apply the measure for a further
limited period. Taxable persons may still opt for the normal VAT arrangements.
(5)       From information provided
by Lithuania, the extension of 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
In Article 2 of Decision 2011/335/EU, the
date ‘31 December 2014’ shall be replaced by ‘31 December 2017’.
Article 2
This Decision shall apply from 1 January
2015.
Article 3
This Decision is addressed to the Republic of   Lithuania.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               OJ L 150, 9.6.2011, p. 6.
[2]               OJ L 347, 11.12.2006, p. 1.
[3]               OJ L 150, 9.6.2011, p. 6.