Proposal for a COUNCIL IMPLEMENTING DECISION amending 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
Date: 2017-08-03
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Lithuania, VAT, derogation from EU law, small business, tax exemption

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   EUROPEAN COMMISSION  Brussels, 3.8.2017  COM(2017) 410 final 2017/0183 (NLE)   Proposal for a COUNCIL IMPLEMENTING DECISION amending 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  
 
EXPLANATORY MEMORANDUM 

Pursuant  to  Article  395(1)  of  Directive  2006/112/EC  of  28 November 2006  on  the  common 
system  of  value  added  tax1  (‘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  26  April  2017,  Lithuania  requested  an 
authorisation to continue to exempt taxable persons whose annual turnover is no higher than 
EUR  45 000.  In  accordance  with  Article  395(2)  of  the  VAT  Directive,  the  Commission 
informed  the  other  Member  States  by  letters  dated  8  May  2017  and  10  May  2017  of  the 
request made by Lithuania. By letter dated 11 May 2017, the Commission notified Lithuania 
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  or  her  supplies  and,  consequently,  he  or  she  cannot  deduct 
VAT on the inputs. 

Under  Article  287(11)  of  the  VAT  Directive,  Lithuania  may  exempt  from  VAT  taxable 
persons whose annual turnover is no higher than the equivalent in national currency of EUR 
29 000 at the conversion rate on the day of its accession. By virtue of Council Implementing 
Decision  2011/335/EU2,  Lithuania  is  authorised  to  apply  a  higher  threshold  and  thus  to 
exempt from VAT taxable persons whose annual turnover is no higher than EUR 45 000. This 
measure was extended by Council Implementing Decision 2014/795/EU3 which expires on 31 
December 2017. Lithuania requested to extend the measure for a further limited period.  

The higher threshold reduces significantly administrative burden and tax compliance costs for 
small  enterprises.  According  to  Lithuania,  the  EUR  45 000  threshold  has  not  had  any 
substantial  impact  on the  collection of  VAT  revenues.  Furthermore,  the data  shows that  the 
bulk of taxable persons (approximately 80-90%) who have registered for VAT and who pay 
VAT did so on a voluntary basis.  

Persons  whose  turnover  does  not  exceed  the  threshold  will  still  have  the  option  to  be 
registered for VAT purposes. 

It is therefore requested to extend the derogation until 31 December 2020.  

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OJ L 347, 11.12.2006, p. 1. 
Council Implementing Decision 2011/335/EU of 30 May 2011 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 150, 9.6.2011, p.6). 
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).  

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Consistency with existing policy provisions in the policy area 

• 
Similar derogations have been granted to other Member States. Luxembourg4 was granted a 
threshold  of  EUR 40 000,  Belgium5  was  granted  a  threshold  of  EUR 25 000,  Poland6  a 
threshold  of  EUR 40 000,  Latvia7  and  Slovenia8  a  threshold  of  EUR 50 000,  Italy9  and 
Romania10 a threshold of EUR 65 000.  

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  Plan11,  and  the  2017  Commission  Work  Programme12,  the  Commission's 
proposal in the form of a comprehensive simplification package is due to be presented by the 
end of 2017. 

It is therefore proposed to extend the measure until 31 December 2020 or until the entry into 
force of a  Directive amending the provisions of the VAT Directive on a special scheme for 
small enterprises.  

• 

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. 

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Council Implementing Decision (EU) 2017/319 of 21 February 2017 amending Implementing Decision 
2013/677/EU 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 47, 24.2.2017, p. 7-8).  
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  (EU)  2016/2090  of  21  November  2016  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 324, 30.11.2016, p.7). 
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  (EU)  2015/2089  of  10  November  2015  amending  Implementing 
Decision  2013/54/EU  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  302, 
19.11.2015, p.107). 
Council  Implementing  Decision  (EU)  2016/1988  of  8  November  2016  amending  Implementing 
Decision  2013/678/EU  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 
306, 15.11.2016, p. 11). 
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). 
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, 
Brussels, 7.4.2016, COM(2016)148 final. 
Commission  Work  Programme  2017  -  Delivering  a  Europe  that  protects,  empowers  and  defends, 
Strasbourg, 25.10.2016, COM(2016)710 final 
COM(2008) 394 of 25 June 2008. 

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2. 

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LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 395 of the VAT Directive.  

• 

Subsidiarity (for non-exclusive competence)  

Considering  the  provision  of  the  VAT  Directive  on  which  the  proposal  is  based,  the 
subsidiarity principle 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. simplification for an additional number of small taxable persons and for the tax 
administration. 

• 

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. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

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

• 

Collection and use of expertise 

There was no need for external expertise. 

• 

Impact assessment 

The proposal for a Council Implementing Decision authorises Lithuania to continue to exempt 
from  VAT  taxable  persons  whose  annual  turnover  does  not  exceed  EUR 45 000.  Persons 
whose  taxable  turnover  does  not  exceed  the  threshold  do  not  have  to  register  for  VAT 
purposes, and thus the administrative burden on them will reduce as a result of the measure, 
since they will not need to keep VAT records or submit a VAT return.  

According to Lithuania, the EUR 45 000 threshold has not had any substantial impact on the 
collection of VAT revenues.  

4. 

BUDGETARY IMPLICATIONS 

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

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5. 

OTHER ELEMENTS 

The proposal includes a sunset clause. 

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2017/0183 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending 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 

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 tax1, and in particular Article 395 thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

By  a  letter  registered  with  the  Commission  on  26  April  2017,  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 EUR 45 000. 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. 

The Commission informed the other Member States by letters dated 8 May 2017 and 
10  May  2017  of  the  request  made  by  Lithuania.  By  letter  dated  11  May  2017,  the 
Commission notified Lithuania that it had all the information necessary to consider the 
request. 

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. 
By  Council  Implementing  Decision  2011/335/EU2,  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.  By  Council  Implementing  Decision 
2014/795/EU3 the derogating measure was extended until 31 December 2017.  

(5) 

Given that the fixed threshold resulted in reduced VAT obligations and thus reduction 
of administrative costs for small enterprises, Lithuania should be authorised to apply 

1 
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3 

OJ L 347, 11.12.2006, p.1. 
Council Implementing Decision 2011/335/EU of 30 May 2011 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 150, 9.6.2011, p.6). 
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 (OJ L 330, 15.11.2014, p.44).  

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the  measure  for  a  further  limited  period,  until  31  December  2020.  Taxable  persons 
may still opt for normal VAT arrangements.  

(6) 

(7) 

(8) 

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. 

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. 

The  derogation  has  no  impact  on  the  Union's  own  resources  accruing  from  value 
added tax because Lithuania will carry out a compensation calculation in accordance 
with Article 6 of Council Regulation (EEC EURATOM) 1553/89, 

HAS ADOPTED THIS DECISION:  

Article 1 

In  the  second  paragraph  of  Article  2  of  Implementing  Decision  2011/335/EU  the  terms  'the 
date of entry into force of a Directive amending the amounts of the annual turnover ceilings 
below which taxable persons may qualify for VAT exemption or until 31 December 2017' are 
replaced  by  '31  December  2020  or  until  the  entry  into  force  of  a  directive  amending  the 
provisions of Articles 281 to 294 of Directive 2006/112/EC'.  

This Decision shall apply from 1 January 2018.  

Article 2 

This Decision is addressed to the Republic of Lithuania.  

Done at Brussels, 

Article 3 

For the Council 
The President 

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