CELEX: 51989PC0240
Language: en
Date: 1989-05-16
Title: PROPOSAL FOR A COUNCIL DECISION AUTHORIZING THE UNITED KINGDOM TO APPLY IN RESPECT OF CERTAIN SUPPLIES TO UNREGISTERED RESELLERS A MEASURE DEROGATING FROM ARTICLE 11 ( A ) ( 1 ) ( A ) OF THE SIXTH DIRECTIVE ( 77/388/EEC ) ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES RELATING TO TURNOVER TAXES

COMMISSION OF THE EUROPEAN COMMUNITIES
                                                  COM(89) 240 final
                                                  Brussels, 16 May 1989
                               Proposal for a
                              COUNCIL DECISION
 authorizing the United Kingdom to apply in respect of certain supplies
 to unregistered resellers a measure derogating from Article 11(A)(1)(a)
 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of
               the Member States relating to turnover taxes
                       (presented by the Commission)
 ---pagebreak---                           EXPLANATORY HEHORAMDUH
1. On 15 March 1985 the United Kingdom submitted to the Commission a re-
    quest for a derogation under Article 27 of the Sixth VAT Directive in
    respect of a special measure to counter tax avoidance in connection
    with the collection of VAT at the retail stage in situations where, by
    virtue of the pattern of distribution, tax is avoided. The derogation
    was authorized for an initial two-year period with effect from 13 Ju-
    ne 1985C1>.
2. By Council Decision of 25 May 1987 e2> , the United Kingdom was autho-
    rized to extend the measure for a further two-year period. The period
    of validity of the measure was limited in this way because of two ca-
    ses before the European Court of Justice (Joined Cases 138 and 139/86
    "Direct Cosmetics Ltd" and "Laughtons Photographs Ltd") in which the
    taxable persons concerned were challenging the validity of the deroga-
    tion granted. In its judgment of 12 July 1988, the Court confirmed the
    validity of the Council Decision of 13 June 1985 authorizing the dero-
    gation requested by the United Kingdom"'.
3. Following the judgment of the Court of Justice and in order to main-
    tain its domestic law, under which it is able to combat tax avoidance
    in the situations described above, the United Kingdom, by letter re-
    ceived by the Commission on 24 February 1989, requested an extension
    of the measure for an indefinite period.
4. By letter dated 22 March 1989, the Commission informed the other Mem-
    ber States of the united Kingdom's request.
<1>
     OJ H° L 199, 31.07.1985, p. 60 and
           L 93, 07;04;1987, p. 17
<a
  > OJ N° L 188, 08.07.1987, p. 52
<•> OJ N° C 205, 06.08.1988, p. 5
                                                                           <L
 ---pagebreak---                                 Proposal for a
                               COUNCIL DECISION
           authorizing the United Kingdom to apply in respect of
                 certain supplies to unregistered resellers
               a measure derogating from Article 11(A)(1)(a)
                of the Sixth Directive (77/388/EEC) on the
                  harmonization of the laws of the Member
                     States relating to turnover taxes
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community,
Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977
on the harmonization of the laws of the Member States relating to turn-
over taxes - Common system of value added tax : uniform basis of assess-
ment41 », hereinafter referred to as the "Sixth Directive1^ and in particu-
lar Article 27 thereof,
Having regard to the proposal from the Commission,
Uhereas, under Article 27(1) of the Sixth Directive, the Council, acting
unanimously on a proposal from the Commission, may authorize any Member
State to introduce special measures for derogation from that Directive,
in order to simplify the procedure for charging the tax or to prevent
certain types of tax evasion or avoidance;
                                                                            (2)
Whereas the United Kingdom was authorized by Council Decision 85/369/EEC       ,
in accordance with the procedure laid down by Article 27(4) of the Sixth
Directive, to introduce for a two-year period a derogation to combat tax
avoidance;
 C1>
     OJ N° L 145, 13.06.1977, p. 1.
 C2>
     OJ N° L 199, 31.07.1985, p. 6 a
 ---pagebreak--- Whereas certain marketing structures based on sales of goods effected by
taxable persons to non-taxable persons with a view to their resale at the
retail stage result in avoidance of tax at the stage of final consump-
tion;
Whereas,  in order   to prevent  such  tax avoidance,   the United  Kingdom
applies a measure permitting the tax authorities to adopt administrative
decisions the effect of which is to tax supplies made by taxable persons
operating such marketing structures on the basis of the open market value
of the goods at the retail stage;
Whereas that measure constitutes a derogation from Article 11(A)(1)(a) of
the Sixth Directive, which stipulates that, within the territory of the
country, the taxable amount in respect of supplies of goods is everything
which constitutes the consideration which has been or is to be obtained
by the supplier from the purchaser or a third party for such supplies;
Whereas the United Kingdom was authorized by the Council Decision of
25 May 1987 c1> to extend for two years the derogation authorized by
Decision 85/369/EEC;
Whereas the United Kingdom's application for that extension was limited
to two years because of the proceedings in Joined Cases 138 and 139/86 :
reference to the Court of Justice by the "London Value Added Tax Tribu-
nal" for a preliminary ruling in the proceedings pending before that Tri-
bunal between   "Direct  Cosmetics  Ltd" and "Laughtons Photographs Ltd"
against "Commissioners of Customs and Excise" on the interpretation of
Article 27 of the Sixth Directive and on the validity of Decision
                                                      (2)
85/369/EEC; whereas, in its judgment of 12 July 1988     , the Court of
Justice confirmed the validity of that Decision;
Whereas the United Kingdom, by      letter received by the Commission    on
24 February 1989, requested authorization to extend the measure for an
indefinite period;
 " > OJ N° L 188, 08.07.1987, p. 52.
 <a>
     OJ N° C 205, 06.08.1988, p. 5-
                                                                            4
 ---pagebreak--- Whereas, in its ludgment of 12 July 1988, the Court of Justice ruled
inter alia that Article 27 of the Sixth Directive permitted the adoption
of a derogating measure such as that at issue on condition that the re-
sultant difference in treatment was justified by objective circumstances;
Whereas, in order to satisfy itself that this condition is met the Com-
mission must be informed of any administrative decisions adopted by the
tax authorities in connection with the derogation in question;
Whereas the other Member States were notified of the United Kingdom1s re-
quest on 22 March 1989;
Whereas this measure will not have a negative effect on the European Com-
munities' own resources accruing from value added tax,
HAS ADOPTED THIS DECISION :
 ---pagebreak---                                 Article 1
By way of derogation from Article 11(A)(1)(a) of the Sixth Directive, the
United Kingdom is hereby authorized to prescribe, in cases where a mar-
keting structure based on the supply of goods through non-taxable persons
results in non-taxation at the stage of final consumption, that the
taxable amount for supplies to such persons is to be the open market
value of the goods as determined at that stage.
                                Article 2
The United Kingdom shall inform the Commission of any administrative
decisions subsequently adopted in connection with the derogation.
                                Article J
This Decision is addressed to the United Kingdom.
Done at Brussels,                               For the Council
                                                The President
 ---pagebreak---  ---pagebreak--- Commission of the European Communities
COM(89) 240 final
Proposal for a
COUNCIL DECISION
authorizing the United Kingdom to apply in respect of certain supplies to
unregistered resellers a measure derogating from Article 11(A)(1)(a) of
the Sixth Directive (77/388/EEC) on the harmonization of the laws of the
Member States relating to turnover taxes
 16.5.1989
Office for Official Publications of the European Communities
L - 2985 Luxembourg
Series: DOCUMENTS
 1989 - 6 pp. — Format: 21.0 x 29.7 cm
EN
ISSN 0254-1475
ISBN 92-77-49640-1
Catalogue number: CB-CO-89-191-EN-C
 ---pagebreak---                                              ISSN 0254-1475
COM(89) 240 final
 DOCUMENTS
Proposal for a
COUNCIL DECISION
authorizing the United Kingdom to apply in
respect of certain supplies to unregistered
resellers a measure derogating from
Article 11(A)(1)(a) of the Sixth Directive
(77/388/EEC) on the harmonization of the laws
of the Member States relating to turnover taxes
09                                         16.5.1989
Catalogue number: CB-CO-89-191-EN-C
ISBN 92-77-49640-1
€
COMMISSION OF THE EUROPEAN COMMUNITIES