Proposal for a COUNCIL IMPLEMENTING DECISION amending Decision 2009/790/EC authorising the Republic of Poland to apply a measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax
Date: 2016-10-20
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Poland, VAT, derogation from EU law, small and medium-sized enterprises, tax exemption, tax-free allowance, turnover

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   EUROPEAN COMMISSION  Brussels, 20.10.2016  COM(2016) 665 final 2016/0326 (NLE)   Proposal for a COUNCIL IMPLEMENTING DECISION amending Decision 2009/790/EC authorising the Republic of Poland to apply a measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax  
 
EXPLANATORY MEMORANDUM 

Pursuant to Article 395(1) of Directive 2006/112/EC of 28 November 2006 on the  common 
system of value added tax1 (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 June 2016, Poland requested an authorisation 
to exempt taxable persons whose annual turnover is no higher than the equivalent in national 
currency  of  EUR  40 000.  In  accordance  with  Article  395(2)  of  the  VAT  Directive,  the 
Commission  informed  the  other  Member  States  by  letters  dated  22  September  2016  of  the 
request made by Poland. By letter dated 23 September 2016, the Commission notified Poland 
that it had all the information necessary to consider the request. 

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CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

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 the VAT on his 
input. 

Under Article 287(14) of the VAT Directive, Poland may exempt from VAT taxable persons 
whose annual turnover is no higher than the equivalent in national currency of EUR 10 000 at 
the conversion rate on the day of its accession. 

In 2009, Poland requested a derogation in order to simplify VAT obligations for small traders 
and to ease the collection of the tax for the national tax administration. By Council Decision 
2009/790/EC  of  20  October  20092,  the  Council  authorised  Poland  to  exempt  from  VAT 
taxable persons whose annual turnover is no higher than the equivalent in national currency of 
EUR 30 000 until 31 December 2012. By Council Implementing Decision 2012/769/EU3, the 
derogation  was  extended  until  31  December  2015  and  again,  by  Council  Implementing 
Decision 2015/1173/EU4, until 31 December 2018. 

Poland has now requested to be authorised to raise the exemption threshold from EUR 30 000 
to EUR 40 000 for the remaining period of the current derogation. Via this demand, Poland 
wants to simplify the burden on business for a higher number of taxable persons who have a 
limited  business  activity  and  to  stimulate  the  development  of  such  small  businesses.  At  the 
same time, Poland wants to reduce the burden on the tax administration by limiting the need 
to  control  small  taxable  persons,  which  is  relatively  costly  in  comparison  to  the  amount  of 
VAT at stake, and to strengthen its control activities towards larger taxable persons. It is in 
this context to be noted that the measure is and will remain fully optional for taxable persons. 

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OJ L 347, 11.12.2006, p. 1. 
Council  Decision  2009/790/EC  of  20  October  2009  authorising  the  Republic  of  Poland  to  apply  a 
measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added 
tax (OJ L 283, 30.10.2009, p. 53). 
Council  Implementing  Decision  2012/769/EU  of  4  December  2012  amending  Decision  2009/790/EC 
authorising  the  Republic  of  Poland  to  apply  a  measure  derogating  from  Article  287  of  Directive 
2006/112/EC on the common system of value added tax (OJ L 338, 12.12.2012, p. 27). 
Council  Implementing  Decision  2015/1173/EU  of  14  July  2015  amending  Decision  2009/790/EC 
authorising  the  Republic  of  Poland  to  apply  a  measure  derogating  from  Article  287  of  Directive 
2006/112/EC on the common system of value added tax (OJ L 189, 17.7.2015, p. 36). 

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The derogation measure is currently applicable until 31 December 2018. It is appropriate to 
maintain this end date. Derogations from the VAT Directive should always be limited in time 
so that their effects can  be assessed. Moreover, the provisions of Articles 281 to 294 of the 
VAT Directive on a special scheme for small enterprises are currently subject to review. As 
announced  in  the  VAT  Action  Plan5,  the  Commission's  proposal  in  the  form  of  a 
comprehensive simplification package is due to be presented by the end of 2017. A Directive, 
amending  the  provisions  of  the  VAT  Directive  on  a  special  scheme  for  small  enterprises, 
might therefore enter into force before the above-mentioned date. 

Consistency with existing policy provisions in the policy area 

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Similar  derogations  have  been  granted  to  other  Member  States.  Belgium6  and  Luxemburg7 
were granted a threshold of EUR 25 000, Lithuania8 a threshold of EUR 45 000, Latvia9 and 
Slovenia10 a threshold of EUR 50 000, Italy11 and Romania12 a threshold of EUR 65 000. 

• 

Consistency with other Union policies 

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"13 
which  calls  on  the  Member  States  to  take  account  of  the  special  features  of  SMEs  when 
designing legislation and, therefore, to simplify the existing regulatory environment. 

2. 

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LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 395 of the VAT Directive. 

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Communication from the Commission to the European Parliament, the Council and the European and 
Social  Committee  on  an  action  plan  on  VAT,  Towards  a  single  EU  VAT  area  –  Time  to  decide 
(COM(2016)148 final of 7.4.2016). 
Council  Implementing  Decision  (EU)  2015/2348  of  10  December  2015  amending  Implementing 
Decision 2013/53/EU authorising the Kingdom of Belgium  to introduce a special measure derogating 
from  Article  285  of  Directive  2006/112/EC  on  the  common  system  of  value  added  tax  (OJ  L  330, 
16.12.2015, p. 51). 
Council  Implementing  Decision  2013/677/EU  of  15  November  2013  authorising  Luxembourg  to 
introduce  a  special  measure  derogating  from  Article  285  of  Directive  2006/112/EC  on  the  common 
system of value added tax (OJ L 316, 27.11.2013, p. 33). 
Council  Implementing  Decision  2014/795/EU  of  7  November  2014  extending  the  application  of 
Implementing  Decision  2011/335/EU  authorising  the  Republic  of  Lithuania  to  apply  a  measure 
derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax (OJ 
L 330, 15.11.2014, p. 44). 
Council Implementing Decision 2014/796/EU of 7 November 2014 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 (OJ L 330, 15.11.2014, p. 46). 
Council Implementing Decision 2013/54/EU of 22 January 2013 authorising the Republic of Slovenia 
to introduce a special measure derogating from Article 287 of Directive 2006/112/EC on the common 
system of value added tax (OJ L 22, 25.1.2013, p.15). 
Council Implementing Decision 2013/678/EU of 15 November 2013 authorising the Italian Republic to 
continue  to  apply  a  special  measure  derogating  from  Article  285  of  Directive  2006/112/EC  on  the 
common system of value added tax (OJ L 316, 27.11.2013, p. 35). 
Council  Implementing  Decision  2014/931/EU  of  16  December  2014  extending  the  application  of 
Implementing  Decision  2012/181/EU  authorising  Romania  to  introduce  a  special  measure  derogating 
from  Article  287  of  Directive  2006/112/EC  on  the  common  system  of  value  added  tax  (OJ  L  365, 
19.12.2014, p. 145). 
COM(2008) 394 of 25 June 2008. 

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• 

Subsidiarity (for non-exclusive competence)  

Considering  the  provision  of  the  VAT  Directive  on  which  the  proposal  is  based,  the 
subsidiarity principle does not apply. 

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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. simplification for an additional number of small taxable persons and for the tax 
administration. 

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Choice of the instrument 

Proposed instrument: Council Implementing Decision. 

Under  Article  395  of  Council  Directive  2006/112/EC,  derogation  from  the  common  VAT 
rules  is  only  possible  upon  authorisation  of  the  Council  acting  unanimously  on  a  proposal 
from the Commission. A Council Implementing Decision is the most suitable instrument since 
it can be addressed to an individual Member State. 

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RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

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

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Collection and use of expertise 

There was no need for external expertise. 

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Impact assessment 

The  proposal  for  a  Council  Implementing  Decision  aims  at  extending  a  simplification 
measure which removes many of the VAT obligations for businesses operating with an annual 
turnover no higher than the equivalent in national currency of EUR 40 000 and has therefore a 
potential  positive impact on the reduction  of  administrative burden for  an  additional  24 000 
taxable persons and, subsequently, on the tax administration. The budgetary impact in terms 
of VAT revenue for Poland is estimated at PLN 300 million. 

4. 

BUDGETARY IMPLICATIONS 

The  proposal  has  no  implication  for  the  EU  budget  because  Poland  will  carry  out  a 
compensation  calculation  in  accordance  with  Article  6  of  Council  Regulation  (EEC 
EURATOM) 1553/89. 

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2016/0326 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Decision 2009/790/EC authorising the Republic of Poland 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 tax14, and in particular Article 395 thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

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Article  287(14)  of  Directive  2006/112/EC  authorises  Poland  to  exempt  from  VAT 
taxable  persons  whose  annual  turnover  is  no  higher  than  the  equivalent  in  national 
currency of EUR 10 000 at the conversion rate on the day of its accession. 
By Council Decision 2009/790/EC15, Poland was authorised, until 31 December 2012 
and as a derogation, to exempt from VAT taxable persons whose annual turnover is no 
higher than the equivalent in national currency of EUR 30 000 at the conversion rate 
on  the  day  of  its  accession.  By  Council  Implementing  Decision  2012/769/EU16,  the 
derogatory measure provided for in Council Decision 2009/790/EC was extended until 
31  December  2015  and  again  extended  by  Council  Implementing  Decision 
2015/1173/EU17 until 31 December 2018. 

In  a  letter  registered  with  the  Commission  on  1  June  2016,  Poland  requested 
authorisation  to  increase  that  threshold  from  EUR  30 000  to  EUR  40 000.  Through 
that measure, an additional number of small taxable persons could be exempted from 
certain  or  all  of  the  obligations  in  relation  to  VAT  referred  to  in  Chapters  2  to  6  of 
Title XI of Directive 2006/112/EC. The burden on the tax administration to audit very 
small businesses would therefore also be decreased. 

The  Commission  informed  the  other  Member  States  by  letters  dated  22  September 
2016  of  the  request  made  by  Poland.  By  letter  dated  23  September  2016,  the 
Commission  notified Poland that it had  all the information necessary to consider  the 
request. 

OJ L 347, 11.12.2006, p.1. 
Council  Decision  2009/790/EC  of  20  October  2009  authorising  the  Republic  of  Poland  to  apply  a 
measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added 
tax (OJ L 283, 30.10.2009, p. 53). 
Council  Implementing  Decision  2012/769/EU  of  4  December  2012  amending  Decision  2009/790/EC 
authorising  the  Republic  of  Poland  to  apply  a  measure  derogating  from  Article  287  of  Directive 
2006/112/EC on the common system of value added tax (OJ L 338, 12.12.2012, p. 27). 
Council  Implementing  Decision  2015/1173/EU  of  14  July  2015  amending  Decision  2009/790/EC 
authorising  the  Republic  of  Poland  to  apply  a  measure  derogating  from  Article  287  of  Directive 
2006/112/EC on the common system of value added tax (OJ L189, 17.7.2015, p. 36). 

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(5) 

(6) 

From  the  information  provided  by  Poland,  potentially  24 000  additional  taxable 
persons could make use of this measure in order to reduce their VAT obligations. The 
budgetary impact in terms of VAT revenue has been estimated by Poland at PLN 300 
million. 

Given that a higher threshold will result in reduced VAT obligations for the smallest 
businesses,  whilst  the  latter  may  still  opt  for  the  regular  VAT  arrangements  in 
accordance with Article 290 of Directive 2006/112/EC, Poland should be authorised to 
apply the increased threshold for the remaining application period of Council Decision 
2009/790/EC; which is until 31 December 2018. However, the provisions of Articles 
281  to  294  of  Directive  2006/112/EC  on  a  special  scheme  for  small  enterprises  are 
subject  to  review  and  a  Directive,  amending  these  provisions  of  the  VAT  Directive, 
might therefore enter into force before the above-mentioned date. 

(7) 

The  derogation  has  no  impact  on  the  Union's  own  resources  accruing  from  VAT 
because Poland will carry out a compensation calculation in accordance with Article 6 
of Council Regulation (EEC EURATOM) 1553/8918. 

(8) 

Decision 2009/790/EC should therefore be amended accordingly, 

HAS ADOPTED THIS DECISION:  

Article 1 and 2 of Decision 2009/790/EC are replaced by the following: 

Article 1 

'Article 1 

By way of derogation from Article 287 of Directive 2006/112/EC, the Republic of Poland is 
authorised to exempt from VAT taxable persons whose annual turnover is no higher than the 
equivalent  in  national  currency  of  EUR 40 000  at  the  conversion  rate  on  the  day  of  its 
accession. 

This Decision shall apply until the entry into force of a Directive amending the provisions of 
Articles  281  to  294  of  Directive  2006/112/EC  on  a  special  scheme  for  small  enterprises,  or 
until 31 December 2018, whichever is the earlier.'. 

Article 2 

This Decision is addressed to the Republic of Poland. 

Article 2 

Done at Brussels, 

For the Council 
The President 

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Council  Regulation  (EEC,  Euratom)  No  1553/89  of  29  May  1989  on  the  definitive  uniform 
arrangements for the collection of own resources accruing from value added tax (OJ L 155, 7.6.1989, 
p. 9). 

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