CELEX: 51974PC0795
Language: en
Date: 1974-07-26
Title: AMENDMENTS to the proposal for a Sixth Council Directive on the harmonization of legislation of Member States concerning turnover taxes Common system of value added tax: Uniform basis of assessment (Presented by the Commission to the Council pursuant to the second paragraph of Article 149 of the EEC Treaty)

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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                      COM(74)795 final
                                                      Brussels , 26 July 1974
                                AMENDMENTS
                              to the proposal for a
                              Sixth Council Directive
                       on the harmonization of legislation of
                      Member States concerning turnover taxes
                          Common system of value added tax :
                            Uniform "basis of assessment
             (Presented by the Commission to the Council pursuant to the
                  second paragraph of Article 149 of the EEC Treaty )
  C0M(74)T95 final
 ---pagebreak---                            INTRODUCTION
On 29 June 1 973 * "the Commission submitted to the Council a proposal for
a Sixth Council Directive on the harmonization of legislation of Member
States concerning turnover taxes and the uniform basis of assessment of
value added tax .
The Economic and Social Committee and the European Parliament were consulted
on this proposo.1 and gave their Opinions on 31 January 1974 and 14 March
1974 respectively .
It has become clear that a certain number of corrections -and amendments
could be made to the text of the proposal for a Sixth Directive , vjhere
these did not alter the basic premises and general guidelines already
adopted by the Commission in its initial proposal®
 ---pagebreak---                            EXPLANATORY MEMORANDUM
At Article 3
In accordance with the Opinion of the European Parliament , it seems
appropriate to accelerate the consultation procedure provided for in
paragraph 2 in cases where Member States wish to derogate from the general
principle laid down in paragraph 1 regarding territorial scope of the tax .
To this end , the Commission proposes that the tine limits of three and six
months referred to in paragraph 2 "be reduced to two and four months
respect ively .
At Article 4
Paragraph 3
Paragraph 3(c ) defines "building land , the general taxation of which has
been particularly controversial .    The European Parliament has adopted an
amendment' aimed at reducing the scope of this definition by deleting the
last indent (" land other than as defined above on which the person
acquiring it , at the time of such acquisition , undertakes to erect a
building within four years").
Building land , then , would only include land prepared for construction or
land on which there stands an incomplete building or a building for
demolition ( first indent of ( c )).
 ---pagebreak---                                      - 2 -
Paragraph 4
The European Parliament is opposed to a time-limit being placed on
Member States' option to treat as a single taxable person , persons who
are legally independent but are bound to one another by financial ,
economic aid organisational relationships   ("Organschaft " and " entity
fiscale ").
The proposed new text of the second subparagraph of paragraph 4 takes
account of the wishes of the European Parliament .   However , in view of
the importance of such groups of legal persons , it did not seem desirable
that the option provided for in this paragraph be exercised by Member
States without the Community authorities being able to give consideration
to the consequences on the international level .   It is proposed , therefore ,
that the exercise of this option be subject to the condition that the
Value Added Tax Committee be consulted .
Paragraph 5
A more precise definition of the circumstances in which bodies governed
by public law must be treated as taxable persons has been requested in
various quarters .
The proposed new text , while referring back to transactions ( production ,
trade , etc .) as defined in paragraph 1 of that Article , specifies that
they must be transactions which could be carried cut by persons governed
by private law :
(a)  from the economic point of view , and
(b )  independently of national legislation .
The first condition is intended to exclude the treatment of the State etc .,
as a taxable person for economic activities which private firms could not
exercise without usurping the basic functions and powers of the States
and other bodies governed by public law ( general administration , the
administration of justice , or national security or defence ).
 ---pagebreak---                                       - 3 -
 The second, condition is intended to include the State etc ., within the
 scope of the tax in respect of economic activities which private firms
 could exercise without usurping the basic functions of the    State , but
which in fact they cannot exercise because of the existence in national
legislation of a provision reserving such exercise to the State .
At Article 5
Paragraph 2
A new version of this paragraph is proposed., deleting the provision that
leasing transactions be considered as supplies .    This treatment , criticised
by the European Parliament and by other bodies , does involve certain
practical difficulties , for if , after the leasing had been taxed as a
supply , the option were not taken up , an adjustment of the tax would have
to be made .   It therefore seens more practical to tax the leasing as a
letting , under Article 7(l ) of the proposal , and to treat it as a supply
only if and when the option is taken up .
Paragraph 5
Certain Member States have requested that it be possible for some trans­
actions which are not effected with the final consumers , to be carried out
free of tax .   This is the case for forward transactions on the commodity
market or more generally sales by connected contract , where the application
of the general rules ( taxation at each stage , invoicing , etc .) could
involve many complications .
This system , whose adoption would be left to Member States to apply ,
introduces an element of flexibility into the general principles , without
the recovery of the tax at the final stage or the collection of own
resources being affected thereby .
At Article 7
Paragraph 3
It seems necessary , for reasons of equality of taxation , to add to this
Article , in the form of a new paragraph , the provision making it possible
to apply to supplies of services the rule in Article 5(4 ) ( the right of
Member States to treat the recipient of certain transfers of goods as
the successor to the business and the personality of the transferor ). The
 ---pagebreak---                                      - 4 -
rights which the second, subparagraph of Article 7(l ) classify    as supply
of services could also be the subject of such transfers .
Paragraph /]
The European Parlianent desires that it should continue to be possible to
tax , in exceptional cases , services " rendered to oneself", as was provided
for in the second subparagraph of Point 9       Annex A to the Second
Directive of 11 April 19&7 • It is proposed therefore to add a new para­
graph to Article 7 »
This new provision is aimed at introducing a greater competitive equality
between suppliers of services in cases wheire the risk of provoking
distortions of competition is serious .
In view of the use which Member States could make of this provision it
seems desirable that cases where it is applied should be submitter to the
VAT C omm i 1 1 e e .
At Article 10
Paragranh 3
The addition of this paragraph is proposed in order to clarify the rules
applicable to international supplies of services as referred to in
Article 2(3 ). Since the tax on such supplies is payable by the recipient ,
it appeared necessary to define the place in which the charge to iax arises
in the same way as that for taxable supplies of services on which the tax
is payable at the place of the suppliers .
At Article 11
ParaGraph 2
The provisions of the third subparagraph constitute exceptions to those of
the second subparagraph which provides that the tax is to become cnargeable
at the time of the chargeable event' or when payments on account arc
received prior to the supply of goods or services .
With regard to payments on account , subparagraph (b ) as at present drafted
( the Member States may , in respect of supplies between taxable persons ,
provide that the tax shall not become chargeable until the time of issue
of the invoice ) is of no practical effect , since taxable persons are
obliged by Article 23(3 ) to issue invoices for payments oil account .
 ---pagebreak---                                         – D –
 It is therefore proposed to specify that the option of providing that the
 tax shall not become chargeable -until the invoice is issued may only be
 exercised in respect of transactions between taxable persons which do not
 involve the making of payments on aci-.onrfc before the relevant supply takes
 place .
 Paragraph 3
 In the case of the importation of goods which are placed at the tine of
 importation under transit , bonded warehouse or temporary importation
 arrangements ;    the fact that the goods have crossed the frontier does not
 of itself mean that the legal conditions for tax to become due have been
 fulfilled , nor is the date on which they cross the frontier the date
 referred to for determining the rate applicable to the chargeable
 transaction .   This is why the crossing of the frontier cannot be taken as
 the chargeable event . Article 11(3 ), p:\rc.rraphs 3 and k , should therefore
bo modified bj linking together the chargeable event and the . time when
the tax becomes due .
 Moreover it is proposed to replace the words " free circulation" by the
 words " home use ", since it must be remembored that :
 (1)   "Free circulation" is synonymous with " librc pratique";
 (2)  Goods - in " free circulation" are by definition all products
       originating in Member States ( Article 9 °f "the EEC Treaty ) and
      products coming from third countries in respect of which import
      formalities have been complied with and any customs duties on charges
      having equivalent effect which are payable have been levied in a
      Member State (Article 10 of the Treaty ).
 This means that for Community products , or products which have become such
 by virtue of the payment of import duties ( CCT etc .) there will not be any
 application for free circulation , as thoy are already in free circulation ,
 but a declaration for home use .    Accordingly , goods of Comiiunity origin
 which , upon importation , are placed under arrangement s of one of the
 descriptions mentioned in the last subparagraph of Article ll(3 ) are
 released from such arrangements by Licans of a declaration for home use .
 ---pagebreak---                                        - 6 -
At Article 12
For various reasons , mainly 01 a practical nature , it was not thought
 expedient to establish a precise parallel between the concept of the
taxable amount within the country on the one hand and that for
 importation on the other , though an attempt was made to reconcile these
 concepts with that of value for custons purposes where the goods involved
are subject to customs duties .
A.    Taxable amo unt within th e territory of the country
The original version of paragraph l(a ) would have added nothing in the way
of clarification to the text of Article 8(a ) of the Second Directive . It
would have made it very difficult besides to take into account in the
taxable amount any subsidies paid , for example , by public or private funds
to enable undertakings to transact certain business at reduced prices .
Moreover , it seemed necessary to restrict to genuinely exceptional cases
the application of the " open market value " criterion , as defined by
subparagraph ( b ) of the original version , which refers to a supply me.de
:, under conditions of fair competition" which is often difficult to
appraise .
This is why the concept now defined in subparagraph ( a ), which deals with
" normal " supplies of goods and services , is based on the actual
consideration , a standard which was already used in the Second Directive .
Therefore the taxable amount must include not only amounts of money
received or receivable but also the value of any goods or services
received or receivable , together with anything that may be granted to the
supplier in respect of the supply in question by any person other than
the recipient of the supply .
In respect of a supply by way of an exchange or similar transaction , the
value of each supply constitutes a consideration for the other supply .
As regards consideration granted to the supplier in respect of the supply
in question by a person other than the recipient of the supply , the case
of subsidies paid by public authorities must be dealt with .as follows :
 ---pagebreak---                                         -7-
    distinction must be made between subsides paid in the interest 01 the
 taxable person himself ( e.g. incentives connected with the restructuring
 :>f undertakings ) and subsidies paid to the t'\::able person in the interests
of purchasers ( e.g. measures of support for farm prices ).     On the one
hand , subsidies of the first kind , which are not made subject to the
condition that a reciprocal supply is provided, by the taxable person , do
not form part of the taxable amount .     On the other hand , subsidies of the
second kind which are linked to supplies of goods or services , must be
taken into account in the taxable      amount .
In paragraph l(b ), which concerns taxable applications to own use and
other transactions which are deemed to be supplies by Article 5(3 ) but for
which obviously there is no consideration , the new text lays down the
same criteria , xvhich were included already in the Second Directive ,
stating that the prices must be calculated at the time of the supply .      It
is in fact more appropriate , as nuch for practical as for psychological
reasons , that the taxable amount should be taken to be the purchase price
or cost price , rather than the open market value .
The text of subparagraph ( c ) must be deleted since it is no longer intended
to treat " leasing" operations as supplies of goods .     In this way certain
technical complications will be avoided and the revenue will in no way
suffer from " leasing" operations being divided into letting and selling
transactions .   " Open market value " therefore does not apply to these cases
nor to undeclared transactions .     The taxable amount for the latter
transactions should be determined by the same criteria as that for
de clared transact ions .
In the new subparagraph ( c ) it is provided that for transactions which are
deemed to be supplies of services by virtue of Article 7(2 ) and for those
referred to in Article 7 (4 ) > the taxable amount is to be the " open market
value ", which is defined in subparagraph ( c ). This is an ancillary
criterion since , in the case of these transactions there is neither a
consideration , nor a purchase price nor a cost price .
 ---pagebreak---                                       - 8 -
rrho option under subparagraph ( d ) enables Member States in respect of
t/;nplies of buildings as defined therein , to adopt a taxable anount for
vhich the criteria are well suited to the transactions in question and
which are therefore easily applicable ,
 .::.c reference to land in the original text was ineffective and therefore
was deleted , since land other than building land is the subject of a
general exemption under Article 14 B ( m ).
In para-graph 3 , the text of subparagraph ( e ) has been amended by widening
the notion of intemcdio-ry activities . Under the new text , amounts paid
in the nane or for the account of the purchaser etc ., are not to be
included in the taxable anount .    This amendment will enable this provision
to be applied more widely , particularly where an intermediary , for example
a travel agency , cannot strictly be regarded in law as an agent . Thus
the problem of the element of foreign taxation borne by such intermediaries
when they receive invoices from suppliers established in other countries
co .11 be resolved by the application of this provision .
The new paragraph 5 was added to take account of the fact that the transfer
of goods which have been used for business purposes by a non-exempt
undertaking is a taxable supply to the extent that tax has been deducted
.'.11 respect of such goods . The new pr jvisior . under which the taxable
amount is to be reduced in proportion to the percentage deduction
actually applied , accordingly covers the case where the goods transferred
have been the object of a proportional deduction .
^•     Misce llaneous provisions
The statement in the original text of paragraph 2 concerning the rof&rencw
to the procedure of Article 31 lends itself to a misunderstanding , as
according to Article 31(2 ) it is up to the Commission to prepare a draft
of the measures to be taken . It is , therefore - the Commission who must
be consulted for the purpose of apiying the procedure laid down in
Ari: id P 31 •
 ---pagebreak---                                     - 9 -
At Article 13
Paragraph 1
The anendnent to this paragraph is a consequent ial amendment following
that to the last subparagraph of Article ll(3 ) paragraphs 3 and
The second subparagraph was added to deal with difficulties which nay-
arise should the rate be altered , for example , during the construction of
a building . It is common commercial practice for interim payments to be
made during the course of construction , and on each of such payments , the
tax becomes payable in accordance with Article ll(2 ).
Paragraph 4
It is proposed that a new provision be added to this paragraph to ensure
that , as in the case of imports of goods , the receipt of services from a
foreign supplier , as defined by Article 2(3 ), is treo-ted equally for tax
purposes in each country .
At Article 14
A
Paragraph l(a )
The exemption of telecommunications services i :; the subject of general
criticism , since firms are thereby prevented from deducting any element
of input tax included in the charge s for telephone and telex services .
The new text cancels the exemption for tolecomrmnico/tions .
Paragraph l(k )
The amendment to the text of this subparagraph is designed, to exclude from
exemption without exception the activities of radio and television
broadcasting organizations .
Paragraph l(l )
The inclusion of this new head of exe-rption , as requested by the European
Parliament , is aimed at enabling local government bodies to procure works
of construction free from VAT , provided that the works involved are not of
a speculative nature .
 ---pagebreak---                                       - 10 -
Β
Subparagraphs ( b ) and ( c )
The European Parliament dosiros that exeuption should be extended to cover
the undertaking of cremation and organizations which have the care of
cemeteries and monuments to victims of acts     of violence .
Subparagraphs (_f ) and ( h )
Tho words " shares of interest 1' were added to subparagraph ( f ) in the
interest of making the text more clear from the point cf view of
guaranteeing coherence between Community languages and to avoid
divergences of interpretation .
It is also proposed , in accordance with the wishes of the European
Parliament , that exemption under subparagraphs ( f ) and ( h ) should not
extend to supplies of services relative       to the transactions concerned .
A definition of " gold to be used as coin" has been added to subparagraph
( h ), to the intent that exemption should be granted only for purchases
of such metal by authorized financial institutions .
Subparagraph ( i )
The object of the new text is to enable sales of tax marks and stamps in
general to be exempted , .and not merely the special case originally
envisaged .
Subparagraph ( 1 )
The wording of the original text could give rise to confusion as regards
taxable persons who carry out supplies as described in Article 12 A ( l)(d );
this text could be interpreted liter-ally to mean that such taxable persons
would be exempt if Article 12 A ( l)(d ) did not in effect apply to them .
It is proposed to specify that the exemption will apply if the taxable
vendor is not in a position to benefit from the arrangements provided for
" dealers in buildings ".
Subparagraph ( n )
The absence of exemption for certain professional activities could give
rise to problems of some delicacy .    For this reason it is proposed, that
such activities should be the subject of a new exemption heading .      Such
 ---pagebreak---                                       - 11 -
exemption is however subject to a condition ("where they are not
themselves involved in the publishing or reproduction of their works")
of such a kind as to avoid having an effect on final consumption .
Subparagraph ( o )
This new head of exemption is designed to avoid rendering recourse to
justice more expensive .
At Article 16
A
Point 7
To achieve consistency with Point 4 of the same Article , it is proposed
that the words " in accordance with rules to be laid down by each Member
State " be added here .
Point 10 ( a ) and ( e )
The Economic and Social Committee has requested additions to the list of
services in this paragraph .    It is proposed therefore to add manufacturing
processes and the supply of computer data .
Point 11
The replacement of the words " in the name and for the account of another
person" by the words " in the name or for the account " is to achieve
consistency with the new wording of Article 12 A ( 3 ) ( e )»
Furthermore , it appeared desirable to have a general solution y by means
of an exemption with refund of input tax , of the problem of intermediaries
( travel agencies , brokers , etc .) who take part in transactions which are
concluded outside their countries .
 ---pagebreak---                                     - 12 -
 Β
As is proposed, in the case of Article 5 ( 5 ) and. for the sane reasons , it
 appeared advisable to provide here , certain conditions for exemption to
"be extended to sales carried out at the stage preceding the exportation
 of the goods :  this leads to the fiscal consequences of exportation
 ( exemption and refund of input tax ) arising at a stage at which it is
virtually certain that the goods are destined for an overseas market
 ( e.g. sales to customary exporters ).
Article 17
In paragraph 2 , under the new text of subparagraph ( a ), tax is deductible
even where an invoice is issued by the supplier before the goods are
actually delivered or the performance of services is actually completed .
In paragraph 3 ? under the new text of subparagraph ( b ) s tax is deductible
also by suppliers of services who take part in certain import transactions .
In Paragraph 4 ? the new text lays down a maximum amount of 50 units of
account , since it must not be too high , particularly for small under­
takings , but on the other hand a ceiling rust be fixed to avoid
applications being made in respect of trivial sums .     The ceiling set
takes account both of the financial interests of the taxable person and
of the additional work imposed as much on the latter as on the tax
authorities .
Article 18
Paragraph 2
In subparagraph 3 , the words " should have " have been replaced by the words
" could have " to avoid the purchaser having to bear the consequences of
any negligence on the part of his supplier .
 ---pagebreak---                                       - 13 -
The proposed additional subparagraph ( 4 ) is by way of derogation from
the time limit imposed on the taxable person for exercising liis right to
deduct in cases where the administration increases the taxable amount ,
and is designed to put the taxable person and the administration on an
equal footing .
Paragraph 3
The proposed amendment is in accordance with the wishes of the European
Parliament , which was opposed to Member States being left free , in the
case of an excess of deductible tax , either to refund it or to have it
carried forward to the next tax period .      This option is retained, in respect
of small amounts , whereas larger amounts must be refunded to the person
entitled as expeditiously as possible .      This is a matter of some
importance for exporters and those involved in seasonal work .
As a result of this amendment , the text of the second subparagraph becomes
superfluous .
Article 19
Parograph 2
The word " exempted" has been added to take account of the fact that sub-
paragraphs ( f ) and ( h ) of Article 14 B apply also to taxable transactions
( e.g. documents of title to goods ).
Reference is made to subparagraph ( h ) in addition to subparagraph ( f ) to
take account of the fact that ; as with dealings in securities , transactions
in money ( for example t gains from exchange ) cannot be taken as indicative
of the true turnover of the undertaking .
The addition of the word " incidental " at the end of the paragraph is
intended to make the reference to real estate or financial transactions
more specific .
At Article 21
The original text of paragraph 1 ( a ) is too widely drafted since the agent
of a taxable person established in another country is not necessarily in
 ---pagebreak---                                        - 14 -
 a position to . 'otermine the amount of the tax duo where the taxable
person himself carries out operations in another country , of which his
agent is not informed..    Consequently , it seems appropriate to li~it the
 scope of the text in order to avoid systematic recourse to a tax agent ,
by specifying that this provision only applies to the agent where the
taxable transaction is carried out through hin or with his assistance .
At Article 23
The addition of a second subparagraph to paragraph 3 ( b ) is designed to
facilitate the issue of certain invoices in a strictly limited number of
 cases . This simplification seens appropriate , especially in view of the
fact that invoices for reduced amounts are often issued for over-the-
counter sales in shops to other taxable persons .
The new text of paragraph 4 is designed to avoid imposing on the Member
States excessively rigid requirements as to tax periods .     This offers
considerable advantages from the administrative and. control point of view
for both the management of undertakings and the tax authorities , or
allows those advantages to continue .
In line with this new flexibility in the general rules , paragraph 5 of
the original proposal is deleted .
In paragraph 9j now paragraph 0 , the addition of the obligation to consult
the VAT Committee is intended to ensure a certain uniformity in the
application of measures which the Member States adopt .
The new text of the last paragraph of Article 23 is aimed, at permitting
Member States to release also from certain obligations those taxable
persons who make both taxable and exempt supplies .
At Article 24
The addition of the provision in the third subparagraph reflects the Parallel
treatment for the importation of goods and the obtaining in one country
of a service supplied- from another country .
 ---pagebreak---                                    - 15 -
Ai Article 25
Paragraoh 2
A correction is made io the French iexi of the second subparagraph
("actif imnobilis£ " for " aciif immobilier" ).
The word " exempt " has been inserted before " transactions" for the seme
reasons as those set out in this explanatory memorandum concerning the
first subparagraph of Article 19 .
Paragraph 3
The original version of this paragraph would exclude from exemption or
relief small-scale craftsmen in the building trade ( e.g. painters ).   For
this reason , it is proposed thai it be specified that , for activities
connected with building , only supplies of buildings or of building land
should be excluded from the special scheme for small undertakings .
Moreover , since the European Parliament has pointed out that the
exemption could be maintained for taxable persons concerned only with
the letting of buildings , a second subparagraph is proposed which takes
account of this wish .
Ai Article 26
Parngraph 1
At the request of the European Parliament , the special scheme for second-
hand goods is extended io original works of art e»nd antiques and
collectors' items .
Ai Article 27
The amendments of the dates appearing in this Article correspond io the
revised text of Article 1 .
Ai Article 28
 ---pagebreak---                                   - 6 -
The changes in the dates in this Article correspond, to the revised text
in Article 1 .
At Article 30
These changes correspond to the now cr.sc s in which consultations are
obligatory .
At Articles 32 . 33 and 3"3
The new dates given in those Articles are to correspond with the revised
text in Article 1 .
The proposed additions to Articles 32 and 33 rvre to take account of the
wishes of the European Parliament .
 ---pagebreak---            AIMTO-ENTS TO THE PROPOSAL FOR A SIXTH COUNCIL DIRECTIVE
           ON THE HARMONIZATION OF MEI'IBER STATES CONCERNING TURNOVER TAXES
Title I : Introductory provisions
                                  Article 3
The text of the second, subparagraph of this Article is amended s.s follows :
'"They shall adopt the necessary laws , regulations and administrative
  provisions so that the system as modified may enter into forte without
  delay and rot lr.t<:r than
Title II : Field of Application
                                  Article 2
                                  ( unchanged )
Title III : Territory
                                  Article 3
The text of the first two subparagraphs of paragraph 2 of this Article is
attended as follows :
"2 . A Member State which , at the date of this Directive , does not apply in
     toto the principle laid down by paragraph 1 and proposes to continue thus
     shall so inform the Commission not later than two months after the date
     of this Directive .
     The Commission Biay, within four months following receipt of such infor­
     mation , consult the Member States on the effects of this request , in
     particular on the fairness of competition and on the Community 's own
     resources ; it shall submit proposals to the Council which , acting by a
     qualified majority, shall decide thereon within four months . "
 ---pagebreak---                                         - 2 -
Title IV : Taxable persons
                                  Article 4
- She text of the second indent of paragraph 3(c ) of this Article is deleted .
- The text of the second subparagraph of paragraph 4 of thi ^ Article is
  amended as follows :
  " Subject to the consultations provided for in Article 30 , each Member
  State may treat as a single taxable person , persons established in its
  national territory who are legally independent but are bound to one
  another by financial , economic an (j organizational relationships ."
- The text of the second subparagraph of paragraph 5 of this Article is
  amended as follows :
  "However , where they carry out transactions covered by paragraph 1 which ,
  from the economic point of view , and independently of national legislation ,
  would be likely to be carried out by persons governed by private law , they
  shall be considered to be taxable persons in respect of such transactions .
  This provision extends to the activities of broadcasting authorities , ana
  of the agricultural intervention agencies in respect of dealings in
  agricultural products in pursuance of a Regulation on the common organi­
  zation of the marlcet in the relevant product . "
Title V :   Taxable transactions
                                  Article 5
                               Supply of goods
- The text of paragraph 2(b ) of thi ^ Article is deleted , and accordingly :
         (c)  becomes  ( b );
         (d)  becomes  ( c );
         ( e) becomes  ( d );
         ( f) becomes  ( e );
         ( g) becomes  ( f ).
 ---pagebreak---                                           - 3 -
                                    Article 5 ( cont . )
- The following paragraph 5 i e added, to this Article :
  " 5 . Forward transactions may be treated by Member States as if there wore
        a single supply from the first seller to the last buyer . "
                                     Article 6
                             dorks of Construction
                                     ( unchanged )
                                     Article 7
                               Supply of Services
- The following paragraphs 3 and 4 are added to this Article :
  !'3 . The provisions of Article 5(4 ) shall apply in like manner with respect
        to the supply of services ."
  "4- In order to prevent serious distortion of competition , Member States
        may, subject to the consulta/fcions provided for in Article 30 , treat
        as a supply of services the carrying out by a taxable person of a
        service within his own undertaking, where the value added tax on such
        a service , had it been carried out by another taxable person , would
        not be wholly deductible . "
                                     Article 3
                                     Imports
                                     ( unchanged )
Title VI :   Place of taxable transactions
                                     Article 9
                                Supply of Goods
                                     ( unchanged )
 ---pagebreak---                                        - 4 -
                                   Article 10
                               Supplv of services
- The following paragraph 3 is added, to this Article :
  " 3 . For the purposes of charging tax on the supplies referred to in
        Article 2(3 ) the place where the service is received shall bo deemed
        to be the place where the business of the person receiving the servi.ee
        is established or , in the absence of such a pl-.ee , the place where he
        has his permanent address ."
Title VII : Chargeable eve^t and the charge to tax
                                   Article 11
- The text of ( b ) in the third subparagraph of paragraph 2 of this Article
  is amended as follows :
  "( b ) in respect of supplies referred to in the first subparagraph of
         Article 23(3)(a ), the time of issue of the invoice ."
- The text of the tMrtl subparagraph of paragraph 3 of this Article is
  amended as follows :
  " However , where goods are subject , on importation , to the Common Customs
  Tariff duties , to agricultural levies or to charges having equivalent
  effect , the chargeable event shall occur - and the tax shall become charge­
  able at the same as such common duties , charges and levies ."
- The text of the last subparagraph of paragraph 3 of this Article is
  amended as follovrs :
  " Where on importation goods are placed under a transit , bonded warehouse
  or temporary importation' arrangement under customs and/or fiscal super­
  vision, with suspension of customs duties -and/or taxes , Ilember States
  may provide that the chargeable event shall occur and the tax shall
  become chargeable only when the good.s are declared for home use ."
 ---pagebreak---                                            - 5 -
Title 'Till : Taxable amount
                                       Article 12
A. Within the territory 01 the country
- The text of paragraph 1 ( a ), ( b ), ( c ) -and. ( d ) of Section A of this Article
  is amended as follcriais :
  "( a ) in respect of supplies of goods and services , other than those
          referred to in ( b ), ( c ) and ( d ) below , everything which constitutes
          the consideration which has been or is to be obtained by the supplier
          in respect of such supplies ;
    ( b ) in respect of supplies under Article 5 ( 3 ) » the purchase price of the
          goods or of similar goods or , in the absence of a purchase price ,
          the cost price , calculated at the time of supply ;
    ( c ) in resiject of supplies under Article 7(2 ) and ( 4 )» the "open market
          value " of the subject of the relevant supply.
          "Open market va,lue " of services means the amount which a customer
          at the marketing stage at which the supply takes place would have
          to p-y to a supplier at arm 's length within the territory of the
          country at the time of the supply, under conditions of fair com­
          petition , to obtain the services in question ;
    ( d ) in respect of supplies of buildings , other than as referred to in
          Article 4( 3 )( b ), purchased for the purpose of resale by a taxable
          person to a non-taxable person or to a taxable person for whom the
          value added tax on the building in question is not deductible , the
          taxable amount may be the difference "between the selling price and
          the purchase price . "
- The text of Section A, paragraph 3(e ) of this Article is amended as
  follows :
   "( e ) amounts paid in the name or for account of the customer and credited
          in the supplier 's books to a suspense account ."
 ---pagebreak---                                              - 6 -
                                          Article 12 ( cont .)
- The iollowmg paragraph 5 i £ added to Section A O ± this Article :
   " 5° Where the supply is of goods for which tax is only partially deductible
         in accordance with Article 17 ( 5 )> "the t?,xable amount shall bo reduced
         in proportion to the percentage deduction actually applied to the
         goods in question ."
B.   Importation of goods
- The* text of Section 3, paragraph 1(a ) of this Article is amended as follows :
   "( a ) the price paid or to be paid by the importer , where this price is the
          sole consideration for importation ;
C. Miscellaneous provisions
- The text of paragraph 2 of these Miscellaneous Provisions is amended as
   follows :
   :,2 . Where a Member St?.te proposes to maintain or introduce standard or
         minimum rates for certain transactions in order to prevent fraud or
         to sii.iplif ,r the calculation . nd collection of the tax , it shall
         consult- the Cotuaission for the purpose of applying the procedure laid
         down in Article 31 ."
Title IX • Rates
                                          Article 13
- The text of the first subparagraph of paragraph 1 of this Article is
   amended as follows :
   " 1 , The rate applic?_ble to taxable transactions shall be that in force at
         the time of the chargeable ev'ont .       However , in the cases provided for
         in the last subparagraph of Article 11 ( 3 ), the rate applicable shall
         be that in force at the time when application is raade for the goods
         to be released for home use ."
– TI UJ i'o ] lowing- &ubj>..u%ngi*aph is added to ;:r,ragraph 1 of this Article :
 ---pagebreak---                                         - 7 -
                                     Article 13 ( cont . )
   "Vfliere the rate is changed , and subject to the consultations provided lor
   in Article 30 , liember States may take transitional measures particularly
   in respect of certain transactions still being carried out ."
- The following subparagraph is added to paragraph 4 of this Article :
   " The sane provision shall apply in respect of the supply of the services
   referred to in Article 2(3 ) within the territory of the country."
Title X : Exemptions
                                     Article 14
                       Exemptions within the territory of the country
A.  Exemptions for certain activities in the public interest
- The text of paragraph 1 ( a ) of Section A of this Article is amended as
   follows :
   "( a ) the supply of services , other than passenger transport and tele­
          communications , and supplies of goods incidental thereto , by public
          postal services ; "
- The text of paragraph l(lc ) of Section A of this Article is amended as
   folio i /s :
   "( k ) the supply of services by theatres , cinoma-clubs , concert-halls ,
          museums , libraries , public park~ , botanical or zoological gardens ,
          educational exhibitions , and operations other thrjn those of radio
          or television organizations , within the frraework of activities in
          the public interest of a social , cultural or educ rtional nature , by :
          - bodies governed by public law * or
          - non-profit-making organisations ; or
          - private charitable organizations ."
- The following subparagraph ( l ) is added to paragraph 1 of Section A of
   this Article :
   "( l ) works referred to in Article 6 whore they arc carried out by or on
          behalf of local government bodies and where they arc not destined
          for resale , not included in the price of the land , and ar.j not lot
 ---pagebreak---                                        - 8 -
         "but ore pl?.ced free of dugo at the dispos-J. of the users ."
B. Other Exemptions
- The text of subparagraphs ( b ), ( c ), ( f ), ( h ), ( i ), ( l ) of Section B of
  thiii Article is attended as folio /s :
  "( b ) the supply of services by undertakers and cremators ana supplies of
         goods incidental thereto ;
   ( c ) supplies of goods and services to organisations responsible for
         constructing, installing and maintaining cemeteries , graves ?jid
         monujuents commemorating war dead and victims of acts of violence ;
   ( f ) dealings in debts , shares , shares of interest , debentures and other
         securities , excluding all documents establishing title to goods and
         all rights , interests and shares covered by Article 5 (0 ( s-) arui ( b )
         This exemption shall not cover supplies of services relative to
         such transactions ;
   ( h ) dealings in currency other than as collector 's items , and in gold
         to be used as coin , and in credit transfers and deposits ;          gold to
         be used .as coin means gold of a standard of at least 900/ 1000 , for
         authorized financial institutions ;     This exemption shall not cover
         supplies of services relative to such transactions ;
   ( i ) supplies by states and local government bodies of tax marks , discs ,
         bands or staraps ;
   ( l ) supplies of buildings or parts thereof and of the land pertaining
         thereto , after first occupation , by a taxable person for whom the
         value added tax on the building is not deductible and to whom
         Article 12A ( l)(d ) is rot applicable . For the purposes of this
         exemption flat-rate farmers , as defined in Article 27 , shall be
         deemed to be taxable persons subject to the normal scheme ;
- The following subparagraphs ( n ) and ( o ) are added to Section B of thi .^
  Article :
  "( n ) supplies of services by authors , writers , composers , lecturers ,
         journalists , actors , musicians , where they .are not themselves
         involved in the publishing or reproduction of their works ;
 ---pagebreak---                                             - 9 -
  "( o ) supplies of services "by members of the legal and judicial professions ,
          where these services are in connection with the administration of
          Justice ."
                                      Article 15
                               Exemptions of imported goods
                                      ( unchanged )
                                      Article 16
                Exemptions of exports and like transactions and inter­
                              national tr?>nsport
- The letter A is ?„dded before the phrase :
  " The Member States , shall , subject to the conditions ..."
- The text of point 3 of this Article is amended as follows :
  "( 3 ) Goods consigned or transported "fc°ab on (je ^ warehouse under customs
          and ( or ) fiscal control , or deliveries within such warehouse' "
- The text of point 7 of this Article is amended as felloe's :
  "( 7 ) Goods for the fuelling ana provisioning of aircraft as referred to in
          point 6 , in accordance with rules to be laid down by each Member
          State ; "
- The text of point 10(b ) and ( e ) of this Article is amended as follows :
  "( a ) Aan-i orients of patents , manufacturing processes , trade marks and
          like rights and the granting of licences ;
    ( e ) Services of consultants, engineers and planning offices and t
          similrx services and the supply of computer data; "
- The text of point 11 of this Article is amended as folio . :s :
  " Services supplied by brokers and other intermediaries , acting in the
  name or for account of another person, where thej'' form part of trans­
  actions specified in this Article , or of transactions which are carried
  out oxitside their national territory and other usual services directly
  relating to exportation as defined in points 1 , 2 and 3 ;"
 ---pagebreak---                                              - 10 -
- The text of point 1.3(b ) of this Article is amended as follows :
   ,; ( b ) The transport of goods which -re "being carried to - doatin ?vtion
            ojrtside national territory or to a bonded warehouse under customs and/or
            fiscal control or in transit ;"
 - The following Jection 3 is added to this Article :
   '•'B. Ilember States mo.y, subject to the consultations provided for in
           Article 30 , exempt supplies of goods to a taxable person if such
           goods cvro to be exported , processed or unprocessed , provided th \t
           during the previous year the taxable person h s exported at least
           50.,j of his turnover ."
Title XI        : Deductions
                                        Article  17
                          Jxitvtqnce and scope of jtne r ignt t o dj3duct
- The text of paragraph 2(a ) of this Article is amended as follows :
   ;! ( a ) Value added tax invoiced to him in accordance with Article 23(3 ) in
            respect of goods or of services supplied or to be supplied to him­
- The text of para-graph 3(b ) of this Article is amended as folio is :
   "( b ) of occupations which axe exempt under Articles 15(2 ), (?)      :JitL (1 1 )
             and Article 16 ."
- The text of the second subparagraph of paragraph 4 of this Article is
   amended as follows :
   w The refund sha.ll be made upon application from the taxable person .        IIo
   application shall be u.-jde in respect of an omount of tax lo'.or than
   50 units of account , but several invoices , provided they arc issued
   during the srae calends year , may together form the subject of a single
   application . ::
 ---pagebreak---                                         - 11 -
                                   Artici e 1o
                   Rules for exercising the right to deduct
- The text of the third subparagraph of paragraph 2 of this Article is
  emended as follows :
  "Where by error or omission the taxable person does not make the deduction
  at the right time , he may exercise his right to deduct at any time up to
  and including 31 December of the year following that in which the de­
  duction could have been made in accordance with the first subparagraph .
  The deduction shall in such case be mad.e in accordance with the provisions
  in force at the time when the deduction should have been made .    It may
  be exercised when the return provided for in Article 23(7 ) is made ."
- The following fourth subparagraph is added to paragraph 2 of this Article :
  "Notwithstanding the provisions of the preceding subparagraph, the
  taxable person is entitled to have taken into account deductions which
  he was not able to m-Jce validly, where the taxable amount is subsequently
  increased . "
- The text of the first subparagraph of paragraph 3 of this Article is
  amended as folio . -s :
  "Where for a given tax period , the axiount of authorised deductions
  exceeds the amount of tax due the excess shall be refunded as soon as
  possible , but not later than one month after the periodic return is
  made .   Where the amount concerned is less than 10 units of account
  Member States may , instead of making a refund , carry the excess forward
  to the following period . "
- The text of the second, subparagraph of paragraph 3 of this Article is
  deleted .
                                   Article 19
                       Calculation of the deduc tible proportion
– The text of paragraph 2 of this Article is amended as follows :
  " 2 . By way of derogation from paragraph 1 , there shall be excluded from
        the calculation of the deductible proportion , amounts of turnover
        attributable to- exempt transactions specified in Article 14B (f ) and
 ---pagebreak---                                              - 12 -
                                        Article 19 ( cont .)
           ( h ), to the sale of capital goods used by the taxable person for the
          purposes of his business , and to incident .1 real estate or financial
          transactions , except where these incidental operations form part of j.
          -regular husinoBP aotdvity by the taxable person .
                                        Article 20
                                  Ad.-justnert 01 d educ t ion , J
                                        ( unchanged )
Title XII : Persons liable for payment of tax
                                        Article 21
                      Persons liable to pay tax to the tax authority
- The text of paragraph 1(a ) of this Article is ariended as follows :
  ,: ( a ) taxable persons who carry out taxable transactions , and agents of
             taxable persons established in another country who carry out tax-able
             transactions , provided that the taxable transactions arc carried out
             through or with the collaboration of such agents . 11
Title XIII : Assessment of the amount of tax to b e paid and liability for
                    payment of the tax
                                        Article 22
                                        ( unchanged )
Title XIV : Obligations of persons liable for payraent
                                        Article 2 ■>
                            Obligations und er the internal system
- The text of paragraph 3(b ) of this Article is amended as follows :
  "( b ) The invoice shall state clearly the price exclusive of tax and the
             corresponding tax at each rate as well as any exemptions .
             However , in respect of invoices for a total amount , including tax,
             no greater than 20 units:' of '.account , the t&xable person niay simply
             state the total awount , including the tax, the applicable rate or
             any exemptions . 11
 ---pagebreak---                                            - 13 -
                                      Article 23 ( cont )
-- The text of paragraph 4 of this Article is amended as lollows :
   "Every taxable person shall submit a return within one month after the end
   of each tax period.      This period shall be fixed by Member States as a month , twom-a?
   or a quarter or , in exceptional case ", a half-year or a year .    This return
   must set out all the information required to calculate the t?.x to be paid
   and the deductions to be made , including the total amount of the supplies
   relevant to such tax and the total amount of exempted supplies ."
- The text of paragraph 5 of this Article is deleted , and accordingly :
   paragraph 5 becones paragraph 5 ;
   paragraph 7 becones paragraph 6 :
   paragraph 3 becomes paragraph 7 :
   paragraph 9 becomes paragraph 8 and the text thereof is amended as follows :
   " 3 . Subject to the consultations provided for in Article 30 , Henbcr States
         may where necessary impose other obligations should this prove necessary
         for the collection of the tax or the prevention of fraud "
   paragraph 10 becomes paragraph 9 and the text thereof is amended as follows :
   " 9 . Member States may release taxable persons from certain obligations
         arising out of exempt supplies ."
                                      Article 24
                        Obligations in respect of imoorts
- The following third, subparagraph is added to this Article :
   "The provisions of this Article may also apply to the supply of services
   referred to in Article 2(3 )«"
Title XV : Special schemes
                                      Article 2 ^
                      Sp e ci al schemes for small undertakings
- The text of the second subparagraph of paragraph 2 of this Article is
   amended as follows :
 ---pagebreak---                                           -  4 -
                                     Article 25 ( cont .)
   " However , uisposals of tangible or intangible investment property which
   formed part of the fixed assets of the undcrt ..king, supplies of buildings
  and of building land , the exempt transactions specified in Article 14 B(d )
   and ( f ) and the letting of buildings shall be disregrarded in calculating
  the turnover ."
- The text of paragraph 3 of this Article is amended as follows :
  "Paragraph 1(a ) shall not apply to the transactions specified in Article
  4(3 ) ( b ) and ( c ), nor to the transactions specified in the second sub­
  paragraph of paro.graph 2 of this Article .
  However , a taxable person who mokes the appropriate application may enjoy
  the exemption provided for in paragraph 1(a ), provided that ho is liable
  for value added tax only in respect of the letting of buildings . "
                                     Article 26
                        Special scheme for second-hand goods
- The text of paragraph 1 of this Article is amended as follows :
  " 1 . ''Second-hand goods " means used moveable property which can be re-used
        as it is or after repair .    However , the arrangements provided for in
        this Article shall apply also to original works of art created by the
        hand of the artist , antiques , collectors 1 items , and stamps and coins
        being collectors ' items ."
                                     Article 27
                        Common flat-rate scheme for farmers
- The text of the third subparagraph of paragraph 3 of this Article is amended
  as follows :
  " The levels of input charge so calculated , rounded down to the nearest
  tenth of one per cent , shall be so fixed in accordance with the procedure
  laid down in Article 31 that they may be adopted :
 ---pagebreak---                                                - 15 -
                                      Article 27 ( cont )
        ( i ) for the first time , not later than 30 September of the second year
              following that of the adoption of thin Directive ;
      ( ii ) for each three-yearly updating: not later than 30 September of the
               third year ;
    ( iii ) in the case of changes likely to affect the level of the charge , as
               soon as possible .
- The text of the fourth subparagraph of paragraph 3 of this Article is
  amended as follows :
  "Member- States shi,ll supply the Commission ivith the macro-economic statistics
  and other data required for the common method of calculation :
        ( i ) for the first time , not later than 30 May of the second year following
                that of the adoption of this Directive ;
      ( ii ) for each three-yearly updating, not later than 30 June of the third
              year ;
    ( iii ) in the case of changes likely to affect the level of the charge , as
              soon as possible .
Title XVI : Trcjisitional provisions
                                      Article 26
- J.ha cooct of paragraph 1 of this Article is amended as follows :
           The exemption under article 1b A point 13 ( c-) ^- r applicable until
          the expiration of the period of three years following            da -te
            of adoption of the present Directive . The Commie si on shall in due
           courae present to the Council proposals concerning the tax scheme
           to be applied at the expiration of the above period to international
           passenger transport by sea or air . "
- The text of the first subparagraph of paragraph 2 of this Article is amended
  as follows :
  "Any provisions brought into force by the Member States in exercise of the
  rights conferred on them by Article 17 of the Second Council Directive
 ---pagebreak---                                            - 16 -
                                     Article 28 ( cont )
  No . 67/ 228/3EC of 11 April 1967 shall cease to apply, in each Member State,
  with effect from the date on which the provisions referred to in the
  second subparagraph of Article 1 of this Directive come into force . "
- The text of paragraph 3 of this Article is amended as folio /s :
  " 3 . Member States which avail themselves of the provisions of the second
        subparagraph of paragraph 2 shall supply to the Commission in every
        two ye cars , and for the first time within six months after the date of
         adoption of this Directive, with such information,- a6 will enable it
        to doteruine whether the grounds on which the exemptions referred to
        in that subparagraph have been maintained in force still obtain .
        The Commission sh?„ll take such information into account in the reports
        provided for in Article 32 and will make proposals in such reports
        for the adaptation by stages of the abovenentioned exemptions to the
        obligations resulting from the achievement of jlconomic and Monetary
        Union . "
Titl e XVII :     Value Added Tax Committee
                                     Article 29
                                     (unchanged )
                                     Article 30
- The text oi this Article is amended as follows :
  "In addition to the consultations made compulsory by Articles 4 » 7 , 13 , 16 ,
  23 , 25 and 27 , the Committee mo,y examine any question relating to the
  application of any Community act concerning the value added tax, raised
  b,y the Chairman either on his own initiative or at the request of the
  representative of a Member State ."
                                     Article 31
                                     ( unchanged )
 ---pagebreak---                                             - 17-
Title XVIII : Miscellaneous provisions
                                     Article 32
- The text of this Article is amended as follows :
   "For the first time on 1 January 0 f the fourth year following that in which
  this Directive is adoptet aid thereaft or every two years , the Commission
   shall , after consulting the Member States , send the Council a report on the
   application of the common Value Added Tax system in the Member States .
   This report shall be transmitted fcy the Council to the European Parliament ."
                                     Article 33
- The text of this Article is amended as follows :
   "At the appropriate time the Council acting on a proposal from the Commission,
   after receiving the Opinion of the European Parliament , and in accordance
   with the interests of the common market , shall adopt further Directives on
   the common value added tax system , in particular to restrict progressively
   or to repeal measures token by the Member States by way of derogation from
   the system , in order to achieve complete parallelism of the national value
   added tax systems and thus permit the attainment of the objective stated
   in Article 4 of the First Directive ."
                                    Article _i4
                                     ( unchanged )
                                    Article 35
- Tne text of thu Article is amended as follows :
   "The Second Council Directive , Wo . 67/223/SSC of 11 April 1967 shall cease to
 have e ff ect^ in each Member State ,             from the date of entry into
   force of the provisions referred to in the second subparagraph of Article 1
   of this Directive ."
                                    Article 36
                                     ( unchanged )
 ---pagebreak---   ANNEX A
( unchanged )
  ANNEX B
( unchanged )
  ANNEX C
( unchanged )