CELEX: 51990PC0182
Language: en
Date: 1990-06-19
Title: PROPOSAL FOR AN AMENDMENT TO THE PROPOSAL FOR A COUNCIL DIRECTIVE SUPPLEMENTING THE COMMON SYSTEM OF VALUE ADDED TAX AND AMENDING DIRECTIVE 77/388/EEC

COMMISSION OF THE EUROPEAN COMMUNITIES
                                    C0MC90) 182 final - SYN 274
                                    Brussels, 19 June 1990
                       PROPOSAL FOR AN
                      AMENDMENT TO THE
             PROPOSAL FOR A COUNCIL DIRECTIVE
  SUPPLEMENTING THE COMMON SYSTEM OF VALUE ADDED TAX AND
               AMENDING DIRECTIVE 77/388/EEC
          TRANSITIONAL ARRANGEMENTS FOR TAXATION
   WITH A VIEW TO ESTABLISHMENT OF THE INTERNAL MARKET
               (presented by the Commission)
 ---pagebreak---                         EXPLANATORY MEMORANDUM
1.  THE ATTACHED PROPOSAL HAS BEEN DRAWN UP WITH A VIEW TO THE
    DEFINITIVE ABOLITION OF ALL FISCAL FRONTIERS AND IS DESIGNED TO
    EXPEDITE PROGRESS ON THE FISCAL ASPECTS OF THE INTERNAL MARKET
    Completion of the internal market has as its corollary the
    removal of fiscal frontiers, that is to say, "abolishing the
    imposition of tax on the importation and the remission of tax
    on exportation in trade between Member States".C 1 ) In order to
    give practical shape to the commitments made by the Member
    States in this connection,( 2 ) the Commission presented in 1987
    a proposal( 3 ) supplementing the common system of VAT as laid
    down in the Sixth Directive. That proposal forms part of an
    overall strategy for the approximation of indirect tax rates
    and harmonization of indirect tax structure.
    The 1987 proposal introduces the principle of "taxation in the
    country of origin" since a consequence of abolishing fiscal
    frontiers is that taxable supplies will attract tax in the
    country from which goods are transported to another Member
    State. In this way, intra-Community sales and purchases of
    goods are afforded the same treatment as sales and purchases
    within Member States.
(£) Directive 77/388/EEC, OJ No L 145, fifth recital.
(2) Article 99 of the Treaty of Rome as amended by the Single Act,
    etc
(3) Proposal COM(87)322, OJ No C 252 of 22.9.87
 ---pagebreak---     It should be borne in mind here that one of the conclusions
    reached by the Council on 13 November 1989 was that these
    uniform tax arrangements in the country of origin remained a
    "medium-term objective".( 4 )
    The ultimate objective has thus been clearly identified and is
    not in doubt. The attached proposal for a Directive by
    amending the Sixth Directive as amended by COM(87) 322, thus
    dovetails   with  and   supplements   the  1987   proposal,   by
    introducing a number of transitional provisions to help Member
    States achieve that objective under optimum conditions. This
    proposal takes account of all these considerations.
2.  THE TRANSITIONAL TAX ARRANGEMENTS SET OUT BY THE COMMISSION IN
    THE ATTACHED PROPOSAL ARE CONSISTENT WITH THE GUIDELINES
    ADOPTED BY THE COUNCIL AND WILL HAVE A DYNAMIC EFFECT ON THE
    PROCESS OF ABOLISHING FISCAL FRONTIERS
    At the outset, in order to facilitate rapid adoption of the
    proposals for the complete abolition of fiscal frontiers, the
    Commission, in a communication sent to the Council and to
    Parliament on 14 June 1989,( 5 ) suggested the introduction at
    the earliest possible opportunity of a transitional phase
    between now and the end of 1992 during which the necessary
    adjustments enabling Member States to give practical shape to
    their   commitments    would    be  made. Furthermore,     while
    reaffirming the principle of generalized taxation in the
    country of origin, the Commission developed a new, pragmatic
    approach which, until such time as VAT rates had been brought
    sufficiently into line, would secure differential treatment for
    certain classes of taxable transaction in order to avoid the
(4) conclusions of the ECOFIN Council of 13 November 1989
(5) COM(89) 260 final.
 ---pagebreak---     risks of distortion of competition that could arise in the case
    of purchases made by final consumers in sectors deemed to be
    sensitive. Accordingly, the following would be the only
    transactions that would continue to be taxed at the rates and
    under the conditions obtaining in the Member States of
    destination:
    - sales to institutional non-taxable persons and to fully
      exempt taxable persons;
    - mail-order sales to private individuals;
    - sales of new passenger vehicles.
    Ultimately these derogations would have lapsed since a process
    of convergence of rates was introduced at the same time.
    In spite of Commission efforts to introduce elements of
    flexibility into its proposals, the Council made the point that
    a general agreement on the tax arrangements proposed by the
    Commission could not be reached before 1 January 1993. It
    considered that such an agreement presupposed the fulfilment of
    conditions which could not be satisfied by that date.(6) It
    thus adopted the following conclusions: "For a limited period,
    the smooth operation of VAT arrangements in the case of
    transactions between different Member States carried out by
    taxable persons must be ensured by taxing the recipient in the
    country of destination at the rate and under the conditions
    obtaining in that country. Exempt or non-taxable bodies making
    purchases of a certain value in other Member States will be
    treated in the same way. ... The differential treatment of
    certain classes of transaction will enable distortions of
(&) ECOFIN Council of 9 October 1989.
 ---pagebreak---     competition to be avoided without hampering          freedom of
   movement.".(7) The Commission welcomed the fact that the
    Strasbourg European Council asked the Council "to adopt as soon
   as possible the decisions which will make the process of the
   complete abolition of fiscal frontiers irreversible".
    In the attached proposal, which the Commission calls on the
   Council to adopt at the earliest possible opportunity, the
   Commission sets out a balanced transitional solution based on a
   system of taxation in the country of destination which
   corresponds to the Council guidelines and which also provides
   for the link that the Council would like to see established
   between    statistics   and   taxation  as   regards   taxpayers'
   obligations.(8)
   The arrangements are gradualist in design and thus contain
   elements of internal dynamism guaranteeing the irreversibility
   of the process of abolishing fiscal frontiers.
   THE ATTACHED PROPOSAL LAYS DOWN A TRANSITIONAL PERIOD FOR
   TAXATION IN THE COUNTRY OF DESTINATION AND SETS THE DATE FOR
   THE TRANSITION TO THE DEFINITIVE ARRANGEMENTS FOR TAXATION IN
   THE COUNTRY OF ORIGIN
   The transitional tax arrangements proposed by the Commission
   will take effect on 1 January 1993; they will expire not later
   than 31 December 1996 following an overall examination with a
   view to determining on the basis of a Commission proposal, the
y) Conclusions of the ECOFIN Council of 13 November 1989.
(8) The actual introduction of the statistical machinery linked to
   the    transitional   arrangements   is  the   subject   of   the
   transitional measures inserted in the proposal for a Council
   Regulation (EEC) (COM(90)177) on the statistics relating to the
   trading of goods between Member States.
 ---pagebreak---    procedures under which the definitive unification of the common
   VAT system shall operate. In consequence, the definitive tax
   arrangements will be operative by 1 January 1997. The Council,
   therefore, is called upon to approve simultaneously the
   introduction   of   the   transitional   arrangements  and   the
   introduction of the definitive arrangements as proposed by the
   Commission.
   The Commission takes the view that such provisions are
   essential:
   - in order to guarantee the irreversibility of the process of
     abolishing fiscal frontiers, in accordance with the wish
     expressed by the Strasbourg European Council on 8 and
     9 December 1989: only the implementing of the definitive
     arrangements will allow the degree of integration desired
     within the internal market to be achieved;
   - in order to give time to businesses and administrations to
     adapt to the new fiscal situation.
   To this end, the Council and the Commission will have to adopt
   the practical procedures for the transition to the definitive
   arrangements not later than 31 December 1995.
4. THE TRANSITIONAL     PROVISIONS   PROPOSED  BY THE    COMMISSION
   ESTABLISH A SYSTEM OF TAXATION IN THE COUNTRY OF DESTINATION
   WITHOUT ANY FRONTIER CONTROLS AND WITHOUT ANY INCREASE IN THE
   BURDEN ON BUSINESSES
   (a) It should be pointed out that a number of provisions
       essential for the establishment and the functioning of the
       internal market will be provided for as of the beginning of
       the transitional period.
 ---pagebreak--- They are:
- Abolition of any checks or formalities imposed for tax
  purposes when goods cross intra-Community frontiers or
  prior to the movement of goods
  As a result, the transitional measures proposed by the
  Commission are of a kind liable to bring about a
  lightening of the administrative and costs burdens on
  firms engaging in intra-Community trade while at the same
  time providing the means for carrying out the necessary
  checks. From now on, intra-Community transactions will
  be subject to the same checks as domestic transactions
  carried out in Member States. Monitoring of VAT payable
  in connection with intra-Community trade will be carried
  out on the basis of normal trade documents inter alia on
  invoices which must indicate clearly either the amount of
  VAT charged or the exempt status of the transaction as
  well as the means of identifying the taxable status of
  the traders;
- Equal treatment as between intra-Community and domestic
  transactions as regards the obligations of persons liable
  to pay the tax
  VAT payable on intra-Community transactions will be
  settled and paid on the basis of the regular return
  currently used by traders for.domestic transactions. As
  a result, no new or additional obligation will be imposed
  on traders provided that the amount relating to intra-
  Community transactions is broken down by goods sent to
 ---pagebreak---       and goods coming from other Member States;
    - Removal of the current restrictions on tax-paid purchases
      made by travellers in the Member State of purchase
      Tax will be charged directly on such purchases by the
      seller, at the rate and under the conditions obtaining in
      the country of origin of the goods. As a result, there
      will no longer be any restrictions on travellers wishing
      to make tax-paid purchases;
    - The easing of burdens on Small and Medium             size
      Enterprises (SME) and the introduction of flexibility
      into the VAT treatment of operations involving SME's
      In this regard the benefit of the exemption arrangements
      applicable to SME's domestic transactions shall be
      extended to such intra-Community supplies as they may
      carry out;
(b) In view of the Council guidelines which seek to retain as a
    general rule the principle of taxation at the rates and
    under   the  conditions   obtaining   in  the   country   of
    destination, the Commission after having examined various
    technical solutions for the taxation of intra-Community
    operations which give rise to transport or dispatch, have
    opted for a legal text which firstly captures the operation
    carried out in the country of departure and secondly
    defines acquisition as a new taxable event in the country
    of arrival. This option means that all reference to
    concepts of importation are avoided and that taxation in
    the country of destination can be assured without any
 ---pagebreak--- checks or formalities when crossing borders. The tax
mechanisms employed conform to the following rules:
- Exemption of supply: transactions between taxable persons
   (whether entitled to deduct tax in full or in part) must
  benefit in the country of departure from the exemption
  currently applied to supplies for export. (However, for
  reasons indicated earlier, supplies by SME's will not
  come within the scope of this exemption).
  In the absence of any border formalities or checks, this
  exemption presupposes that the following two conditions
  are met:
  - the person by whom the goods are acquired is a taxable
     person (or a person ranking as such):
     Accordingly, it is up to him to provide evidence of his
     VAT status if necessary by means of a statement to that
     effect issued by the administration in the Member State
     in which he is registered;
  - the goods are dispatched or transported to another
     Member State, with the onus of furnishing proof of
     their departure from the country of departure falling
     on the seller; where appropriate on the basis of
     documents provided by the trader for whose account the
     transport operation is carried out:
- Taxation of the acquisition
  The corresponding acquisition will give rise to taxation
  in the country of destination and the tax will be payable
  by the person by whom the goods are acquired. The
  acquisition operation is defined as the process of
  acquiring the right to dispose of tangible property as
 ---pagebreak---                                                            10
owner. It is based, therefore, on a legal and economic
event which takes place in the country of destination
that is the counterpart of the supply operation carried
out in the country of origin.
In this way, the taxable transaction in the country of
destination is as such disconnected from the physical and
material operation of introducing the goods into the tax
territory, an operation which constitutes the very
concept of importation. Naturally, this concerns only
purchases of goods that         are being dispatched       or
transported from one Member State to another since the
transitional arrangements will in no way alter the scope
of VAT as regards domestic transactions.
Accordingly, checks on the taxation of acquisitions of
intra-Community origin are based on the commercial
documents usually issued or received by traders: order
forms, transport documents, delivery notes, sales and
acquisition    contracts,     invoices,     settlements    of
account. Furthermore,      in     order     to     facilitate
administrative    cooperation    and    mutual    assistance,
invoices must explicitly give the VAT numbers of the
seller and of the person by whom the goods are acquired.
Special arrangements
So as to limit during the transitional period the major
risks of distortion of competition linked to differences
in rates between Member States, the principle of taxation
in the country of destination will be applied to certain
 ---pagebreak---                                                         11
targeted    transactions   subject   to   the    following
conditions:
* The mechanism for taxing intra-Community transactions
  between taxable persons is extended to acquisitions
  made by institutional non-taxable persons and by exempt
  taxable persons where, in the year under consideration,
  they exceed a threshold fixed initially at ECU 35 000.
  This is because, given that such traders act as final
  consumers where VAT is concerned, their purchasing
  decisions are liable to be influenced by the difference
  in rates.    It was necessary, therefore, to apply to
  them the special arrangements defined above.
  The doubling of the threshold from 1 January 1995 will
  provide   for the widening of the scope of the
  arrangements for taxation in the country of origin for
  the entire duration of this period. As the Commission
  would like this special arrangement to be relatively
  flexible traders whose purchases remain below the
  threshold may opt for taxation of their acquisitions in
  the country of destination. This option is valid for
  two consecutive years and is irrevocable;
* On account of their high unit value, which makes them
  particularly susceptible to differences in rates, it is
  proposed that new private vehicles never previously
  registered should be taxed in respect of their
  acquisition in the Member State of use, where the first
  registration on a permanent basis takes place;
* Mail-order sales are an area of activity in which,
  because of the very structure of this type of
 ---pagebreak---                                                        12
  distribution, demand is particularly sensitive. In an
  open market, significant differences in rates from one
  Member State to another might only underline this
  phenomenon. Such differences in rates could cause
  activities to be shifted elsewhere. The aim during the
  transitional period is to exert control over this risk
  without hampering the free movement of goods. The
  Commission thus proposes that mail-order sales, which
  it has moreover defined in a manner consistent with the
  objectives laid down, should be taxed in the country of
  destination where the seller has an annual turnover of
  intra-Community   mail-order   sales   of   more   than
  ECU 1 million. The tax mechanism envisaged involves
  shifting the place of taxation of such sales in order
  to make the non-established seller's tax representative
  liable for VAT in the country of destination.
Treatment of operations involving SME's
Supplies for export carried out by SME's entitled to the
exemption laid down in Article 24 of the Sixth Directive
and in the proposal for a Twenty-Second VAT Directive
will, as is the case for their domestic transactions, be
covered by the exemption from tax applicable to SME's
domestic transactions. In consequence, supplies for
export by SME's will not give rise to the exemption laid
 ---pagebreak---                                                        13
down in Article 15 of the Sixth VAT Directive in the
country of departure. Symmetrically, they will not give
rise to an acquisition in the country of destination of
the goods. However, it is worth recalling that SME's can
in any event opt to benefit from the normal VAT
arrangements.
With regard to purchases made by SME's, such transactions
will be subject to taxation in the country of departure
of the goods insofar as they do not exceed the threshold
fixed in the special arrangements applicable to purchases
by exempt taxable persons - i.e. either ECU 35 000 or
ECU 70 000 - SME's in this regard are treated as if they
were taxable persons whose domestic activities are fully
exempt from VAT.
 ---pagebreak---                                                                  14
                EXPLANATORY NOTE ON THE LEGAL TEXT:
Observations regarding  the provisions applicable during the tran-
sitional period solely  to intra-Community transactions - Article 2
of the modified version of COM(87)322 introducing a new wording for
Article 28 of the Sixth Directive
Point (a)
The provisions laid down define the special tax arrangements
applicable to mail-order sales during the transitional period.
Scope of the special arrangements for mail-order sales
Essentially, these arrangements cover mail-order sales to private
individuals. However, mail-order sales to institutional non-
taxable persons or to fully exempt taxable persons will also be
covered in cases where such sales do not qualify for the
arrangements generally applicable during the transitional period
and provided for at (b) , second indent and (c) . Mail-order sales
to taxable persons are subject to the general arrangements provided
for at (b).
Passenger vehicles are also excluded from the scope of the special
arrangements for mail-order sales, since they are covered by the
specific provisions laid down at (b), first indent and (c).
 ---pagebreak---                                                                  15
Definition of mail-order sales
The concept of mail-order sales is determined by factors to do with
the way in which the offer is made, e.g. in a catalogue reproduced
in bulk, using any medium whatsoever, whether or not printed, which
the consumer can consult in the absence of the trader or his
representative. Furthermore, the application of three criteria
will make it possible to ascertain whether the offer does, in fact,
display the characteristics recognized as being specific to mail-
order sales contracts. Thus, among the transactions excluded from
the special arrangements for mail-order sales are (i) sales in
respect of which no prior offer was made and which are in response
to distance ordering, and (ii) sales consequent upon simple
advertising comprising an offer to buy (in the press).
Condition of eligibility for the special arrangements tied to the
volume of cross-frontier transactions
Traders with a cross-frontier mail-order turnover exceeding
ECU 1 million (all Community destinations taken together) must
apply   the   special   arrangements. Nevertheless,    traders  not
satisfying the eligibility condition tied to the volume of their
cross-frontier transactions may in their own interest apply for
special arrangements, which will apply for two consecutive
years. The threshold mechanism is defined as follows: as soon as a
mail-order firm exceeds, during a calendar year, a volume of mail-
order sales, in the country of departure of the goods, which come
within the scope of this special arrangement and are destined for
the other 11 Member States, of 1 million ECU, the firm falls within
the scope of the special arrangement; Member States must define the
practical procedures for the implementation of this criterion.
 ---pagebreak---                                                                  16
Taxation mechanism for mail-order sales
Supplies covered by the special arrangements for mail-order sales
are deemed to take place in the country to which the goods are
dispatched or transported. The tax is paid in that country, within
the conditions laid down in Article 21(1) (a) of the Sixth
Directive, where appropriate through the intermediary of a tax
representative.
Traders will continue to exercise their right to deduct input tax
in the Member State in which they are established in accordance
with Article 17(3)(a) of the Sixth Directive as regards
transactions which they carry out in another Member State provided
those transactions, if carried out within the territory of the
country, would have conferred the right to deduct input tax there.
Point (b)
This point lists the transactions that fall within the scope of the
general transitional arrangements. The proposed provisions lay
down the system of exemptions to be applied in the country of
departure to supplies of goods and to supplies of services directly
linked to such goods.
Nature of the exemption mechanism
Pursuant to the combined provisions of Articles 5 and 8(1)(a) of
the Sixth Directive a seller makes a supply which is situated in
the country of departure and which is therefore taxable there. In
order to tax the acquisition of the goods dispatched or transported
 ---pagebreak---                                                                   17
to the Member State of destination it is essential that the supply
made by the seller in the country of departure is exempt. Failing
this, double taxation would arise. Supplies referred to under (b)
are for this reason treated as supplies under Article 15 of the
Sixth Directive which qualify for exemption upon export. It should
be underlined that this exemption does not preclude the exercise of
the right of deduction of the seller or of the supplier of services
under Article 17(3)(b) of the Sixth Directive, given that the right
to   deduction  is maintained     for  transactions   exempt   under
Article 15.
Definition of transactions exempt in the country of departure of
the goods
1. Status of the trader carrying out the exempt transaction
   The exemption will apply only if the supply of the goods or the
   related services is effected by a taxable person, whether
   entitled to deduct tax in full or in part.
   Small and medium-sized businesses, all of whose transactions are
   exempt within a Member State pursuant to the exemption from tax
   laid down in Article 24 of the Sixth Directive (as well as by
   the proposal for a Twenty-Second VAT Directive) are excluded
   from   the  arrangements   for taxation    in the    country   of
   destination. Similarly intra-Community supplies made by them
   will benefit from the Article 24 exemption and will not give
   rise to any acquisition transaction        in the country of
   destination. Supplies by flat-rate farmers are dealt with under
   the same principles.
 ---pagebreak---                                                                    18
2. Nature of transactions and status of person by whom goods are
   acquired
      (a) The supplies of private vehicles qualifying for exemption
        in the country of departure are those carried out by a
        taxable person whose activity is purchasing and selling
        vehicles  other than used vehicles covered by Article 32 of
        the 6 th VAT Directive(9) : it should be remembered that used
        cars sold by taxable resellers of used goods have been
        directly excluded from the scope of the transitional
        arrangements since the latter apply without prejudice to the
        provisions of Article 32 which lays down the Community
        arrangements applicable to used goods:
        * Private    vehicles   supplied   under   the   transitional
          arrangements must, therefore, form part of the seller's
          stock in trade.
        * The scope of the concept of private vehicles used here
          corresponds to that given by Article 2 of Directive
          83/182/EEÇ; it therefore includes motorcycles. Commercial
          vehicles*10) however are excluded from the special
          arrangements for destination taxation.
(y) This concerns the new proposal for a directive regarding
    special arrangements to apply to used goods, works of art,
    antiques  and collectors items (COM(88) 846 final).
(10)Commercial vehicle within the meaning of Directive 83/182/EEC
    means:
    any road vehicle which by its design or equipment, is suitable
    for and intended transporting, whether for payment or not:
    - more than nine persons, including the driver;
    - goods,
    as well as any road vehicle for special use other than
    transport as such
 ---pagebreak---                                                                19
    * Private vehicles supplied by a taxable user other than the
      taxable person mentioned above will also be exempt if they
      satisfy the conditions     laid down under the      general
      transitional arrangements: these vehicles are, in fact,
      capital goods the supply of which will be exempt in the
      country of departure and the acquisition of which by a
      taxable person (or a person ranking as such) will be taxed
      in the country of destination (this is necessary in order
      to avoid a situation in which the taxable person by whom
      they are acquired would have to seek a deduction for VAT
      paid in the country of departure).
(b) Generally   speaking,   the exemption  in   the  country   of
    departure covers supplies, other than those        identified
    above, where they are made to an eligible trader, that is to
    say, where the person by whom goods are acquired is:
    * either a fully or partially taxable person, irrespective
      of the amount of acquisitions made by him;
    * or an institutional non-taxable person or a fully exempt
      taxable   person   whose  purchases  exceed   35 000   ecus
      (70 000 ecus from 1 January 1995) during the calendar year
      when     the      supply    under    consideration      was
      made. Nevertheless, since such persons who do not fulfil
      this condition may opt for taxation of their acquisitions
      in the country of destination, the seller may claim
      exemption for his supplies in the country of departure if
      the person by whom the goods are acquired has exercised
      the option available to him.
(c) In conformity with the general principles of the common VAT
    system, supplies of services directly linked to supplies of
 ---pagebreak---                                                           20
goods which are exempt under the transitional arrangements
are themselves exempt in the country in which they are
territorially located under this proposal. The services
concerned here are mainly transport of goods services and
ancillary services as well as services of intermediaries
acting in the name and on behalf of another. This provision
aims at applying the same tax arrangements to services as
that applied to the supplies to which they relate thus
preserving the neutrality of the tax arrangements for intra-
Community trade.
For the record, it is recalled that the COM(87) 322 proposal
defined a new territoriality for transport services by
providing for the taxation of the totality of intra-
Community transport services in the country of departure of
the transport only. The transitional arrangements modify
the application of this new rule to the extent that they
reintroduce exemption for transport services directly linked
to a supply of goods for export as defined in point 5(b).
However, in the case of passenger transport the tax
treatment   of such supplies     in relation to journeys
undertaken within the Community will be the subject of
specific provisions on the basis of a Commission proposal to
be made before 31 December 1991.
By way of conclusion, it should be pointed out that, in all
the situations covered at (b) , the exemption applies
irrespective of the place of establishment of the person by
whom goods are acquired provided the latter are transported
to a country other than the country of departure by the
 ---pagebreak---                                                                  21
       seller or for his account.       However, if the transport
       operation is carried out by the person by whom the goods are
       acquired or for his account, the exemption applies only on
       the express condition that the person by whom goods are
       acquired   is   not    established   in   the   country   of
       departure. Subject to the provisions at (i), the exemption
       provided for at (b) is restricted to supplies made by the
       last seller in the country of departure.
Point (c)
The tax provisions in the country of destination are developed in
(c) . The proposed provisions define the acquisition transaction
and the procedures for taxing such transactions. They are,
therefore, the consequence of the provisions laid down at (b) and
need to be looked at in conjunction with the latter.
Definition of "acquisition" transactions taxable in the country of
destination
(a) By analogy with supplies exempt in the country of departure
    under the provisions of (b), the matching acquisitions are
    liable to tax in the country to which the goods are transported
    or dispatched. The acquisition transaction is, therefore,
    defined as "the process of acquiring the right to dispose of
    tangible property as owner": it thus exactly mirrors in the
    country of destination the supply transaction carried out in
    the country of departure, this being defined as "the process of
    transferring the right to dispose of tangible property as
    owner". These two transactions, which are located in two
    different countries for VAT purposes, are based on the
 ---pagebreak---                                                                  22
    occurrence of one and the same legal event which finds
    practical embodiment in the drawing-up of a supply-acquisition
    contract.
    The point should be made that the acquisition transaction may
    involve only goods that are transported or dispatched to
    another Member State, regardless of the conditions under which
    such transport takes place and, in particular, regardless of
    the conditions governing payment of the transport costs (by the
    seller or for his account, by the person by whom the goods are
    acquired or for his account).
(b) To the extent that differences in the scope of the right to
    deduct continue to exist, it has appeared necessary to make the
    appropriation of certain property taxable in the country of
    destination by assimilating such transactions with acquisitions
    made for consideration. Similar considerations apply to the
    transfer of property between two Member States by a fully
    exempt taxable person or by a non-taxable person within the
    meaning of Article 4(5). In both cases, the question concerns
    the preservation of the neutrality of VAT whether it be applied
    to domestic transactions or within the framework of intra-
    Community relations: in consequence, it is intended to tax in
    the country of destination goods which otherwise would have
    been consumed there without the VAT applicable being
    charged. Naturally, the Member State of destination is obliged
    to take account of VAT which may have been charged on the goods
    in the Member State of departure so as to avoid possible double
    taxation.
 ---pagebreak---                                                                  23
Place at which an acquisition transaction takes place
In order to ensure that taxation takes place in the country of
destination,   an  acquisition   transaction  from   a  territorial
viewpoint, is situated at the place where the goods that have been
transported or dispatched are situated.
Chargeable event and chargeability of VAT in respect of acquisition
transactions
In this context, chargeable event and chargeability coincide and
occur at the time the acquisition transaction is carried out.
Accordingly, a supply transaction exempt under (b) and the matching
acquisition transaction under (c) are transactions which are each
characterized by their own chargeable event and chargeability but
which, nevertheless, are located at the same moment in time since
the legal conditions necessary for tax to become chargeable are
identical for both transactions.
Point (d)
Given the nature of the acquisition transaction, its taxable amount
can only be the taxable amount for the matching supply transaction
in the country of departure and, as such, it is based on the
concept of consideration defined in Article 11(A)(1) and (2). For
the record, point 4 of this proposal defines the rate of exchange
applicable to those elements of the taxable amount drawn up in a
currency other than that of the country of taxation. In particular
this provision applies to the taxable amount for acquisition
transactions. An additional provision has been introduced to cover
 ---pagebreak---                                                                  24
those cases in which acquisition has given rise to a transport
operation carried out by the person by whom the goods are acquired
or for his account and to ancillary services the costs of which are
borne by the person by whom the goods are acquired and not by the
seller. In such cases, the value of the services incidental to the
acquisition of goods must be included in the taxable amount for
that acquisition and hence taxed at the rate and under the
conditions obtaining in the country to which the goods are
transported. It is to be noted that this provision has to be taken
together with the exemption in the country of departure for the
supply of services directly linked to supplies exempt under (b).
If the costs of those same supplies are borne by the seller, their
value will form an integral part of the consideration sought by the
seller from the person by whom the goods are acquired and will, as
a result, be automatically included in the taxable amount for the
acquisition transaction. In conformity with the objective of
applying taxation in the country of destination, the rate of VAT
applicable to the acquisition transaction will be the same as that
applied within the territory of the country of destination to a
supply of the same goods.
Point (e)
The person liable for the tax payable under the special
arrangements for mail-order sales is, in accordance with the
present provisions of Article 21(1)(a), the taxable person not
established in the Member State of taxation or possibly his tax
representative or some other person.
Where tax is payable in respect of an acquisition transaction, the
person by whom the goods are acquired is the person liable to pay
the tax and he must comply with the obligations relating to
declaration.
 ---pagebreak---                                                                  25
If the person by whom the goods are acquired is not established in
the country where the acquisition transaction is taxable, it is
specifically laid down that a fiscal representative of the person
by whom the goods are acquired may be designated as the person
liable to pay the tax.
The person liable to pay tax is required to comply with the
obligations relating to declaration and payment in respect of
acquisition transactions on the regular return normally used by him
to account for and pay the tax for which he is liable on domestic
transactions as a taxable person. As a result, tax payable on an
acquisition transaction is treated in exactly the same way as tax
payable on a domestic supply transaction. If the person liable is
not a taxable person or if he has been released from the
obligations relating to declaration which were incumbent upon him
as a taxable person under the arrangements applicable to domestic
transactions, it will be for the Member States to define what
obligations relating to declaration, settlement and payment are
incumbent on him (inter alia a requirement to declare and pay the
tax at the time a vehicle acquired by a private individual is
registered).
Point (f)
Since Article 17(2)(a) of the Sixth Directive as amended by
document COM(87) 322 will take effect only on expiry of the
transitional period (cf. point (j)), this provision reintroduces
for the duration of that period the rules on territoriality laid
down in the Sixth Directive for a range of intangible services.
It will not be possible during the transitional period to provide
for a right to deduct input tax payable or paid in another Member
State.
 ---pagebreak---                                                                  26
Point(g)
Provisions which at present allow the right to opt for taxation in
respect of banking and financial activities exempt under
Article l3(B)(d) of the Sixth Directive, have been reintroduced
under this point for the duration of the transitional arrangements.
Point (h)
This provision exempts the acquisition of goods the supply or
importation of which would have been exempted in the country of
destination.
It thus covers acquisitions of goods the supply of which for
domestic transactions would in any event be exempt, in particular
by the provisions of Article 13 of the Sixth Directive on
exemptions on domestic transactions.
This also covers acquisitions of goods which if imported (from
third countries) would have been exempt under the provisions of
Article 14(1)(d) and (g) of the Sixth Directive.
Moreover the provisions of Article 15(4) to (9) of the Sixth
Directive will be examined later particulalrly in the context of
possible changes to the proposal for a directive    on ships stores
presented by the Commission on 21 January 1980C11).
Point (i)
In view of the creation of the acquisition transaction, this point
takes over the provisions of Article 16(2) of the Sixth Directive
(ii)proposal  COM(79)794  final,  O.J. E.C.  No C 31  of  8.2.1980,
    page 10
 ---pagebreak---                                                                  27
so as to give traders who make export supplies the possibility of
benefitting from an exemption from tax in cases where they are the
consignee for import transactions, acquisitions, supplies and
services linked to their export supplies to other Member States or
to third countries.
Point (j)
Under this provision, the person by whom goods are acquired may
deduct VAT payable or paid on goods that have been the subject of
an acquisition transaction. This right to deduct input tax is
subject to the same conditions as the right to deduct VAT payable
or paid on goods that have been supplied. It should, therefore, be
noted that this right to deduct input tax may in principle be
exercised as soon as the person by whom goods are acquired becomes
liable for the tax payable on the acquisition transaction.
Naturally, acquisition transactions will not be taken into
consideration   in determining    the deductible    proportion  for
partially taxable persons since they are not as such a component of
turnover.
It has also been necessary to include a special measure to ensure
that, in a given Member State during the transitional period, a
right to deduct VAT payable or paid in another Member State is not
granted.
Point (k)
In the interests of setting out all the obligations to be complied
with during the transitional period by persons liable to pay the
tax, the text of Article 22 of the Sixth Directive has been
reproduced in its entirety. However, only some of its provisions
 ---pagebreak---                                                                  28
have been amended; these are commented on below:
First paragraph of Article 22(3)(a): The obligation to issue an
invoice, which already covers any supply made to another taxable
person, is extended to supplies made to a non-taxable person within
the meaning of Article 4(5). This obligation applies irrespective
of the country in which the person by whom the goods are acquired
is established and thus supplements the text of Article 22(2) of
the Sixth Directive as regards the supporting documents to be
provided in respect of intra-Community transactions where both the
supply and acquisition of goods are concerned;
Second paragraph of Article 22(3)(b): In the case of supplies of
goods covered by the transitional tax arrangements for intra-
Community trade in the country of destination, the invoice must
give the VAT numbers of the two traders concerned. This provision
makes it possible to enter on the invoice one of the factors
essential in determining the tax treatment to be applied and, as
such, is a necessary item of information for implementing
administrative cooperation and mutual assistance procedures;
Second   and  third   paragraphs  of Article 22(4): The    proposed
provisions define the obligation to declare the amount of intra-
Community supplies of goods by indicating separately from the total
amount of transactions the amount of goods sent to other Member
States and the amount of acquisitions received from other Member
States. This obligation applies only to transactions involving
tangible movable goods and, as a result, excludes transactions
involving services not linked to a supply of goods;
 ---pagebreak---                                                                  29
Article 22(9): The obligation to issue an invoice in respect of
goods supplied to persons in other Member States is not covered by
the possibilities for easing the burden of obligations on persons
liable to pay the tax since the invoice is important for
identification purposes and for checking that the transactions in
question have been afforded the proper tax treatment;
Article 22(10): The exemption in the country of departure for
supplies of goods referred to in the second indent at (b) is
conditional on the VAT status of the person by whom the goods are
acquired. In order to ensure that the seller possesses the
necessary information to apply that exemption, the person to whom
the goods are supplied must be able to produce a statement from the
competent tax administration certifying his VAT status. As such a
statement can be issued only at the request of the person by whom
the goods are acquired, the latter must necessarily submit a new
request in the event of any change in his VAT status.
 ---pagebreak---                                                                 30
                                   Proposal for an
                          Amendment to the proposal for a
                                  COUNCIL DIRECTIVE _
                  SUPPLEMENTING THE COMMON SYSTEM OF VAT
                     AND AMENDING DIRECTIVE 77/388/EEC
THE COMMISSION AMENDS ITS PROPOSAL 0 ) AS"FOLLOWS:
1.    The following shall be inserted between the second and third
      recitals:               " "
      "Whereas nevertheless the full and definitive abolition of fiscal
      frontiers presupposes the fulfilment of conditions which cannot
      be satisfied before 31 December 1992;
      Whereas accordingly, a clearly defined transitional period must
      be provided for during which transitional provisions designed to
      facilitate passage to the definitive taxation arrangements and to
      ensure the irreversibility of the process leading to the complete
      abolition of fiscal frontiers, must be implemented;"
2.     Article 2 is replaced by the following provisions:
                      . _. .    .   ".Article 2
        Article 28 of Directive 77/388/EEC is hereby replaced by the
       following:
                                     Article 28
      Notwithstanding the other provisions of this Directive and
      without prejudice to Article 32, the following provisions, shall
      apply until 31 December 1996 at the latest:
 (1)
     0J No C 252, 22.9.1987, p.2.
 ---pagebreak---                                                              31
(a) Where goods supplied to a non-taxable person or to a taxable
    person whose activity is fully exempt, who does not qualify
    for the arrangements provided for in the second indent of point
    (b), are dispatched or transported they shall be deemed to be
    supplied at the place where they are at the time they reach
    the person by whom the goods are acquired, provided that the
    following conditions are simultaneously met:
    - the supplies comprise goods other than private vehicles
      that have been dispatched or transported to another Member
      State ;
    - the supplies are effected within the context of mail-order
      selling. "Mail-order selling" means a specialized economic
      activity involving goods selected from a catalogue and sold
      on a retail basis. "Catalogue" means any offer to the
      public made using any medium whatsoever which is reproduced
      in bulk and which lists the articles for sale in such a way
      that the following three criteria are met:
      -the contract ', is concluded on the basis of a trader's
       catalogue which the  consumer has a proper opportunity of
       reading in the absence of the trader,
 ---pagebreak---                                                                  32
       r there is intended   to be continuity of contact between the
         trader and the     consumer in relation to that or any
         subsequent transaction,
      - both the catalogue and the contract clearly inform the
         consumer of his right to return goods to the trader within
         a period of not      less than seven days of receipt or
         otherwise to cancel the contract within that period without
         obligation of any kind other than to take reasonable care
         of the goods :
    - the annual turnover exclusive of value-added tax generated
      by the seller in connection with mail-order selling to
      Member States other than that from which the goods are
      dispatched     or transported     exceeds the equivalent in
      national currency of ECU 1 million at the conversion rate
      ruling      on    the   day   on  which   this   Directive    is
      adopted. Member States shall grant to taxable persons not
      satisfying this condition the right to opt for the present
      arrangements governing mail-order sales. The option shall
      apply for two calendar years;
(b) Under conditions which they shall lay down for the purpose of
    ensuring the correct and straightforward application of the
    exemptions provided for below and of preventing any evasion,
    avoidance or abuse, Member States shall, by analogy with the
    transactions referred to in Article 15, exempt the following
    where they are effected by taxable persons other than those
    qualifying for the exemption from tax referred to in
    Article 24 or for the flat-rate arrangements referred to in
    Article 25:
    - supplies of private vehicles forming part of the seller's
      stock in trade and dispatched or transported to another
      Member State by the seller or for his account or by a
      person not established within the territory of the country
      by whom the goods are acquired or for his account;
 ---pagebreak---                                                        33
supplies other than those referred to in (a) to a taxable
person or to a non-taxable person within the meaning of
Article 4(5) of goods other than private vehicles as
referred to in the first indent which are dispatched or
transported to a taxable person or a non-taxable person
within the meaning of Article 4 (5) in another Member State
by the seller or for his account or by a person not
established within the territory of the country by whom the
goods are acquired or for his account.
However, where the person by whom the goods are acquired is
a taxable person whose activity is fully exempt or a non-
taxable person within the meaning of Article 4(5), this
provision shall apply only from the moment during the
calendar year when the total amount of corresponding
purchases   exclusive  of value-added    tax   exceeds the
equivalent value in national currency of ECU 35 000 at the
conversion rate ruling on the day this Directive is
adopted. This amount shall be increased to ECU 70 000 with
effect from 1 January 1995, at the conversion rate applicable
on that date.    The threshold for purchases which applies
for the purposes of these provisions consists of the amount
of purchases exclusive of value-added tax which have been
dispatched or transported from a Member State other than
the Member State of arrival of the goods, with the
exception of:
- purchases of private vehicles the supply of which is
  covered by the provisions of the first indent
- purchases of goods the supply of which is covered by the
  provisions of point (a)
- purchases of goods the supply of which is effected by a
  taxable person who benefits from the exemption regime of
  Article 24.
 ---pagebreak---                                                              34
      This provision shall also apply      where the respective
      ceilings of ECU 35 000 and ECU 70 000 have not been
      exceeded, provided that the person to whom the goods are
      supplied has exercised this option. The option shall be
      valid for two calendar years;
    - supplies of services, including transport and incidental
      transactions but excluding supplies of services exempt
      under Article 13, where they are directly linked to
      transactions referred to in this point (b);
    - supplies of services made by intermediaries acting for and
      on behalf of others where they intervene in transactions
      referred to in the first, second and third indents of this point (b);
(c) VAT shall be charged on acquisitions for consideration of
    goods the supply of which by taxable persons is governed by
    the provisions set out in the first and second indents of point
    (b). "Acquisition of goods" means        the      process of
    acquiring the right to dispose of tangible property as
    owner. The place where an acquisition is made shall be
    deemed to be the place where the goods dispatched or
    transported are at the time they reach the person by whom
    they are acquired. The chargeable event shall occur and the
    tax shall become chargeable when the acquisition is made.
 ---pagebreak---                                                               35
    The following shall be treated as an acquisition of goods for
    consideration:
    - the acquisition by a taxable person whose activity is fully
      exempt or by a non-taxable person within the meaning of
      Article 4(5), for the purposes of his activity in the
      Member State of destination, of goods transferred from the
      Member State of departure of the goods. The Member State of
      arrival of the goods shall take the measures necessary to
      avoid any double taxation;
    - the acquisition by a taxable person, for the purposes of
      his activity in the Member State of destination, of goods
      not eligible for a deduction of input tax in full or in
      part where those goods have been transferred from the
      Member State of departure of the goods. The Member State of
      arrival of the goods shall take the measures necessary to
      avoid any double taxation;
    By derogation from Article 8(1)(a) where the place of
    departure of the consignment or transport of goods is in a
    Member State other than the country of acquisition of those
    goods, the place of the supply by the person by whom the
    goods are acquired and the place of any subsequent supplies
    shall be deemed to be in the country of acquisition of the goods;
(d) The taxable amount of the acquisition shall be the same as
    that which would be applicable within the territory of the
    country to the supply of the same goods in accordance with
    Article 11(A)(1) and (2) and (C) . To the extent that they
    have not already been included, the taxable amount of the
    acquisition   shall  include   expenses  incidental   to the
 ---pagebreak---                                                                  36
    acquisition such as commission, packaging, transport and
    insurance costs charged up to the point within the territory
    of the country at which the goods dispatched or transported
    arrive.
    As regards the transfer of goods referred to in the second
    indent of point (c), the taxable amount shall be determined in
    accordance with Article 11(A)(1)(b).
    The rate of tax applicable to the acquisition of a good shall
    be that applied to the supply of the same good within the
    territory of the country;
(e) In the case referred to in point (a), the tax shall be payable in
    accordance with Article 21(1)(a).
    In the cases referred in point (c), the. person by whom the goods
    are acquired shall declare the acquisition and shall pay the
    tax.    Where the taxable transaction is carried out by a
    person by whom the goods are acquired who is established
    abroad, Member States may take measures providing for the tax
    to be payable by another person - in particular a fiscal
    representative may be designated for these purposes.
    Where the person liable to pay the tax is a non-taxable
    person or a taxable person released from the obligation to
    make a tax return, Member States shall take the measures
    necessary to ensure that he complies with the obligations set
    out in point (k). To that end, provision may be made for the
    simplification of those obligations and for an annual return;
(f) The place where services specified in Article 9(2)(e) are
    supplied when performed for customers established outside the
 ---pagebreak---                                                            37
    Community or for taxable persons established in the Community
    but not in the same country as the supplier shall be the
    place where the customer has established his business or has
    a fixed establishment to which the service is supplied or, in
    the absence of such a place, the place where he has his
    permanent address or usually resides;
(g) Member States may grant taxable persons the right to opt for
    taxation of the transactions referred to in Article 13(B)(d);
(h) Member States shall exempt the acquisition of goods the
    supply of which would in all circumstances be exempted within
    the country. They shall also exempt the acquisition of goods
    the importation of which would in all circumstances be
    exempted pursuant to Article 14(1)(d) and (g);
(i) Subject to the consultation provided for in Article 29,
    Member States may opt to exempt acquisition by, imports for,
    and supplies of goods to a taxable person intending to export
    them to another Member State or to a third country as they
    are or after processing, as well as supplies of, services
    linked with his exporting business, up to a maximum equal to
    the value of his exports during the preceding twelve months;
(j) The provisions governing deductions shall also apply to VAT
    payable or paid on the acquisitions referred to in point (c).
 ---pagebreak---                                                                            38
     However, the tax payable or paid in a Member State by a
     taxable person:
     - in respect of goods supplied or to be supplied to him by a
       taxable person;
     - in respect of goods which have been imported or have been
       subject to an acquisition;
     - and in respect of services supplied or to be supplied to
       him by a taxable person;
     shall    not    qualify     for    deduction     in    another     Member
     State. With regard to taxable persons who are established in
     the territory of the Community, the right to refund shall be
     determined pursuant to Directive 79/1072/EEC during the
     transitional period;
(k) By way of derogation from the provisions of Article 22 the following shall apply:
      1.   Every taxable person shall state when his activity as a
           taxable person commences, changes or ceases.
      2.   Every taxable person shall keep accounts in sufficient
           detail to permit application of value added tax and
           inspection by the tax authority.
      3.   (a) Every taxable person shall issue an invoice, or
                other document serving as an invoice, in respect of
                all goods and services supplied by him to another
                taxable person or to a non-taxable person within the
                meaning of Article 4(5) and shall keep a copy
                thereof. This obligation shall apply, irrespective
                of whether the persons referred to in this paragraph
                are taxable persons or non-taxable persons as
 ---pagebreak---                                                                39
    defined in Article 4(5) within the territory of the
    country or in another Member State.
    Every taxable person shall likewise issue an invoice
    in respect of payments on account made to him by
    another taxable person before the supply of goods or
    services is effected or completed.
(b) The invoice shall state clearly the price exclusive
    of tax and the corresponding tax at each rate as
    well as any exemptions.
    The   invoice shall also state           in respect of
    transactions referred to in point (b) of this Article 28 the VAT
    registration number of the taxable person supplying
    the goods and that of the person by whom they are
    acquired.
(c) The Member States shall determine the criteria for
    considering whether a document serves as an invoice.
Every taxable person shall submit a return within an
interval to be determined by each Member State. This
interval may not exceed two months following the end of
each tax period. The tax period may be fixed by Member
States as a month, two months or a quarter. However,
Member States may fix different periods provided that
these do not exceed a year.
 ---pagebreak---                                                                                  40
   The return must set out all the information needed to
   calculate the tax that has become chargeable and the
   deductions to be made, as well as, where appropriate,
   the total amount of supplies referred to:in point (b) of, this Article
    28, the total amount of acquisitions referred to in point (c) ot^chis Article 28 and, in
   so far as it seems necessary for the establishment of
   the basis of assessment, the total amount of the
   transactions relative to such tax and deductions, and
   the total amount of the exempted supplies.
5. Every taxable person shall pay the net amount of value
   added tax when submitting the return. The Member States
   may, however, fix a different date for the payment of
   the amount or may demand an interim payment.
6. Member States may require a taxable person to submit a
   statement         including        the      information         specified        in
   paragraph 4 and concerning all transactions carried out
   the preceding year. This statement shall also provide all
   the information necessary for any adjustments.
7. Member States shall take the necessary measures to
   ensure that those persons who, in accordance with
   Article 21(1)(a) and (b), are considered to be liable to
   pay tax instead of a taxable person established in
   another country and who are jointly and severally liable
   for the payment comply with the obligations relating
   to the submission of a return and payment.
 ---pagebreak---                                                           41
8.  Without prejudice to the provisions to be adopted
    pursuant to Article 17(4), Member States may, subject to
    respecting equality of treatment between domestic and
    intra-Community transactions, impose other obligations
    which they deem necessary for the correct levying and
    collection of the tax and for the prevention of fraud.
9.  With the exception of the obligation to issue invoices
    in respect of supplies specified in point (b), Member
    States may release taxable persons:
    - from certain other obligations;
    - from all other obligations where those taxable persons
      carry out only exempt transactions;
    - from the payment of the tax due where the amount is
      insignificant.
10. Where a taxable person or a non-taxable person within
    the meaning of Article 4(5) or a taxable person
    qualifying    for    the   arrangements   laid   down   in
    Articles 24 and 25      so    requests,   the    competent
    authorities in the Member State in which he is
    established shall issue to him a statement certifying
    his VAT status provided the person making the request
    fulfils the conditions defined in the second indent of point
    (b). However, where the seller already possesses such a
    statement, the person by whom the goods are acquired
    shall not be obliged to provide a new statement during
    the   calendar    year   for which    the  statement   was
 ---pagebreak---                                                               42
            issued. That statement shall be in conformity with the
            specimen certificate set out in the Annex hereto.
            If a statement certifying his VAT status has already
            been issued to him, the taxable person or the non-
            taxable person within the meaning of Article 4(5) shall
            submit a new request in the event of any change in his
            VAT status."
3. Article 3 is replaced by the following provisions :
                                   "Article 3
    1. The following Council Directives shall cease to have effect
       on 31 December 1992:
       Directive 83/183/EEC
       Directive 74/651/EEC
    2. The following Council Directives shall cease to have effect
       on 31 December 1992 in so far as intra-Community relations
       are concerned:
       Directive 69/169/EEC
       Directive 83/181/EEC
       Directive 85/362/EEC
    3. The following Council Directives shall cease to have effect
       on 31 December 1996:
       Directive 79/1072/EEC
       Directive 83/182/EEC."
4. A new Article 4b shall be inserted :
                                  "Article 4b
    Article 11(C)(2) of Directive 77/388/EEC shall be replaced by
 ---pagebreak---                                                                 43
   the following provisions :
(2) Where elements determining the taxable amount are expressed in a
   currency other than that of the Member State where evaluation is
   carried out, the rate of exchange applicable shall be the last
   rate of sale registered on the most representative exchange
   market or markets of the Member State concerned at the time the
   tax becomes payable according to procedures fixed by Member
   States."
   Done at Brussels,      "                    For the Council
 ---pagebreak---                                                                     44
                                 ANNEX
                      CERTIFICATE OF VAT STATUS
              (Name and address of competent authority)
certifies that
              (Surnames and forenames or name of firm)
                         (nature of activity)
                    (Address of the establishment)
is recognised for VAT purposes under the registration number
        as an operator entitled to receive supplies of goods
exempted from value-added tax by virtue of the application of
Article 2 of Directive COM(87) 322 as amended by Directive COM (90)
182.
      Date
                                    Official
                                    Stamp
                               (Signature, name and grade)
(1) If the applicant does not have a VAT registration number, the
competent authority shall state the reason for this.
 ---pagebreak---  ---pagebreak---                                                                  45
           COMPLIANCE BURDENS ON FIRMS AND AFTER 1992
                DUE TO VAT AND STATISTICAL RETURNS
                         IMPACT ASSESSMENT
Present situation:
VAT
Current customs based import/export procedures require that
goods consignments must stop at customs posts when crossing
borders.   In addition the goods have to be declared to the
authorities and cleared through Customs either at the border or
elsewhere.    Goods consignments are declared to the customs
authorities using the Single Administrative Document (SAD).
At present up to 50 boxes approximately on the (SAD) may have to
be completed in respect of each individual consignment, in trade
between Member States I 1 ).  Additionally a further five boxes
must be completed by the administrative authorities.
No precise figures are available for the number   of SAD's issued
in any one year. However a reasonable estimate    is that between
50 to +/- 60 millions SAD's are used in purely     intra-Community
trade each year.        This figure would not       include other
consignments, such as third-country goods         transiting the
Community.
Taxable traders who use the SAD for import and export
transactions also have to complete periodic VAT returns in the
usual manner.
Statistics
The SAD is also used as the basis for         the   collection  of
statistics on trade between Member States.
Situation from 1993 onwards
Under the Commission's proposal, the obligations        imposed on
Community firms will be considerably reduced:
^   All these boxes may not necessarily be completed by the same
    firm.
 ---pagebreak---                                                                 46
VAT
No SAD will be required in most intra-Community trade.
There will be no stops or controls at borders by customs.
Custfom clearance formalities will also be dispensed with.
For traders subject to VAT, the only obligations relating to
intra-Community trade will be:
- an inclusion in their normal periodic VAT-returns of two
  global (import and export) figures for their trade with other
  Member States.
- the inclusion of the VAT-number of seller and purchaser on the
  invoice documenting the transaction.
- obtaining a declaration from the domestic VAT-authorities,
  that they are subject to VAT. This documentation shall be
  given to the seller in the other country as a precondition for
  the zero-rating of exports.
Once completed, however, these requirements would involve no
further compliance burden transaction-by-transaction. The only
other documentary requirement will be to keep the normal common
records and documents which firms are required to keep in any
case.
Small enterprises(2) VAT exempt can chose between two options:
- they simply buy in other Member States at the rate of VAT
  applicable in those other Member States (rate of VAT in
  country of origin), implying absolutely no subsequent
  relations with VAT-authorities in any countries, subject to an
  annual purchases threshold of 35.000 ecus*3', above which they
  must use the following option;
- they can choose to buy VAT-free, but pay subsequently the
  domestic rate of VAT on the purchase.       This presupposes a
  registration with the VAT-authorities, so that they can prove
  their status to the seller.
The same regime applies to traders which are exempt from VAT by
reason of the type of activity they carry on (banks, insurance,
some public institutions etc.).
(*) The Commission has a proposal before the Council which will
    harmonise the VAT exempt thresholds, which at present vary
    between Member States, to an obligatory level of 10.000 ecus
    per annum and an optional level of 35.000 ecus throughout
    the Community.
*3' This threshold will be raised to 70.000 ecus with effect
     from 1 January 1995
 ---pagebreak---                                                                 47
Statistics
As the SAD document disappears a new system is introduced for
the collection of trade statistics between Member States
implying the following burdens:
Small enterprises which are VAT exempt are completely exempted
from the supply of any statistics on trade between Member
States.
- The great majority of other firms will only be required to
  complete two extra boxes (value of intra-Community imports and
  exports) on their periodic VAT returns, which would serve both
  VAT and statistical purposes.
- Only the largest firms (about 20% of VAT registered firms)
  will in addition be required to complete an INTRASTAT monthly
  declaration for statistical purposes on which seven compulsory
  and three optional data items are to be indicated.
The situation after 1992
When the regime change towards the taxation in the country of
origin as the general principle, requirements relating to the
documentation of the status of the buyer will in general
disappear.
 ---pagebreak---  ---pagebreak---  ---pagebreak---                                                                                   ISSN 0254-1475
                                                                   COM(90) 182 final
                                                       DOCUMENTS
 EN                                                                                          09
                                  Catalogue number : CB-CO-90-214-EN-C
                                                               ISBN 92-77-60280.5
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