Proposal for a COUNCIL IMPLEMENTING DECISION authorising Romania to apply a special measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax
Date: 2017-08-11
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Romania, VAT, derogation from EU law, small business, tax exemption

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   EUROPEAN COMMISSION  Brussels, 11.8.2017  COM(2017) 426 final 2017/0192 (NLE)   Proposal for a COUNCIL IMPLEMENTING DECISION authorising Romania to apply a special 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 
derogating  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, Romania requested to  continue 
the application of the measure derogating from Article 287 of the VAT Directive allowing the 
exemption  from  VAT  of  taxable  persons  with  an  annual  turnover  not  exceeding  a  specific 
threshold. At the same time Romania requested to increase the exemption threshold from the 
equivalent  in  national  currency  of  EUR 65 000  to  the  equivalent  in  national  currency  of 
EUR 88 500.  

In accordance with Article 395(2) of the VAT Directive, the Commission informed the other 
Member States by letter dated 9 June 2017 of the request made by Romania. By letter dated 
12 June 2017, the Commission notified Romania 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. 

Based  on  Article  287(18)  of  the  VAT  Directive,  Romania  may  exempt  from  VAT  taxable 
persons whose annual turnover is no higher than the equivalent in national currency of EUR 
35 000 at the conversion rate on the day of its accession. By virtue of Council Implementing 
Decision 2012/181/EU2 Romania is authorised to apply a higher threshold and thus to exempt 
from VAT taxable persons with an annual turnover not exceeding EUR 65 000. This measure 
was  extended  by  Council  Implementing  Decision  2014//931/EU3  which  expires  on  31 
December 2017. Romania requested to extend the measure for a further limited period and at 
the same to increase the exemption threshold to EUR 88 500.  

Raising  the  threshold  is  expected  to  reduce  VAT-related  obligations  for  a  number  of  small 
enterprises  with  reduced  economic  activity  and  to  stimulate  the  activity  of  these  small 
enterprises, as they will be relieved from a number of tax obligations such as filing of VAT 
returns or keeping VAT records. It is also anticipated that the increase of the threshold will 
reduce the burden of the tax authorities by removing the need to monitor the collection of a 
small volume of revenues from a larger number of small enterprises.  

According to Romania, the increase of the threshold will have no important impact on state 
revenues. It is estimated that the increase of the threshold would lead to the reduction of state 
budget revenues of approximately 0.60% of total VAT receipts.  

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

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3 

OJ L 347, 11.12.2006, p. 1.  
OJ L 92, 30.3.2012, p. 26.  
OJ L 365, 19.12.2014, p. 145.  

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Consistency with existing policy provisions in the policy area 

• 
Similar  derogations  have  been  granted  to  other  Member  States.  Belgium4  was  granted  a 
threshold of EUR 25 000, Luxembourg5 was granted a threshold of EUR 30 000, Poland6 and 
Estonia7  a  threshold  of  EUR  40 000,  Lithuania8  a  threshold  of  EUR  45 000,  Latvia9  and 
Slovenia10 a threshold of EUR 50 000 and Italy11 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  Plan12,  and  the  2017  Commission  Work  Programme13,  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  allow  for  the  raising  of  the  threshold  by  Romania  up  to  the 
equivalent  in  national  currency  of  EUR  88 500  as  from  1  January  2018  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 

Although the threshold is rather high compared to the level of thresholds granted to the other 
Member States, 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 

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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) 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  2016/2090//EU  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 (EU) 2017/563 of 21 March 2017 authorising the Republic of Estonia 
to  apply  a  special  measure  derogating  from  Article  287  of  Directive  2006/112/EC  on  the  common 
system of value added tax (OJ L 80, 25.3.2017, 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  (EU)  2015/2089/EU  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/EU  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). 
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 

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Europe"14 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.  

• 

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,  derogating  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. 

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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 Romania 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 increases the threshold of annual turnover 
below which taxable persons may be exempted from VAT. It therefore extends the scope of 
the  simplification  measure  which  removes  many  of  the  VAT  obligations  for  businesses 
operating  with  an  annual  turnover  no  higher  than  the  equivalent  in  the  national  currency  of 
EUR 88 500.  

Persons whose taxable turnover does not exceed the threshold will not have to be identified 
for  VAT  purposes  and  will  not  need  to  keep  VAT  records  or  submit  VAT  returns.  The 
administrative burden on them will thus reduce as a result of the measure. There will also be a 

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COM(2008) 394 of 25 June 2008. 

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reduction in the workload for the tax authorities which will not need to monitor the collection 
of a small volume of revenues from an additional number of small enterprises.  

The budgetary impact of the increase of the ceiling in terms of VAT revenue for Romania is 
estimated at around 0.60% of total VAT receipts. 

4. 

BUDGETARY IMPLICATIONS 

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

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2017/0192 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Romania 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 tax15, and in particular Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

Under  Article  287(18)  of  Directive  2006/112/EC,  Romania  may  exempt  from  value 
added  tax  (VAT)  taxable  persons  whose  annual  turnover  is  no  higher  than  the 
equivalent in national currency of EUR 35 000 at the conversion rate on the day of its 
accession. 
By virtue of Council Implementing Decision 2012/181/EU16 Romania is authorised to 
apply  a  higher  threshold  and  to  exempt  from  VAT  taxable  persons  with  annual 
turnover  not  exceeding  EUR  65 000.  This  measure  was  extended  by  Council 
Implementing Decision 2014/931/EU17 which expires on 31 December 2017. 

By  letter  registered  with  the  Commission  on  26  April  2017  Romania  requested  the 
authorisation to continue derogating from Article 287 (18) of Directive 2006/112/EC 
and at the same time to increase the exemption threshold to the equivalent in national 
currency of EUR 88 500.  

A  higher  threshold  for  the  special  scheme  for  small  enterprises  is  a  simplification 
measure, as it may significantly reduce the VAT obligations of small enterprises. 

In  accordance  with  Article  395(2)  of  Directive  2006/112/EC,  the  Commission 
informed the other Member States by letter dated 9 June 2017 of the request made by 
Romania. The Commission notified Romania by letter dated 12 June 2017 that it had 
all the information necessary to consider the request. 

(6) 

Romania  expects  that  the  measure  reduces  VAT-related  obligations  for  a  number  of 
small enterprises. It should also reduce the burden on the tax authorities by removing 

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OJ L 347, 11.12.2006, p. 1. 
Council  Implementing  Decision  2012/181/EU  of  26  March  2012  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 92, 30.3.2012, p. 26).  
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).  

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(7) 

(8) 

(9) 

the need to monitor the collection of a small volume of revenues from larger number 
of small enterprises.  

Given that this derogating measure is to result in reduced VAT obligations for small 
enterprises, Romania should be authorised to apply the measure for a limited period. 
Taxable persons should still be able to opt for the normal VAT arrangements. 

As  Articles  281  to  294  of  Directive  2006/112/EC  governing  the  special  scheme  for 
small  enterprises are subject to  review, it is  possible that a directive amending those 
provisions of Directive 2006/112/EC will enter into force before the period of validity 
of the derogation expires. 

Based  on  information  provided  by  Romania,  the  increased  threshold  will  have  a 
negligible impact on the overall amount of tax revenue collected at the stage of final 
consumption. 

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

HAS ADOPTED THIS DECISION:  

By way of derogation from Article 287(18) of Directive 2006/112/EC, Romania is authorised 
to exempt from VAT taxable persons whose annual turnover is no higher than the equivalent 
in national currency of EUR 88 500 at the conversion rate on the day of its accession. 

Article 1 

This Decision shall apply from 1 January 2018 until 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, 
whichever date is the earlier. 

Article 2 

This Decision is addressed to Romania. 

Done at Brussels, 

Article 3 

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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