Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2013/676/EU authorising 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: 2016-06-01
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Romania, VAT, basis of tax assessment, derogation from EU law, supply, taxpayer, wood product

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   EUROPEAN COMMISSION  Brussels, 1.6.2016  COM(2016) 354 final 2016/0163 (NLE)   Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2013/676/EU authorising 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  
 
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  9  February  2016,  Romania  has  requested  an 
extension  of  the  derogation  from  Article  193  of  the  VAT  Directive  in  order  to  apply  the 
reverse charge mechanism to wood products. In accordance with Article 395(2) of the VAT 
Directive, the Commission informed the other Member States by letter dated 23 March 2016 
of  the  request  made  by  Romania.  By  letter  dated  29  March  2016,  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). 

Pursuant  to  Article  395  of  the  VAT  Directive,  Romania  requested  in  2009  a  derogation  in 
order to be authorised to apply the reverse charge mechanism to, inter alia, supplies of wood 
products. Under this procedure, the taxable person, to whom the supplies are made, becomes 
liable for the payment of the VAT. These woods products include, more 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. 
This  request  was  approved  by  Council  Implementing  Decision  2010/583/EU1  until  31 
December 2013 and, as regards the wood products, subsequently extended until 31 December 
2016 by Council Implementing Decision 2013/676/EU2. 

Romania has now again asked for an extension of the derogation regarding the application of 
the reverse charge mechanism to supplies of these wood products. 

On  the  basis  of  the  report  provided  by  Romania,  which  was  presented  together  with  the 
request  for  extension  of  the  measure,  designating  the  recipient  as  the  person  liable  for  the 
payment  of  VAT  for  supplies  of  the  above-mentioned  wood  products  had  the  effect  of 
preventing tax evasion and avoidance in this sector which is characterised by a large number 
of small resellers and intermediaries which have proved difficult to control. An extension for 
another limited period seems therefore justifiable as it would not appear that the measure has 
had a negative impact on fraud at the retail level, in other sectors or in other Member States. 

However,  any  new  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 2019 and that Romania shall again present a report, which 

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Council Implementing Decision 2010/583/EU of 27 September 2010 authorising Romania to introduce 
a  special  measure  derogating  from  Article  193  of  Directive  2006/112/EC  on  the  common  system  of 
value added tax (OJ L 256, 30.9.2010, p. 27) 
Council Implementing Decision 2013/676/EU of 15 November 2013 authorising 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 (OJ L 316, 27.11.2013, p. 31) 

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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. 

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LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 395 of the VAT Directive. 

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Subsidiarity (for non-exclusive competence)  

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 

The 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, i.e. to prevent certain forms of tax evasion or avoidance in a specific sector.  

• 

Choice of the instrument 

Under  Article  395  of  the  VAT  Directive,  derogation  from  the  common  VAT  rules  is  only 
possible  with  the  authorisation  of  the  Council  acting  unanimously  on  a  proposal  from  the 
Commission.  Moreover,  a  Council  Decision  is  the  most  suitable  instrument  since  it  can  be 
addressed to individual Member States. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

This proposal is based on a request made by Romania and concerns only this Member State. 

• 

Collection and use of expertise 

There was no need for external expertise. 

• 

Impact assessment 

The  Decision  proposal  aims  at  preventing  certain  forms  of  tax  evasion  or  avoidance  in  the 
wood  sector  and  has  therefore  a  potential  positive  impact  as  it  will  continue  to  prevent 
previously  applied  fraud  schemes  in  this  wood  sector.  The  non-extension  of  the  measure 
would, according to Romania, inevitably lead to the revival of these schemes. 

However, because of the narrow scope of the derogation and the limited application in time, 
the impact will in any case be limited. 

4. 

BUDGETARY IMPLICATIONS 

The proposal will have no negative implication for the EU budget. 

5. 

OTHER ELEMENTS 

The proposal includes a sunset clause;  an automatic time limit which is set at 31 December 
2019. 

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2016/0163 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Implementing Decision 2013/676/EU authorising 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 tax3, and in particular Article 395 thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

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 value added tax (VAT) 
to the tax authorities. 

Implementing  Decision  2010/583/EU4 

Council 
subsequently  Council 
Implementing  Decision  2013/676/EU5  authorised  Romania  to  apply  a  derogating 
measure  in  order  to  designate  the  recipient  as  the  person  liable  for  the  payment  of 
VAT in case of supplies of wood products by taxable persons. 

and 

By  letter  registered  with  the  Commission  on  9  February  2016,  Romania  requested 
authorisation to continue to apply the measure beyond 31 December 2016. 

The Commission informed the other Member States of the request made by Romania 
in  a  letter  dated  23  March  2016.  By  letter  dated  29  March  2016,  the  Commission 
notified Romania that it had all the information necessary to consider the request. 

Prior to the authorisation to apply the 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. According to  the report of Romania, presented together 
with the request for extension of the measure, designating the recipient as the person 
liable for the payment of VAT had the effect of preventing tax evasion and avoidance 
in this sector and remains therefore 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. 

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OJ L 347, 11.12.12006, p. 1. 
Council Implementing Decision 2010/583/EU of 27 September 2010 authorising Romania to introduce 
a  special  measure  derogating  from  Article  193  of  Directive  2006/112/EC  on  the  common  system  of 
value added tax (OJ L 256, 30.9.2010, p. 27). 
Council Implementing Decision 2013/676/EU of 15 November 2013 authorising 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 (OJ L 316, 27.11.2013, p. 31). 

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(7) 

The  measure  should  not,  in  the Commission's  view,  have  any  adverse  impact  on  the 
prevention of fraud at the retail level, in other sectors or in other Member States. 

(8) 

The authorisation should be limited in time until 31 December 2019. 

(9)  Where  Romania  considers  that  a  further  extension  beyond  2019  is  necessary,  a  new 
report together with the extension request should be submitted to the Commission no 
later than 1 April 2019. 

(10)  The derogating measure has no adverse impact on the Union's own resources accruing 

from VAT. 

(11) 

Implementing Decision 2013/676/EU should therefore be amended accordingly, 

HAS ADOPTED THIS DECISION:  

Article 1 

 Implementing Decision 2013/676/EU is amended as follows: 

(a) in Article 1 the date ‘31 December 2016’ is replaced by ‘31 December 2019’; 

(b) in Article 3 the date ‘1 April 2016’ is replaced by ‘1 April 2019’. 

This Decision is addressed to Romania. 

Done at Brussels, 

Article 2 

For the Council 
The President 

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