CELEX: 51993PC0657
Language: en
Date: 1993-12-13
Title: Proposal for a COUNCIL DECISION AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY TO APPLY A SPECIAL MEASURE DEROGATING FROM ARTICLES 2(1) AND 17 OF THE SIXTH DIRECTIVE (77/388/EEC) ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES RELATING TO TURNOVER TAXES

COMMISSION OF THE EUROPEAN COMMUNITIES
                                                    C0MC93) 657 final
                                                    Brussels, 13 December 1993
    m
  HBB
                                     Proposal for a
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                                    COUNCIL PECtSIQN
    $m
              AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY TO APPLY A SPECIAL
             MEASURE DEROGATING FROM ARTICLES 2(1) AND 17 OF THE SIXTH DIRECTIVE
             (77/388/EEC) ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES
                                  RELATING TO TURNOVER TAXES
                              (presented by the Commission)
,mm warn.
 ---pagebreak---                             EXPLANATORY MEMORANDUM
The present proposal for a Council Decision authorizes the Federal Republic of
Germany to introduce a special measure in accordance with Article 27 of the Sixth
VAT Directive 77/388/EEC of 17 May 1977 on the common system of value added
taxW, as last amended by Council Directive 92/111/EEC of 14 December 1992<2>.
With the completion of the Single Market, the arrangements for the taxation of
services supplied within the European Community have been modified. The
exemptions related to the exportation of goods and to the placing of certain goods
under a customs procedure have been discontinued, as have the arrangements for
including the value of services in the taxable amount in the case of imported goods.
Under these circumstances, the territoriality principle as applied to a number of
services, with these services being taxed in the place where they are physically carried
out, has the effect of obliging taxable persons who are not established within the
Member State of performance of the services to pay VAT in the Member State where
the services are carried out, and subsequently to apply for refund under the Eighth<3> or
Thirteenth^4) Directives. This concerns above all services supplied in respect of work
 on movable tangible property and the supply of transport services (and ancillary
activities thereto) which are of a purely domestic nature but which are directly linked
to intra-Community goods transport services (the national leg of an intra-Community
movement of goods).
The resulting proliferation of cases in which a refund is applied for under the Eighth
and Thirteenth Directives is hindering the freedom to supply services within the Single
Market.
Moreover, prior systematic vetting of applications, coupled with an increase in the
 number of cases, could well cause delay of VAT refunds under the Eighth and
 Thirteenth Directives.
 It is, therefore, most important in this context to consider measures which can rapidly
 simplify matters for traders but which will not undermine the principles of taxation
 associated with the Single Market.
 To that end, the Federal Republic of Germany has submitted a request for
 authorization on the basis of Article 27 of the Sixth VAT Directive, to introduce
 special measures derogating from Articles 2(1) and 17. The purpose of such measures
 would be to exempt the services rendered in the third and fourth indents of
 Article 9(2)(c) and the supply of domestic goods transport services (and ancillary
 activities thereto) directly linked to intra-Community goods transport services,
 provided that those services are supplied to taxable persons not established within the
 Member State of performance of the services and who in any case qualify for a refund
 <'>OJNo. L 145/1, 13.6.1977.
 <2> OJ No. L 384/47, 30.12.1992.
 <3> Council Directive 79/1072/EEC - OJ No. L 331 of 27.12.1979, p. 11.
 W Council Directive 86/560/EEC - OJ No.L 326 of 21.11.1986, p. 40.
 ---pagebreak--- of VAT on those services by means of the procedures laid down in the Eighth and
Thirteenth Directives. Given this proviso, such a derogation would in no way affect the
amount of tax payable at thefinalconsumption stage.
In order to qualify for the exemption, a person to whom these services are supplied,
but who is not established in the Member State of performance of the services, would
have to establish his status as a taxable person in the manner laid down in the Eighth
and Thirteenth Directives. It would also be necessary for the supplier who is liable to
pay tax within the territory of the country to state the actual grounds for exemption on
the invoice and the number by which his customer is identified for VAT purposes
within the Community.
As a result of this derogation, the growth of intra-Community activity in the service
sectors concerned would not be hindered by the tax charges resulting from difficulties
in applying refund procedures, and there would be sufficient time to consider other
solutions.
The Commission notes that the special measure proposed shall not alter the
fundamental principles of the Sixth VAT Directive, in particular concerning the place
of supply, but simplifies the arrangements for refunding the tax which would in any
case be refundable under the Eighth and Thirteenth Directives. Consequently, the
derogation in question does not have a negative effect on the own resources of the
European Communities accruing from VAT.
The Commission is convinced that the measure in question is intended to simplify the
procedures for charging the tax. The Commission, therefore, considers it appropriate
for the Federal Republic of Germany to be authorized to apply the planned special
measure, but that such an authorization should be limited in time, lasting no later than
31 December 1994.
With the exception of the Member State to which it is addressed, the present proposal
for a Council Decision is identical to the proposals adopted by the Council on
25 October 1993 for 9 other Member States (OJ No. L 273, 5.11.1993, p. 33-50).
 ---pagebreak---   THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European                       Community,
Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the
harmonization of the laws of the Member States relating to turnover taxes - Common
system of value added tax: uniform basis of assessment*1), and in particular Article 27
thereof,
Having regard to the proposal from the Commission,
Whereas, under Article 27(1) of Directive 77/388/EEC, the Council, acting
unanimously on a proposal from the Commission, may authorize any Member State to
introduce special measures for derogation from that Directive, in order to simplify the
procedure for charging the tax or to prevent certain types of tax evasion or avoidance;
0) OJ No. L 145, 13.6.1977, p. 1. Directive as last amended by Directive 92/111/EEC (OJ No L 384,
   30.12.1992, p. 47).
 ---pagebreak--- Whereas, by letter dated 27 October 1993 and received by the Commission on
10 November 1993, the Federal Republic of Germany requested the authorization to
introduce a measure for derogation from Article 17 of Directive 77/388/EEC,
Whereas, the other Member States were informed on 22 November 1993 of the
request made by the Federal Republic of Germany;
Whereas implementation of the transitional VAT arrangements leads to VAT being
charged on certain work on movable tangible and certain services relating to the
transport of goods and ancillary transport activities at the place where these services
are supplied, irrespective of the place where the taxable person to whom these services
are supplied is able to exercise his rights of deduction, and whereas this results in
growing use of the refund procedures provided for by Directives 79/1072/EEO2> and
86/560/EEC<3>;
Whereas the increasing use of the refund procedures provided for by Directives
79/1072/EEC and 86/560/EEC may impede the development of intra-Community trade
in certain services;
Whereas the measure for derogation in question aims to introduce a simplification
consisting in the exemption of certain services supplied to taxable persons not
established in the territory of the country but identified in the Community, for which
these taxable persons would in any event be entitled to a refund;
Whereas certain requirements should be imposed on taxable persons with a view to
 preventing tax evasion or avoidance;
Whereas, it is desirable for this derogation to be limited to the time necessary to enable
 the Council, acting on a proposal from the Commission, to adopt a definitive solution;
Whereas the measure for derogation in question has no effect on the European
 Communities' own resources accruing from value added tax,
HAS ADOPTED THIS DECISION:
 (2> OJ No. L 331, 27.12.1979, p. 11.
 <3> OJ No. L 326, 21.11.1986, p. 40.
 ---pagebreak---                                                                                         £
                                          Article I
By way of derogation from Article 2(1) of Directive 77/388/EEC, the Federal Republic
of Germany is hereby authorized to exempt the supply of services referred to in
Article 2 rendered to taxable persons identified in accordance with Article 22(1 )(c), (d)
and (e) of Directive 77/388/EEC and in a Member State other than the Federal
Republic of Germany who would have qualified in accordance with Directives
79/1072/EEC and 86/560/EEC for a refund of the tax which would have been due had
these services been taxed.
                                         Article 2
In the circumstances provided for in Article 1, the Federal Republic of Germany is
authorized to exempt:
 1) the supply of services referred to in the third and fourth indents of Article 9(2)(c)
     of Directive 77/388/EEC but excluding the supply of services exempted in
     accordance with Articles 14, 15 and 16 of Directive 77/388/EEC;
2) the transport services located in the territory of the country in accordance with
     Article 9(2)(b) of Directive 77/388/EEC, directly linked to the intra-Community
     transport of goods as defined in Article 28b(C)(l) of Directive 77/388/EEC;
3) ancillary transport activities within the meaning of the second indent of
     Article 9(2)(c) of Directive 77/388/EEC effected within the territory of the country
     related to the transport services covered by paragraph 2 above.
                                          Article 3
 By way of derogation from Article 17 of Directive 77/388/EEC, the services referred
 to in Article'2 and supplied with exemption from tax in the circumstances laid clown in
 Article 1 shall be eligible for deduction of input tax.
 ---pagebreak---                                         Article 4
To apply the exemption provided for in Article 1, the supplier of the services shall in
particular:
1) in the case of the supplies of services referred to in Article 2(1):
    -   be in possession of a certificate establishing that the person to whom the
        services have been supplied is a taxable person and issued, as appropriate, in
        the form laid down by Directives 79/1072/EEC or 86/560/EEC;
    -   mention, on his invoice, the grounds for exemption and the identification
        number by which the customer is identified in accordance with Article 22(1 )(c),
        (d) and (e) of Directive 77/388/EEC, and under which the service has been
        rendered to him;
2) in the case of supplies of services referred to in Article 2(2):
    -   satisfy the requirements referred to in the second indent of point 1 and be in
        possession of a declaration in which the person to whom the services have been
        supplied acknowledges that he fulfils the conditions referred to in Article 1 ;
    -   provide proof that the transport services are directly linked to an intra-
        Community transport within the meaning of Article 28b(C)(l) of Directive
        77/388/EEC;
3) in the case of supplies referred to in Article 2(3):
    -    satisfy the requirements referred to in the second indent of point 1 and be in
        possession of a declaration in which the person to whom the services have been
         supplied acknowledges that he fulfils the conditions referred to in Article 1 ;
    -    provide proof that the ancillary transport activities are directly linked to the
        transport services which are referred to in Article 2(2).
 ---pagebreak---                                                                                   î
                                       Article 5
The Council, acting unanimously on a proposal that the Commission will make as soon
as feasible, shall adopt, after consultation of the European Parliament, before
31 December 1994, a modification to Directive 77/388/EEC which covers the services
mentioned in this Decision.
The derogations provided for in this Decision shall cease to have effect on the date
which the Council determines when it adopts the modification to Directive
77/388/EEC but not later than 31 December 1994.
                                       Article 6
This Decision is addressed to the Federal Republic of Germany.
Done at Brussels,
                                                                     For the Council
                                                                       The President
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                                                                    ISSN 0254-1475
                                                              COM(93) 657 final
                                                      DOCUMENTS
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                                Catalogue number : CB-CO-93-710-EN-C
                                                             ISBN 92-77-62752-2
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