Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision (EU) 2018/1904 authorising the Netherlands to introduce a special measure derogating from Article 285 of Directive 2006/112/EC on the common system of value added tax
Date: 2022-11-23
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Netherlands, VAT, derogation from EU law, small business, tax exemption

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   EUROPEAN COMMISSION  Brussels, 23.11.2022  COM(2022) 648 final 2022/0383 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision (EU) 2018/1904 authorising the Netherlands to introduce a special measure derogating from Article 285 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  (‘the  VAT  Directive’1),  the  Council,  acting  unanimously  on  a 
proposal  from  the  Commission,  may  authorise  any  Member  State  to  introduce  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  23 August  2022,  the  Netherlands  requested  an 
authorisation to extend a measure derogating from Article 285 of the VAT Directive allowing 
the  exemption  from  VAT  of  taxable  persons  whose  annual  turnover  does  not  exceed 
EUR 25 000. 

In  accordance  with  Article  395(2)  of  the  VAT  Directive,  the  Commission  informed  all 
Member  States,  except  Spain,  on  25  August  2022  and  Spain  on  26  August  2022,  of  the 
request made by the Netherlands. By letter dated 29 August 2022 the Commission notified the 
Netherlands that it had all the information necessary to consider the request.  

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Chapter 1 of Title XII of the VAT Directive allows Member States to apply special schemes 
to  small  enterprises,  including  the  possibility  to  exempt  taxable  persons  whose  annual 
turnover does not exceed a certain threshold from VAT. This exemption implies that a taxable 
person does not have to charge VAT on his supplies and, consequently, cannot deduct VAT 
on the inputs. 

Under the first paragraph of Article 285 of the VAT Directive, Member States which have not 
exercised  the  option  under  Article  14  of  the  Second  Council  Directive  67/228/EEC2  may 
exempt  from  VAT  taxable  persons  whose  annual  turnover  does  not  exceed  EUR  5  000. 
Pursuant to the second paragraph of Article 285 of the VAT Directive, those Member States 
may  also  grant  graduated  tax  relief  to  taxable  persons  whose  annual  turnover  exceeds  the 
ceiling fixed by them for its application.  

The  Netherlands  were  authorised  to  introduce  such  a  special  measure  by  Council 
Implementing Decision (EU) 2018/1904. The measure which will end on 31 December 2022 
is optional for taxable persons. 

In  that  context,  the  Netherlands  requested  an  extension  of  the  special  measure  for  two 
additional years.  

The  Netherlands  indicated  that  the  special  measure  reduces  administrative  burden  for  both 
taxable  persons  and  the  tax  authority  and  that  it  contributes  to  the  simplification  of  tax 
collection. According to the Netherlands, the effect on the State budget of the special measure 
is around 0,1%. It also indicated that the extension of the special measure would only have a 
negligible  impact  on  total  VAT-revenue  collected  at  the  stage  of  final  consumption.  Such 
effects being in line with the requirements of  the second subparagraph of Article 395(1) of 
the VAT Directive.  

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2 

OJ L 347, 11.12.2006, p. 1. 
Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member 
States concerning turnover taxes  – Structure and procedures for application of the common system of 
value added tax (OJ 71, 14.4.1967, p.1303/67). 

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Furthermore, the extension of the special measure until 31 December 2024 complies with the 
requirements  of  Council  Directive  (EU)  2020/285  of  18  February  2020  amending  Directive 
2006/112/EC  on  the  common  system  of  value  added  tax  as  regards  the  special  scheme  for 
small enterprises which set a maximum VAT turnover threshold for small businesses across 
the EU as from 1 January 2025. 

It  is  therefore  proposed  to  allow  the  Netherlands  to  extend  the  special  measure  until  31 
December 2024. 

• 

Consistency with existing policy provisions in the policy area 

Similar derogations exempting from VAT taxable persons whose annual turnover is below a 
certain  threshold,  as  provided for in  Articles 285 and 287 of the VAT  Directive, have been 
granted  to  other  Member  States.  Recently,  for  example,  Slovenia  was  granted  the  right  to 
extend the use of a threshold of EUR 50 0003, Poland a threshold of EUR 40 0004, Hungary a 
threshold of EUR 48 0005, Belgium a threshold of EUR 25 0006, Malta a threshold of EUR 30 
0007, and Czech Republic was granted a threshold of EUR 85 0008. 

The derogating measure is in line with the objectives of Directive (EU) 2020/285 amending 
Articles 281 to 294 of the VAT Directive on a special scheme for small enterprises9, which 
resulted from the VAT action plan10, and aims to create a modern, simplified scheme for those 
businesses.  In  particular,  it  seeks  to  reduce  VAT  compliance  costs  and  distortions  of 
competition  both  domestically  and  at  EU  level,  reduce  the  negative  impact  of  the  threshold 
effect, and facilitate business compliance as well as monitoring by tax administrations. 

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Council  Implementing  Decision  (EU)  2022/464  of  21  March  2022  amending  Implementing  Decision 
2013/54/EU as regards the authorisation granted to the  Republic of  Slovenia to continue to apply the 
special measure derogating from Article 287 of Directive 2006/112/EC on the common system of value 
added tax (OJ L 94, 23.3.2022, p. 4–5). 
Council Implementing Decision (EU)  2021/1780 of 5 October 2021 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 360, 11.10.2021, p. 122–123). 
Council Implementing Decision (EU) (2022/73) of 18 January 2022 amending Implementing Decision 
(EU) 2018/1490 as regards authorisation to Hungary to apply for a further period the special measure 
derogating from Article 287 of Directive 2006/112/EC on the common system of value added tax (OJ L 
12, 19.1.2022, p. 148–150). 
Council  Implementing  Decision  (EU)  2022/88  of  18  January  2022  amending  Implementing  Decision 
2013/53/EU  as  regards  authorisation  to  the  Kingdom  of  Belgium  to  apply  for  a  further  period  the 
special measure derogating from Article 285 of Directive 2006/112/EC on the common system of value 
added tax (OJ L 14, 21.1.2022, p. 23–24). 
Council  Implementing  Decision  (EU)  2021/753  of  6  May  2021  authorising  Malta  to  apply  a  special 
measure derogating from Article 287 of Directive 2006/112/EC on the common system of value added 
tax, and repealing Implementing Decision (EU) 2018/279 (OJ L 163, 10.5.2021, p. 1-2). 
Council  Implementing  Decision  (EU)  2022/865  of  24  May  2022  authorising  the  Czech  Republic  to 
introduce  a  special  measure  derogating  from  Article  287  of  Directive  2006/112/EC  on  the  common 
system of value added tax (OJ L 151, 2.6.2022, p. 66–67). 
Council  Directive  (EU)  2020/285  of  18  February  2020  amending  Directive  2006/112/EC  on  the 
common system of value added tax as regards the special scheme for small enterprises and Regulation 
(EU)  No  904/2010  as  regards  the  administrative  cooperation  and  exchange  of  information  for  the 
purpose  of  monitoring  the  correct  application  of  the  special  scheme  for  small  enterprises  (OJ  L  62, 
2.3.2020, p. 13). 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council  and  the  European 
Economic and Social Committee on an action plan on VAT – Towards a single EU VAT area – Time to 
decide COM(2016)148 final. 

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Moreover, the threshold of EUR 25 000 is consistent with Directive (EU) 2020/285, insofar as 
it allows Member States to set the annual turnover threshold required for an exemption from 
VAT at a level no higher than EUR 85 000 (or the equivalent in national currency). 

• 

Consistency with other Union policies 

The  Commission  has  been  consistently  stressing  the  need  for  simpler  rules  for  small 
enterprises.  In  this  respect,  the  Commission  adopted  in  March  2020  an  SME  Strategy  for  a 
sustainable  and  digital  Europe11,  where  it  committed  to  continue  to  work  on  reducing  the 
burden on SMEs. The objective to reduce the regulatory burden for SMEs is one of the pillars 
of that strategy. This special measure is in line with such objectives, as far as fiscal rules are 
concerned.  It  is  also  consistent  with  the  2020  Action  Plan  on  fair  and  simple  taxation 
supporting  the  recovery  strategy12,  which  acknowledges  that  tax  compliance  costs  remain 
high in the EU, and that compliance costs are typically substantially higher for small than for 
large companies. 

2. 

• 

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  it  is  based,  the  subsidiarity 
principle has already been applied at the level of the VAT Directive.  

• 

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  simplify  the  tax  collection  for  small  taxable  persons  and  for  the  tax 
administration. 

• 

Choice of the instrument 

The instrument proposed is a Council Implementing Decision. 

Under Article 395 of the VAT Directive, a derogation from the common VAT rules is only 
possible upon authorisation by the Council, which is 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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Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions  –  An  SME  Strategy  for  a 
sustainable and digital Europe (COM(2020) 103 final). 
Communication  from the  Commission to the  European Parliament and the  Council  –  An  Action Plan 
for fair and simple taxation supporting the Recovery Strategy (COM(2020) 312 final). 

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3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

No stakeholder consultation has been conducted. The present proposal is based on a request 
made by the Netherlands and concerns only this particular Member State. 

• 

Impact assessment 

The proposal for a Council Implementing Decision aims at continuing for another two years a 
simplification  measure  for  taxable  persons  whose  annual  turnover  does  not  exceed 
EUR 25 000.  Taxable  persons  whose  annual  turnover  does  not  exceed  the  threshold  are 
released  from  many  of  the  general  VAT  obligations  and  the  administrative  burden  on  them 
will reduce as a result of this measure as well. It also simplifies tax collection for the Dutch 
tax authorities. 

According to  the Netherlands, the extension of the EUR 25 000 threshold will not have any 
substantial impact on the total tax revenue at the stage of final consumption. Approximately 
6% of taxpayers are expected to use the exemption threshold, which corresponds to an impact 
on the budget of around 0.1%. 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. 

• 

Fundamental rights 

The proposal does not have any consequences for the protection of fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

The special measure  introduced by Council  Implementing Decision (EU) 2018/1904 had no 
significant implications on the EU budget because the Netherlands carried out a compensation 
calculation in accordance with Article 6 of Council Regulation (EEC EURATOM) 1553/89. 
Following  entering  into  force  of  Council  Regulation  (EU,  Euratom)  2021/769  of  30  April 
2021  amending  Regulation  (EEC,  Euratom)  No  1553/89  on  the  definitive  uniform 
arrangements for the collection of own resources accruing from value added tax13, there will 
be  no  compensation  calculation  carried  out  by  the  Netherlands  as  of  VAT  own  resource 
statement  for  the  financial  year  2021  onwards.  The  proposal  for  Council  Implementing 
Decision  which  aims  at  extending  the  special  measure  of  Council  Implementing  Decision 
(EU)  2018/1904  will  not  have  either  any  significant  implications  on  the  EU  budget.  The 
corrections  and  compensations  have  historically  had  a  negligible  impact  on  the  VAT-based 
own  resource  amount.  Therefore  their  removal  will  not  have  a  significant  budgetary 
implication.

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Council  Regulation (EU, Euratom) 2021/769 of 30 April  2021 amending Regulation (EEC, Euratom) 
No 1553/89 on the definitive uniform arrangements for the collection of own resources accruing from 
value added tax (OJ L 165, 11.5.2021, p. 9).  

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2022/0383 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Implementing Decision (EU) 2018/1904 authorising the Netherlands to 
introduce a special measure derogating from Article 285 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) 

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By Council Implementing Decision (EU) 2018/19042, the Netherlands was authorised 
to introduce a special measure derogating from Article 285 of Directive 2006/112/EC 
(‘the special measure’) to exempt  taxable persons whose annual turnover is no higher 
than EUR 25 000 from VAT.  

Implementing Decision (EU) 2018/1904 is to expire on 31 December 2022. By letter 
dated 23 August 2022, the Netherlands  requested  authorisation to continue to apply 
the  special  measure,  authorised  by  that  Implementing  Decision,  for  a  further  period 
until  31 December 2024, the date  by  which Member States  are to  transpose Council 
Directive  (EU)  2020/2853.  That  Directive  lays  down  simpler  VAT  rules  for  small 
enterprises and also allows Member States to exempt taxable persons whose Member 
State annual turnover does not exceed a threshold of EUR 85 000 or the equivalent in 
national currency. 

By letter dated 25 August 2022, the Commission transmitted the request made by the 
Netherlands  to  the  other  Member  States,  except  Spain,  pursuant  to  Article  395(2), 
second  subparagraph,  of  Directive  2006/112/EC.  By  letter  dated  26  August,  the 
Commission  transmitted  that  request  to  Spain.  By  letter  dated  29  August  2022,  the 
Commission notified the Netherlands that it had all the information necessary for the 
appraisal of the request. 

OJ L 347, 11.12.2006, p. 1. 
Council  Implementing  Decision  2018/1904  of  4  December  2018  authorising  the  Netherlands  to 
introduce  a  special  measure  derogating  from  Article  285  of  Directive  2006/112/EC  on  the  common 
system of value added tax (OJ L 310, 6.12.2018, p. 25). 
Council  Directive  (EU)  2020/285  of  18  February  2020  amending  Directive  2006/112/EC  on  the 
common system of value added tax as regards the special scheme for small enterprises and Regulation 
(EU)  No  904/2010  as  regards  the  administrative  cooperation  and  exchange  of  information  for  the 
purpose  of  monitoring  the  correct  application  of  the  special  scheme  for  small  enterprises  (OJ  L  62, 
2.3.2020, p. 13). 

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(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

The special measure is in line with Directive 2006/112/EC, as amended by Directive 
(EU)  2020/285,  which  seeks  to  reduce  VAT  compliance  burden  of  small  enterprises 
and avoid distortions of competition in the internal market.  

The special measure will remain optional for taxable persons as they may still opt for 
the normal VAT arrangements pursuant to Article 290 of Directive 2006/112/EC. 

According  to  information  provided  by  the  Netherlands,  continued  application  of  the 
special  measure  will  only  have  a  negligible  effect  on  the  overall  amount  of  the  tax 
revenue collected at the stage of final consumption. 

Following the entry into force of Council Regulation (EU, Euratom) 2021/7694, there 
is to be no compensation calculation carried out by the Netherlands with regard to the 
VAT-based own resource statement for the financial year 2021 onwards. 

Given  the  positive  impact  of  the  special  measure  in  simplifying  VAT-related 
obligations by reducing the administrative burden and compliance costs for both small 
enterprises and tax authorities, and given a negligent effect on the total VAT revenue 
generated,  it  is  appropriate  to  extend  the  authorisation  set  out  in  Implementing 
Decision (EU) 2018/1904. 

The extension of the authorisation  should be limited in time to allow for an evaluation 
of its effectiveness and appropriateness of the threshold. Moreover, pursuant to Article 
3(1)  of  Directive  (EU)  2020/285,  Member  States  are  to  adopt  and  publish,  by  31 
December  2024,  the  laws,  regulations  and  administrative  provisions  necessary  to 
comply  with  Article  1  of  that  Directive,  and  are  to  apply  those  provisions  from  1 
January  2025.  It  is  therefore  appropriate  to  authorise  the  Netherlands  to  apply  the 
special measure until 31 December 2024.  

(10) 

Implementing Decision (EU) 2018/1904 should therefore be amended accordingly, 

HAS ADOPTED THIS DECISION:  

Article 1 

Article 2 of Implementing Decision (EU) 2018/1904 is replaced by the following: 

This Decision shall apply from 1 January 2020 until 31 December 2024.’. 

‘Article 2 

This Decision is addressed to the Kingdom of the Netherlands. 

Done at Brussels, 

Article 2 

For the Council 
The President 

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Council  Regulation (EU, Euratom) 2021/769 of 30 April  2021 amending Regulation (EEC, Euratom) 
No 1553/89 on the definitive uniform arrangements for the collection of own resources accruing from 
value added tax (OJ L 165, 11.5.2021, p. 9). 

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