CELEX: 51989PC0614
Language: en
Date: 1989-12-06
Title: PROPOSAL FOR A COUNCIL DECISION AUTHORIZING THE FRENCH REPUBLIC TO APPLY A MEASURE DEROGATING FROM ARTICLE 2 OF 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

COMMISSION OF THE EUROPEAN COMMUNITIES
                                     C0MC89) 614    fi na t
                                    Brussels, 6 December 1989
                         Proposal for a
                        COUNCIL DECISION
           authorizing the Ftenah Repuhlio to apply
            a measure derogating from Article 2 of
           the Sixth Council Directive (77/388/EBC)
          of 17 May 1977 on the harmonization of the
                      laws of the Member States relating to
                        turnover taxes
                (presented by the Commission)
 ---pagebreak---                                                           C*YV\ folk
                                    - 2 -                            i
1. By letter received on 29 September 1989, the French Government submitted
   to the Commission a request for a derogation under Article 27 of the
   Sixth VAT Directive1 for a period of three years expiring on
   31 December 1992. The derogation is designed principally to prevent
   certain types of tax evasion or avoidance and secondarily to simplify
   the procedure for collecting VAT. These fraudulent practices, which
   have consisted mainly of the Issuing of false invoices designed to
   transfer an entitlement to tax deduction (with the invoiced taxes never
   being repaid to the Treasury), have in the past caused considerable
   revenue losses for the Treasury. These practices were perpetrated
   mainly by small-scale vaste recovery operators which had no permanent
   establishment and which were therefore difficult to monitor.
   This derogation from Article 2 of the Sixth Directive is intended not
   to subject to compulsory taxation all transactions involving supplies
   of fresh industrial waste and récupérable material. Such transactions
   should be subject to tax as from 1 January 1990 in accordance with
   Article l(2)(a) of the Eighteenth Council Directive (89/465/EBC) of
   18 July 1989.2
2. The arrangements envisaged by the French Government consist of exempting
   from VAT:
     (i) supplies by:
          - firms with an annual turnover of less than FF 500 000;
          - firms which do not have a permanent establishment or which,
            although they have a permanent establishment, recorded a
            turnover in respect of such products in the previous year of
            less than FF 6 million, unless they are authorized to subject
            such transactions to VAT;
1 OJ NO L 148, 13.6.1977.
2 O J N O L 226, 3.8.1989.
 ---pagebreak---                                    - 3 -
Cii) imported supplies.
3. The French Government also points out that half the firms in the
sector, which account for more than 80% of the total turnover, would in
future be subject to VAT in respect of such transactions. The transactions
not subject to tax would be those carried out by firms operating mostly
outside commercial channels; the exemption of their transactions should not
therefore entail any distortion of competition, m any case, the value of
the reoovered product does not escape taxation when sales are made by users
of that product.
4. The authorization would be valid until 31 December 1992. Prior to that
date, the Commission would present to the Council a report on the
application of this authorization.
5. In accordance with Article 27(3) of the Sixth VAT Directive, the other
Member States were Informed of the French request by letter dated
27 October 1989.
 ---pagebreak---                                      - 4 -
                                Proposal for a
                               COUNCIL EBCISICH
              authorizing the French Hepublic to apply a measure
                       derogating from Article 2 of the
             Sixth Council Directive (77/388/EBC) of 17 Ifay 1977
            on the harmonization of the laws of the Member States
                          relating to turnover taxes
THE COUNCIL OF THE EUROPEAN OCMMDNITIES,
Having regard to the Treaty establishing the European Economic Community,
Having regard to the Sixth Council Directive (77/388/EBC) 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 the aforementioned Directive, the Council,
acting unanimously on a proposal from the Commission, may authorize any
Member State to introduce special measures for derogation from that
Directive in order to simplify the procedure for charging the tax or to
prevent certain types of tax evasion or avoidance;
Whereas the Eighteenth Council Directive (89/465/EBC) of 18 July 19892
abolishes, as from 1 January 1990, the transitional derogation provided for
in Article 28(3) (b) of the Sixth Direotive/ read in conjunction with
point 20 of Annex F, which permits Member States to continue to exempt
1 O J N O L 145, 13.6.1977.
2 O J N O L 226, 3.8.1989.
 ---pagebreak---                                     - 5-
supplies of récupérable material and fresh industrial waste; whereas the
arrangements for taxing such supplies pose problems In France because some
             waste recovery operators have been accustomed in the past to
issue false invoices designed to transfer an entitlement to tax deduction,
with the taxes invoioed not being paid to the Treasury; whereas, by letter
to the Commission dated 29 September 1989, the French Republio requested
authorization to introduce a special measure derogating from Article 2 of
the Sixth Directive;
Whereas that special measure consists:
- firstly of exempting transactions carried out by taxable persons whose
    annual turnover in respect of such products is below a given amount and
    restricting taxation to transactions carried out by firms which, by
    their structure, show themselves to be reliable and of good repute in
    tax matters; the authorities are to check these conditions under an
   authorization procedure which may Involve the provison of a guarantee;
   and
- secondly of exempting imports;
Whereas this measure constitutes a derogation from Article 2 of the
Sixth Directive, according to which all supplies of goods or services
effected for considération within the territory of a country by a taxable
person acting as such and all Imports of goods are subject to value added
tax;
Whereas the authorization requested can be granted under certain conditions;
 Whereas the authorization shall be temporary, in accordance with the request
 made by the Republic of France, whereas this will permit an evaluation of
 the effects of the measure after a certain period of application;
 Whereas the Commission will present a report to the Council, before 31 De-
 cember 1992, on the application of this authorization perhaps accompanied
 by a proposal for a Decision to prolong it;
 ---pagebreak---                                     - 6 -
Whereas this derogation wi 11 not have a negative effect on the European
Communities' own resources accruing from value added tax;
Whereas the other Member States were informed of the French Republic's
request on 27 October 1989,
HAS ADOPTED THIS DBŒSXGN:
 ---pagebreak---                                     - 7
                                 Article 1
By way of derogation from Article 2 of the Sixth Directive, the
French Republic is hereby authorized, until 31 December 1992 and In respect
of fresh Industrial waste and récupérable material, to exempt from value
added tax:
(i) supplies made by:
-  firms whose annual turnover is less than FF 500 000;
- firms which do not have a permanent establishment or which, although
   they have a permanent establishment, have achieved in the previous year
   a turnover figure in respect of such products of less than FF 6 million,
   unless they are authorized to subject such transactions to VAT;
(ii) Imported supplies.
                                 Article 2
In the light of a report from the Commission on the application of the
authorization referred to In Article 1, accompanied, where appropriate, by
a proposal for a decision, the Council, acting on the basis of that
proposal, shall determine, before 31 December 1992, whether the said
authorization is to be extended.
                                 Article g
This Decision is addressed to the French Republic.
 ---pagebreak---  ---pagebreak---                                                                      ISSN 0254-1475
                                                              COM(89) 614 final
                                                      DOCUMENT
EN                                                                              09
                                 Catalogue number : CB-CO-89-578-EN-C
                                                             ISBN 92-77-55697-S
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