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: 2018-10-26
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Poland, VAT, derogation from EU law, small business, tax exemption

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   EUROPEAN COMMISSION  Brussels, 26.10.2018 COM(2018) 713 final 2018/0366 (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 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 15 May 2018, Poland requested an authorisation 
to continue to exempt from VAT 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 20 July 2018 
except from Spain which was informed by a letter dated 23 July 2018. By letter dated 23 July 
2018, the Commission notified Poland that it had all the information necessary to consider the 
request. 

1. 

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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. 

By  Council  Decision  2009/790/EC1  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/EU2, the 
derogation was extended until 31 December 2015 and subsequently by Council Implementing 
Decision  2015/1173/EU3  until  31  December  2018.  Council  Implementing  Decision  (EU) 
2016/20904  increased  the  exemption  threshold  to  the  equivalent  in  national  currency  of 
EUR 40 000.  

Poland  requested  an  extension  of  that  measure  for  another  limited  period.  Poland  indicated 
that  the  reasons  for  the  derogation  request  remain  largely  unchanged.  The  special  measure 
simplifies the burden on business for a higher number of taxable persons who have a limited 
business activity and stimulates the development of such small businesses. At the same time 

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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). 
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. 7–8).  

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the measure results in the reduction of the administrative 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. It also allows strengthening the control activities towards larger 
taxable persons. The measure is and will remain fully optional for taxable persons. 

Given a potential positive impact on the reduction of administrative burden for businesses and 
tax administration without a major impact on the total VAT revenue, it is proposed to extend 
the  derogation  for  another  limited  period,  until  31  December  2021.  The  Commission  has 
recently  launched  a  proposal5  modifying  Articles  281  to  294  of  Directive  2006/112/EC 
governing  the  special  scheme  for  small  enterprises.  It  is  thus  possible  that  a  directive 
amending  those  Articles  enters  into  force  and  sets  a  date  from  which  Member  States  are  to 
apply national provisions to implement it. If this date is set before the derogation expires on 
31 December 2021, this Decision should cease to apply. 

Consistency with existing policy provisions in the policy area 

• 
Similar derogations have been granted to other Member States.  Luxembourg6 was granted a 
threshold  of  EUR 30 000,  Estonia7  a  threshold  of  EUR 40 000,  Italy8  a  threshold  of  EUR 
65 000,  Croatia9  a  threshold  of  EUR  45 000,  Latvia10  a  threshold  of  EUR  40 000  and 
Romania11 a threshold of EUR 88 500.  

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 on the SMEs scheme14 has recently been presented. 

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Proposal  for  a  Council  Directive  amending  Directive  2006/112/EC  on  the  common  system  of  value 
added tax as regards the special scheme for small enterprises, 18.1.2018, COM(2018) 21 final. 
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).  
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  (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  (EU)  2017/1768  of  25  September  2017  authorising  the  Republic  of 
Croatia  to  introduce  a  special  measure  derogating  from  Article  287  of  Directive  2006/112/EC  on  the 
common system of value added tax (OJ L 250, 28.9.2017, p. 71). 
Council  Implementing  Decision  (EU)  2017/2408  of  18  December  2017  authorising  the  Republic  of 
Latvia  to  apply  a  special  measure  derogating  from  Article  287  of  Directive  2006/112/EC  on  the 
common system of value added tax (OJ L 342, 21.12.2017, p. 8). 
Council Implementing Decision (EU) 2017/1855 of 10 October 2017 authorising  Romania to apply a 
special measure derogating from Article 287 of Directive 2006/112/EC on the common system of value 
added tax (OJ L 265, 14.10.2017, p. 19). 
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 
Proposal  for  a  Council  Directive  amending  Directive  2006/112/EC  on  the  common  system  of  value 
added tax as regards the special scheme for small enterprises, 18.1.2018, COM(2018) 21 final. 

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It is therefore proposed to grant the derogating measure until 31 December 2021 or until the 
date from which Member States are to apply any national provisions that they are required to 
adopt  in  the  event  that  a  directive  is  adopted  amending  Articles  281  to  294  of  Directive 
2006/112/EC.  

• 

Consistency with other Union policies 

The measure is in line with the Union's objectives for small businesses, as laid down in the 
Commission  Communication  "Think  small  first"  –  a  "Small  Business  Act"  for  Europe"15 
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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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 
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,  a  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 Poland 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 aims at continuing for another three years 
a  simplification  measure  which  removes  many  of  the  VAT  obligations  for  businesses 

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COM(2008)394 of 25 June 2008. 

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operating  with  an  annual  turnover  no  higher  than  the  equivalent  in  national  currency  of 
EUR 40 000 and therefore has a potential positive impact on the reduction of administrative 
burden  for  businesses  and  tax  administration  without  a  major  impact  on  the  total  VAT 
revenue. Because of the narrow scope of the derogation and its limited application in time, the 
impact of the measure will in any case be limited. 

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. 

5. 

OTHER ELEMENTS 

The proposal includes a sunset clause; an automatic time limit.  

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2018/0366 (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 tax1, and in particular Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

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Point (14) of Article 287 of Directive 2006/112/EC authorises Poland to exempt from 
value  added  tax  (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/EC2, Poland was authorised, until 31 December 2012, 
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. The authorisation to apply that special measure was subsequently extended 
by  Council  Implementing  Decision  2012/769/EU3  until  31  December  2015  and  by 
Council  Implementing  Decision  (EU)  2015/11734  until  31  December  2018.  Council 
Implementing  Decision  (EU)  2016/20905  increased  the  exemption  threshold  to  the 
equivalent in national currency of EUR 40 000.  

By  letter  registered  with  the  Commission  on  15  May  2018,  Poland  requested  an 
authorisation to continue to exempt from VAT taxable persons whose annual turnover 
is no higher than the equivalent in national currency of EUR 40 000. 

In  accordance  with  the  second  subparagraph  of  Article  395(2)  of  Directive 
2006/112/EC,  the  Commission  transmitted  the  request  of  Poland  to  other  Member 

OJ 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  (EU)  2015/1173  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). 
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).  

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States  by  letter  dated  20  July  2018  except  from  Spain  to  which  the  request  was 
transmitted by  letter of  23 July 2018.  By letter  dated 23 July 2018, the  Commission 
notified Poland that it had all the information necessary to consider the request. 

From the information provided by Poland it appears that the reasons for the derogation 
request  remain  largely  unchanged.  It  simplifies  the  burden  on  business  for  a  higher 
number of taxable persons who have a limited business activity. It also results in the 
reduction of the administrative 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. The measure is fully optional for taxable persons. 

Given that the higher threshold has resulted in reduced VAT obligations for the small 
businesses, whilst such businesses 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 measure for a further limited period until 31 December 2021. 

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 
Articles  will  enter  into  force  setting  a  date  from  which  Member  States  are  to  apply 
national  provisions  before  the  period  of  validity  of  the  derogation  expires  on  31 
December 2021. If that happens, this Decision should cease to apply. 

The  derogation  has  no  impact  on  the  Union's  own  resources  accruing  from  VAT 
because Poland is to carry out a compensation calculation in accordance with Article 6 
of Council Regulation (EEC, Euratom) No 1553/896.  

(5) 

(6) 

(7) 

(8) 

(9) 

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

HAS ADOPTED THIS DECISION:  

Article 2 of Decision 2009/790/EC is replaced by the following: 

'Article 2 

Article 1 

This Decision shall apply from 1 January 2010 until the earlier of the following two dates: 

(a) 

(b) 

31 December 2021;  

the date from which Member States are to apply any national provisions that they are 
required to adopt in the event that a directive is adopted amending Articles 281 to 294 
of Directive 2006/112/EC governing the special scheme for small enterprises.' 

This Decision shall apply from 1 January 2019.  

Article 2 

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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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This Decision is addressed to the Republic of Poland. 

Done at Brussels, 

Article 3 

For the Council 
The President 

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