CELEX: 51993PC0450
Language: en
Date: 1993-09-29
Title: Proposal for a COUNCIL DECISION authorizing the Portuguese Republic to apply a measure derogating from Article 2(1) and Article 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
                  •                                                C0M(93> 450 final
                  :
                                                                   Brussels, 29 September 1993
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                                                   Proposal for a
                                                  COUNCIL DECISION
                      authorising the Portuguese Republic to apply a measure derogating fro»
                         Article 2(1) and Article 17 of the sixth Directive (77/388/EBC)
                               on the harmonization of the laws of the Member states
                                             relating to turnover taxes
                                           (presented by the Commission)
 ---pagebreak---                     EXPLANATORY MEMORANDUM
The present proposal for a Council Decision authorizes the Portuguese
Republic 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 tax , as last amended by Council Directive 92/ill/EEC of
14 December 1992 .
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 or
Thirteenth Directives. This concerns above all services supplied in
respect of work on movable tangible property and the supply of transport
services 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 Portuguese Republic has submitted a         request for
authorization on the basis of Article 27 of the Sixth VAT Directive, to
introduce special measures derogating from Article 2(1) and 17. The
purpose of such measures would be to exempt the services rendered in the
third and forth indents of Article 9(2)(c) and the supply of domestic
goods transport services 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
  OJ No. L 145/1, 13.6.1977
  OJ No. L 384/47, 30.12.1992
  Council Directive 79/1072/EEC OJ No. L 331 of 27.12.1979, p. 11
  Council Directive 86/560/EEC OJ No. L 326 of 21.11.1986, p. 40
 ---pagebreak---                                    1
services and who in any case qualify for a refund 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 the final consumption 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, and would, in addition, have to undertake to repay the VAT
payable on any supply of services which might have been exempted in
error. 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.
However, given that the possibility of using customs procedures remains
for work carried out on movable tangible property temporarily imported
into the Community from third countries, the scope of the present
derogation does not extend to cover supplies of such services when
supplied to persons not established 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
sufficient time would be given to consider other more permanent
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 Portuguese Republic to be authorized to
apply the planned special measure, but that such an authorization should
be limited in time, for a duration lasting until 31 December 1995.
 ---pagebreak---                                  Proposal for a
                           COUNCIL DECISION
 authorizing the Portuguese Republic to apply a measure derogating from
    Article 2(1) and Article 17 of the sixth Directive (77/388/EEC)
          on the harmonization of the laws of the Member States
                        relating to turnover taxes
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard    to  the    Treaty  establishing   the  European   Economic
Community,
Having regard to the sixth Council Directive (77/388/EEC) of 17 May 1977
on the harmonization of the laws of the Member States relating to
turnover taxes - Common system of value added tax:        uniform basis of
assessment, 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;
Whereas, by letter dated 28 July 1993 and received by the Commission on
2 September 1993, the Portuguese Republic requested authorization to
introduce     a   measure     for    derogation    from    Article 17    of
Directive 77/388/EEC;
Whereas the other Member States were informed on 13 September 1993 of
the request made by the Portuguese Republic;
Whereas implementation of the transitional VAT arrangements leads to VAT
being charged on certain work on movable tangible property and certain
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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/EEC and 86/560/EEC;
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;
 ---pagebreak---                                        t
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:
 ---pagebreak---                                  Article 1
By way of derogation from Article 2(1) of Directive 77/388/EEC, the
Portuguese Republic is hereby authorized to exempt the supply of
services referred to in Article 3(1) and (2) rendered to taxable persons
identified in a Member State other than the Portuguese Republic in
accordance with Article 22(l)(c),(d) and (e) of Directive 77/388/EEC who
would     have   qualified    for     a    refund   in   accordance  with
Directive 79/1072/EEC if these services had been taxed.
                                  Article 2
By way of derogation from Article 2(1) of Directive 77/388/EEC, the
Portuguese Republic is hereby authorized to exempt the supply of
services referred to in Article 3(2) and rendered to taxable persons
identified in a Member State other than the Portuguese Republic in
accordance with Article 22(1)(c), (d) and (e) of Directive 77/388/EEC
who    would   have   qualified    for   a   refund   in  accordance with
Directive 86/560/EEC if these services had been taxed.
                                  Article 3
In the circumstances provided for in Articles 1 and 2, the Portuguese
Republic 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;
2. the transport services located in the territory of the country,
    directly linked to the intra-Community transport of goods as defined
    in Article 28bC(l) of Directive 77/388/EEC.
                                  Article 4
By way of derogation from Article 17 of Directive 77/388/EEC, the
services referred to in Article 3 and supplied in the circumstances laid
down in Articles 1 and 2 shall be eligible for deduction of input tax.
                                  Article 5
In order to be eligible for exemption from tax in accordance         with
Articles 1 and 2, a taxable person shall in particular:
1. In the case of the supplies of services referred to in Article 3(1):
    -   be in possession of a certificate establishing that the person to
       whom the services have been supplied is a taxable person and
        issued in the form laid down by Directives 79/1072/EEC and
       86/560/EEC;
       be in possession of a declaration in which the person to whom the
       services have been supplied acknowledges that he is jointly and
 ---pagebreak---       severally liable for payment of the tax due on any operation which
      may have been exempted in error and undertakes to repay this tax
      to the supplier of the service;
   -  mention, on his invoice, the grounds for exemption and the
      identification number of the person to whom the services have been
      supplied.
2. In the case of the supplies of services referred to in Article 3(2):
      satisfy the requirements referred to in point 1;
   -  provide proof that the transport service is directly linked to an
      intra-Community transport within the meaning of Article 28bC(l) of
      Directive 77/388/EEC.
                               Article 6
The Portuguese Republic      is hereby authorized       to  apply   this
simplification measure until 31 December 1995.
                               Article 7
This Decision is addressed to the Portuguese Republic.
                                        Done at Brussels
                                                For the Council
                                                The President
 ---pagebreak---                                                   f
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