Article 158 
1. By way of derogation from Article 157(2), Member States may provide for warehousing arrangements other than customs warehousing in the following cases: (a) where the goods are intended for tax-free shops, for the purposes of the supply of goods to be carried in the personal luggage of travellers taking flights or sea crossings to third territories or third countries, where that supply is exempt pursuant to point (b) of Article 146(1); (b) where the goods are intended for taxable persons, for the purposes of carrying out supplies to travellers on board an aircraft or a ship in the course of a flight or sea crossing where the place of arrival is situated outside the Community; (c) where the goods are intended for taxable persons, for the purposes of carrying out supplies which are exempt from VAT pursuant to Article 151. 2. Where Member States exercise the option of exemption provided for in point (a) of paragraph 1, they shall take the measures necessary to ensure the correct and straightforward application of this exemption and to prevent any evasion, avoidance or abuse. 3. For the purposes of point (a) of paragraph 1, ‘tax-free shop’ shall mean any establishment which is situated within an airport or port and which fulfils the conditions laid down by the competent public authorities.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The purpose of the current proposal for a Directive amending Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax 1 (hereafter the ‘ VAT Directive ’ ) is to prolong: 1) the possibility for Member States to apply the reverse charge mechanism to combat existing fraud in supplies of goods and services included in Article 199a(1) of the VAT Directive and 2) the possibility to use the Quick Reaction Mechanism (QRM) , as set out in Article 199b of the VAT Directive , to combat fraud via the application of the reverse charge mechanism in very specific cases . As a general rule, Article 193 of the VAT Directive stipulates that the taxable person supplying goods or services is liable to pay VAT. As a derogation, the reverse charge mechanism allows to designate the recipient of the supply as the person liable for the payment of VAT. Under this reverse charge mechanism, VAT is not charged by the supplier but accounted for by the customer (a taxable person) in his VAT return. This VAT is then deducted in that same VAT return and, therefore, insofar this person has a full right of deduction, the result is nil. The reverse charge mechanism is used to combat fraud and in particular Missing Trader Intra-Community (MTIC) fraud. This type of fraud occurs when a trader acquires goods, transported or dispatched from another Member State, by means of a supply exempt from VAT, and sells them on including VAT on the invoice to the customer. After having received the VAT amount from the customer such trader disappears before paying the VAT due to the tax authorities. At the same time, the customer acting in good faith can normally deduct the VAT he paid to the supplier through his VAT return. Hence, under the reverse charge mechanism VAT is not effectively paid to the supplier. The reverse charge mechanism based on Article 199a o f the VAT Directive is optional for Member States to apply. It allows them to fight this type of fraud in the pre-defined sensitive areas where it typically occurs 2 on their territory . Once suppliers are obliged to use the reverse charge mechanism for such domestic supplies, t he y cann ot charge VAT on their invoice. They will subsequently not receive the VAT amount from their customer and , as a result , such traders cannot disappear with the amount of VAT received. The QRM of Article 199b is an exceptional measure allowing Member States to quickly introduce , in cases of imperative urgency, a temporary reverse charge mechanism for supplies of goods and services in sectors where sudden and massive fraud occurred and which are not listed in Article 199a of the VAT Directive. This procedure is exceptional and extremely quick as the Commission has to react within one month, either with a negative opinion or to confirm in writing to the Member State concerned that it does not object the measure. The Member State may adopt the QRM special measure from the date of receipt of that confirmation. By u sing this mechanism , Member States can bridge the p eriod required for obtaining a ‘ normal ’ derogation under A rticle 395 of the VAT Directive, which can take up to six months . Such a derogation requires a proposal from the Commission and unanimous adoption by Council. Article 199a of the VAT Directive was introduced 3 for the period 2010 until 30 June 2015 and was a first time extended 4 , with amendments, until 31 December 2018. Article 199b of the VAT Directive was introduced 5 for the period 2013 until 31 December 2018. Both Article s 199a and 199b of the VAT Directive were subsequently extended 6 until 30 June 2022 in order to coincide with the initially foreseen date on which the VAT definitive system would enter into force (see more details below) . At the time the application period of Articles 199a and 199b of the VAT Directive would be extended until 30 June 2022 , the Commission presented a r eport on the effects of the mechanisms i ncluded in these articles 7 and concluded, on the basis of contributions of tax administrations and business stakeholders, that the measures in these articles were useful in the fight against fraud. In order to deal with the issue of (MTIC) fraud in a more structural manner , the Commission made a proposal for the introduction of the so-called definitive VAT system, a simpler and fraud-proof system for intra-Union trade of goods 8 . These arrangements, which the Commission proposed to enter into force on 1 July 2022, provide a fundamental response to MTIC fraud. However, the state of play of the ongoing negotiations in the Council indicates that it will not be possible for the definitive VAT system to enter into force on 1 July 2022. In order to allow the negotiations on the definitive system to continue, without putting at risk the available tools in order to combat VAT fraud, it is appropriate to prolong the anti-fraud measures contained in the said articles for another limited period. To extend the application period of Articles 199a and 199b would also allow developing further tools to fight tax evasion. To that end, and in accordance with the Tax Package 9 , the C ommission is prepar ing a proposal in order to modernise the current VAT rules, taking into account the opportunities offered by digital technologies. Under the heading ‘VAT in the digital age’, the Commission will assess VAT reporting obligations, possibly including on Transaction-B ased R eporting (TBR) and a n enhanced system of e-invoicing . This should provide quicker and more detailed information on individual transactions to tax administrations and therefore lower the risk of fraud . Based on such legislative developments, the need to further extend Articles 199a and 199b should be reassessed in the future. 
Revised version (Article 158 ):
2. Where Member States exercise the option of exemption provided for in point (a) of paragraph 1, they shall take the measures necessary to ensure the correct and straightforward application of this exemption and to prevent any evasion, avoidance or abuse. 3. For the purposes of point (a) of paragraph 1, ‘tax-free shop’ shall mean any establishment which is situated within an airport or port and which fulfils the conditions laid down by the competent public authorities.
Article 159 
Member States may exempt the supply of services relating to the supply of goods referred to in Article 156, Article 157(1)(b) or Article 158.
Article 160 
1. Member States may exempt the following transactions: (a) the supply of goods or services carried out in the locations referred to in Article 156(1), where one of the situations specified therein still applies within their territory; (b) the supply of goods or services carried out in the locations referred to in Article 157(1)(b) or Article 158, where one of the situations specified in Article 157(1)(b) or in Article 158(1) still applies within their territory. 2. Where Member States exercise the option under point (a) of paragraph 1 in respect of transactions effected in customs warehouses, they shall take the measures necessary to provide for warehousing arrangements other than customs warehousing under which point (b) of paragraph 1 may be applied to the same transactions when they concern goods listed in Annex V and are carried out in warehouses other than customs warehouses.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The purpose of the current proposal for a Directive amending Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax 1 (hereafter the ‘ VAT Directive ’ ) is to prolong: 1) the possibility for Member States to apply the reverse charge mechanism to combat existing fraud in supplies of goods and services included in Article 199a(1) of the VAT Directive and 2) the possibility to use the Quick Reaction Mechanism (QRM) , as set out in Article 199b of the VAT Directive , to combat fraud via the application of the reverse charge mechanism in very specific cases . As a general rule, Article 193 of the VAT Directive stipulates that the taxable person supplying goods or services is liable to pay VAT. As a derogation, the reverse charge mechanism allows to designate the recipient of the supply as the person liable for the payment of VAT. Under this reverse charge mechanism, VAT is not charged by the supplier but accounted for by the customer (a taxable person) in his VAT return. This VAT is then deducted in that same VAT return and, therefore, insofar this person has a full right of deduction, the result is nil. The reverse charge mechanism is used to combat fraud and in particular Missing Trader Intra-Community (MTIC) fraud. This type of fraud occurs when a trader acquires goods, transported or dispatched from another Member State, by means of a supply exempt from VAT, and sells them on including VAT on the invoice to the customer. After having received the VAT amount from the customer such trader disappears before paying the VAT due to the tax authorities. At the same time, the customer acting in good faith can normally deduct the VAT he paid to the supplier through his VAT return. Hence, under the reverse charge mechanism VAT is not effectively paid to the supplier. The reverse charge mechanism based on Article 199a o f the VAT Directive is optional for Member States to apply. It allows them to fight this type of fraud in the pre-defined sensitive areas where it typically occurs 2 on their territory . Once suppliers are obliged to use the reverse charge mechanism for such domestic supplies, t he y cann ot charge VAT on their invoice. They will subsequently not receive the VAT amount from their customer and , as a result , such traders cannot disappear with the amount of VAT received. The QRM of Article 199b is an exceptional measure allowing Member States to quickly introduce , in cases of imperative urgency, a temporary reverse charge mechanism for supplies of goods and services in sectors where sudden and massive fraud occurred and which are not listed in Article 199a of the VAT Directive. This procedure is exceptional and extremely quick as the Commission has to react within one month, either with a negative opinion or to confirm in writing to the Member State concerned that it does not object the measure. The Member State may adopt the QRM special measure from the date of receipt of that confirmation. By u sing this mechanism , Member States can bridge the p eriod required for obtaining a ‘ normal ’ derogation under A rticle 395 of the VAT Directive, which can take up to six months . Such a derogation requires a proposal from the Commission and unanimous adoption by Council. Article 199a of the VAT Directive was introduced 3 for the period 2010 until 30 June 2015 and was a first time extended 4 , with amendments, until 31 December 2018. Article 199b of the VAT Directive was introduced 5 for the period 2013 until 31 December 2018. Both Article s 199a and 199b of the VAT Directive were subsequently extended 6 until 30 June 2022 in order to coincide with the initially foreseen date on which the VAT definitive system would enter into force (see more details below) . At the time the application period of Articles 199a and 199b of the VAT Directive would be extended until 30 June 2022 , the Commission presented a r eport on the effects of the mechanisms i ncluded in these articles 7 and concluded, on the basis of contributions of tax administrations and business stakeholders, that the measures in these articles were useful in the fight against fraud. In order to deal with the issue of (MTIC) fraud in a more structural manner , the Commission made a proposal for the introduction of the so-called definitive VAT system, a simpler and fraud-proof system for intra-Union trade of goods 8 . These arrangements, which the Commission proposed to enter into force on 1 July 2022, provide a fundamental response to MTIC fraud. However, the state of play of the ongoing negotiations in the Council indicates that it will not be possible for the definitive VAT system to enter into force on 1 July 2022. In order to allow the negotiations on the definitive system to continue, without putting at risk the available tools in order to combat VAT fraud, it is appropriate to prolong the anti-fraud measures contained in the said articles for another limited period. To extend the application period of Articles 199a and 199b would also allow developing further tools to fight tax evasion. To that end, and in accordance with the Tax Package 9 , the C ommission is prepar ing a proposal in order to modernise the current VAT rules, taking into account the opportunities offered by digital technologies. Under the heading ‘VAT in the digital age’, the Commission will assess VAT reporting obligations, possibly including on Transaction-B ased R eporting (TBR) and a n enhanced system of e-invoicing . This should provide quicker and more detailed information on individual transactions to tax administrations and therefore lower the risk of fraud . Based on such legislative developments, the need to further extend Articles 199a and 199b should be reassessed in the future. 
Revised version (Article 160 ):
2. Where Member States exercise the option under point (a) of paragraph 1 in respect of transactions effected in customs warehouses, they shall take the measures necessary to provide for warehousing arrangements other than customs warehousing under which point (b) of paragraph 1 may be applied to the same transactions when they concern goods listed in Annex V and are carried out in warehouses other than customs warehouses.
Article 161 
Member States may exempt supply of the following goods and of services relating thereto: (a) the supply of goods referred to in the first paragraph of Article 30 while they remain covered by arrangements for temporary importation with total exemption from import duty or by external transit arrangements; (b) the supply of goods referred to in the second paragraph of Article 30 while they remain covered by the internal Community transit procedure referred to in Article 276.
Article 162 
Where Member States exercise the option provided for in this Section, they shall take the measures necessary to ensure that the intra-Community acquisition of goods intended to be placed under one of the arrangements or in one of the situations referred to in Article 156, Article 157(1)(b) or Article 158 is covered by the same provisions as the supply of goods carried out within their territory under the same conditions.
Article 163 
If the goods cease to be covered by the arrangements or situations referred to in this Section, thus giving rise to importation for the purposes of Article 61, the Member State of importation shall take the measures necessary to prevent double taxation.
Article 164 
1. Member States may, after consulting the VAT Committee, exempt the following transactions carried out by, or intended for, a taxable person up to an amount equal to the value of the exports carried out by that person during the preceding 12 months: (a) intra-Community acquisitions of goods made by the taxable person, and imports for and supplies of goods to the taxable person, with a view to their exportation from the Community as they are or after processing; (b) supplies of services linked with the export business of the taxable person. 2. Where Member States exercise the option of exemption under paragraph 1, they shall, after consulting the VAT Committee, apply that exemption also to transactions relating to supplies carried out by the taxable person, in accordance with the conditions specified in Article 138, up to an amount equal to the value of the supplies carried out by that person, in accordance with the same conditions, during the preceding 12 months.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The current initiative aims at enabling Member States to temporarily exempt the supply of COVID‑19 vaccines and in vitro diagnostic medical devices ( testing kits) as well as services closely linked to such vaccines and such devices from value added tax (VAT). It also enables Member States, as is already the case for vaccines, to apply a reduced VAT rate to COVID‑19 in vitro diagnostic medical devices and closely linked services. On 30 January 2020, the World Health Organization (WHO) declared the COVID ‑19 outbreak as a public health emergency of international concern. Then, on 11 March 2020, the WHO characterised the situation of the COVID ‑19 outbreak as a pandemic. Since the beginning of the COVID ‑19 outbreak, the European Union has taken unparalleled action to protect lives and livelihoods and limit the impact of the virus on the economy. The Union is leading the global effort for universal testing, treatment and vaccination by mobilising resources through international pledging and by joining forces with countries and global health organisations through the Access to COVID ‑19 Tools (ACT) Accelerator collaborative framework 1 . The latter was launched on 24 April 2020 by the WHO and a group of global actors. It is a call for action in a landmark global collaboration aiming at accelerating equitable global access to safe, quality, effective, and affordable COVID‑19 diagnostics, therapeutics and vaccines. On 4 May 2020, Commission President von der Leyen launched the Coronavirus Global Response as the Union’s response to this call for action. In the Commission President’s words, “[t] he world will only be freed from this pandemic when vaccines, testing kits and treatments are available and affordable to everyone who needs them” . The pledging campaign under the Coronavirus Global Response has raised almost EUR 16 billion to date, including EUR 11.9 billion pledged by the Member States, the Commission and the European Investment Bank. On 18 September 2020, the Commission confirmed its participation in the COVAX Facility, following the announcement, on 31 August 2020, of a EUR 400 million contribution in guarantees to support COVAX and its objectives in the context of the Coronavirus Global Response. The COVAX Facility is the vaccines pillar of the ACT Accelerator and aims to speed up development and manufacture of COVID‑19 vaccines and to guarantee fair and equitable access for every country in the world. It is co-led by Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations (CEPI) and WHO. As part of the effort to help protect people everywhere in the world, and in the Union in particular, the Commission put forward on 17 June 2020 an EU strategy for COVID ‑19 vaccines 2 . The proposed EU approach to secure vaccines for EU people complements the Union’s action for universal access to affordable coronavirus vaccination, treatment and testing. The aim is to accelerate the development, manufacturing and deployment of vaccines against the virus and make sure that in the fight against COVID ‑19 no one in the Union is left behind. The EU vaccine strategy has among its objectives to ensure equitable and affordable access to the supplies of COVID‑19 vaccines for all EU people as early as possible. Generally, an effective and safe vaccine against COVID‑19 is seen as the most likely permanent solution to the pandemic, as it will facilitate control of COVID‑19 disease and will reduce mortality. However, there is no guarantee that such vaccine will be available soon. Therefore, the development and deployment of COVID‑19 in vitro diagnostic medical devices remain crucial. The Commission will implement the EU strategy for COVID‑19 vaccines together with the Member States. This increases the likelihood that all in the EU, as well as in the European Economic Area (EEA), gain equitable and affordable access to those vaccines in the shortest possible period. An important step towards joint action between Member States has been taken by the creation of an inclusive Vaccine Alliance by France, Germany, Italy, and the Netherlands. This alliance was formed to pool the national resources of those countries and secure fair access to vaccine supplies for the European population. The Union will materialise its strategy for COVID ‑19 vaccines in two ways. First, by securing sufficient production of vaccines in the EU - and thereby sufficient supplies for its Member States - through Advance Purchase Agreements (APAs) with vaccine producers. The related funding will come from the Emergency Support Instrument (ESI 3 ). Second, by making use of existing regulatory, financial, advisory and other tools at its disposal while adapting the Union’s regulatory framework to the current urgency. The contracts with vaccine producing companies will be concluded through a procurement process run by the Commission on behalf of all participating Member States. Once any of the vaccines supported proves successful, Member States will be able to acquire that vaccine directly from the producer based on the conditions laid down in the APA. As the ultimate acquirers of the vaccines, Member States will participate in the process from the outset. In the framework of the EU vaccine strategy, the Commission already concluded agreements to purchase potential COVID ‑19 vaccines with some pharmaceutical companies, while exploratory talks intended to result in APAs have been concluded or will be conducted with others. On 30 September 2020, the WHO issued a draft landscape document of COVID ‑19 candidate vaccines 4 , listing 41 candidate vaccines in clinical evaluation. Since the emergence of the COVID‑19 pandemic and awaiting a vaccine, healthcare professionals have created numerous tests. These tests detect either the presence of the virus or the presence of antibodies against the virus. The most common COVID‑19 tests marketed on the European market are as follows: · Nucleic acid test (e.g. PCR), primarily involving a swab of the nose and throat. The presence of the virus is then detected in the sample taken. · Antigen test, also involving a swab of the nose and throat. This test also detects the presence of the virus. – There are “rapid” antigen tests, where the sample is placed on a plate and the result appears after a few minutes. – There are also ELISA (enzyme-linked immunosorbent assay) or “ELISA-like” tests which are more complex but offer a more reliable and qualitative method. · Antibody test (IgG/IgM/IgA) via a blood sample. This test makes it possible to detect antibodies against the virus in the sample taken. Antibody tests can also be performed via “rapid” tests, or via ELISA or “ELISA-like” tests. Member States are responsible for the strategy and criteria to determine which people are tested and what types of COVID‑19 in vitro diagnostic medical devices are deployed. In the face of the COVID ‑19 pandemic, the Commission has taken exceptional measures in the area of VAT to help victims of the outbreak. On 3 April 2020, the Commission adopted Decision (EU) 2020/491 5 enabling Member States to temporarily exempt from VAT (and relieve from customs duties) vital goods needed to combat the effects of the COVID ‑19 o utbreak (covering among other personal protective equipment, in vitro diagnostic medical devices, medical devices such as ventilators and a limited number of medicines 6 ) . This decision covers only importation and not intra-Community or domestic supplies, because the autonomous powers of the Commission are limited to this field. The initial measure applied for a period of six months, and was further extended by three months until 31 October 2020 7 . A further prolongation until the end of April 2021 has been decided. The current VAT rules contain two main tools that already allow Member States to alleviate the cost of COVID‑19 vaccines and in vitro diagnostic medical devices. First, Council Directive 2006/112/EC 8 (the VAT Directive) provides exemptions without deductibility for hospital and medical care 9 . The objective of those exemptions is to reduce the cost of medical care and to make it more accessible to individuals. Preventive medical care, e.g. when the person concerned is not suffering from any disease or health disorder, may fall under the exemption. This would apply with regard to COVID ‑19 vaccination and testing supplied by way of hospital and medical care. However, the existing exemption would not apply to the supply of COVID ‑19 vaccines and in vitro diagnostic medical devices - including services closely linked thereto - to hospitals, medical practitioners, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature. They would thus be burdened with the VAT cost when acquiring such vaccines and in vitro diagnostic medical devices. Hence, although COVID‑19 vaccination and testing supplied in the context of hospital and medical care would be exempt from VAT, supplies of such vaccines and in vitro diagnostic medical devices acquired by hospitals, medical practitioners, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature would not be covered by this exemption. Therefore, the VAT burden would remain for those. Second, u nder the current VAT rules, Member States may apply a reduced (that is, no lower than 5%) VAT rate to “ pharmaceutical products normally used for health care, prevention of illnesses and as treatment for medical […] purposes ” 10 . The concept of "pharmaceutical products" is not defined in the VAT Directive but has always been understood to cover pharmaceutical products as defined by the Combined Nomenclature 11 . The pharmaceutical products contained in the Combined Nomenclature (Chapter 30) include vaccines. Therefore, vaccines are currently eligible for reduced VAT rates. Moreover, based on historical standstill derogations, certain Member States may continue to apply super-reduced rates (namely lower than 5%) or exemptions with the deductibility of the VAT paid at the preceding stage (zero rate) to pharmaceutical products, including vaccines. However, there is no general provision in the VAT Directive allowing a zero rate to pharmaceutical products that could apply in the case of COVID ‑19 vaccines. In contrast to vaccines, the general VAT rules of the VAT Directive would not allow reduced rates to apply to COVID ‑19 in vitro diagnostic medical devices 12 . Moreover, while Decision (EU) 2020/491 enabled Member States to temporarily exempt from VAT the importation of in vitro diagnostic medical devices among other, there is no explicit provision in the EU VAT rules allowing to exempt from VAT the intra-Community and domestic supply of such devices. In conclusion, although the current VAT rules allow partly alleviating the cost of COVID ‑19 vaccination and testing, they do not permit the application of a zero rate to such vaccines and services closely linked thereto. Likewise, they do not permit the application of either a reduced or a zero rate to in vitro diagnostic medical devices, including services closely linked thereto. The 2018 Commission proposal 13 to amend the VAT Directive as regards VAT rates, which is pending before the Council, could provide a satisfactory solution in lifting VAT from the overall supply of COVID ‑19 vaccination and testing. If adopted unanimously by Council , it would allow Member States to apply a reduced rate or even a zero rate to supplies of COVID ‑19 vaccines and in vitro diagnostic medical devices, including services closely linked thereto, if such supplies benefit only the final consumer and pursue an objective of general interest. However, there is a need for immediate action in fighting the pandemic. Given the urgency, a swift adaptation of the EU VAT rules is necessary in order to ensure that COVID‑19 vaccines and in vitro diagnostic medical devices become more affordable for Europeans by reducing their cost of provision by the health system, thus enhancing the potential for COVID‑19 prevention and screening in the Union. This is a prerequisite for ensuring that full societal and economic activity may be restored in the near term. It is imperative that such measure be of temporary character with the aim to exempt from VAT the supply of COVID‑19 vaccines and in vitro diagnostic medical devices while also allowing a reduced VAT rate for the latter. This measure should remain in place until the COVID‑19 health crisis comes to an end. In concrete terms, the measure in question should not go beyond 31 December 2022. Before the end of this period, the situation will be reviewed and, if necessary, the period of application of the measure may be extended. Pursuant to Article 94(2) of the VAT Directive, the potential reduced rate and the VAT exemption in the form of zero rate applied to the above supplies within the territory of a Member State will also be applicable to the intra-Community supply to or importation into that Member State of COVID‑19 vaccines and in vitro diagnostic medical devices. 
Revised version (Article 164 ):
1. Member States may, after consulting the VAT Committee, exempt the following transactions carried out by, or intended for, a taxable person up to an amount equal to the value of the exports carried out by that person during the preceding 12 months: (a) intra-Community acquisitions of goods made by the taxable person, and imports for and supplies of goods to the taxable person, with a view to their exportation from the Community as they are or after processing; (b) supplies of services linked with the export business of the taxable person. Member States may, after consulting the VAT Committee, exempt the following transactions carried out by, or intended for, a taxable person up to an amount equal to the value of the exports carried out by that person during the preceding 12 months: (a) intra-Community acquisitions of goods made by the taxable person, and imports for and supplies of goods to the taxable person, with a view to their exportation from the Community as they are or after processing; (b) supplies of services linked with the export business of the taxable person. 2. Where Member States exercise the option of exemption under paragraph 1, they shall, after consulting the VAT Committee, apply that exemption also to transactions relating to supplies carried out by the taxable person, in accordance with the conditions specified in Article 138, up to an amount equal to the value of the supplies carried out by that person, in accordance with the same conditions, during the preceding 12 months.
Article 165 
Member States may set a common maximum amount for transactions which they exempt pursuant to Article 164.
Article 166 
The Commission shall, where appropriate, as soon as possible, present to the Council proposals concerning common arrangements for applying VAT to the transactions referred to in Sections 1 and 2.
Article 167 
A right of deduction shall arise at the time the deductible tax becomes chargeable.
Article 168 
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay: (a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person; (b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18(a) and Article 27; (c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i); (d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22; (e) the VAT due or paid in respect of the importation of goods into that Member State.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Value added tax (VAT) is a general consumption tax borne ultimately by the final consumer but collected by businesses supplying goods or services. The scope of VAT, as set out in Article 2 of the VAT Directive 1 , is very broad, covering any supply of goods and services for consideration by a taxable person within the territory of a Member State and any importation of goods into the European Union (EU). One of the aims of the VAT Directive was to draw up a common list of VAT exemptions so that EU own resources could be collected in a uniform manner in all Member States 2 . That is why the exemption of any transaction from VAT requires a specific provision in the VAT Directive. The VAT Directive does not provide for any general exemption for the supply of goods or services for security and defence purposes. In principle, goods or services supplied to, or goods imported by, armed forces will therefore carry VAT 3 . The cost of VAT is reflected in an increase in the revenues that the tax generates for the state treasury (as public bodies, the military forces are unable to recuperate such VAT), which in turn feed into the budget that finances activities such as national defence. The Directive does provide for an exemption for supplies to the armed forces of any state party to the North Atlantic Treaty that are taking part in a common defence effort outside their own state. This exemption was established to address situations in which the circle of revenue and expenditure flow is broken, because VAT on such supplies would normally constitute revenue for the state in which the armed forces are located, rather than their own. The Excise Directive 4 provides for a similar exemption from excise duty 5 for movements of excise goods to the armed forces of any North Atlantic Treaty Organisation (NATO) member. While NATO defence effort has been covered by the VAT Directive since 1977 6 and the Excise Directive since 1993, neither of the exemptions covers supplies linked to the common defence effort within the Union framework, because there is as yet no common Union defence policy. However, the common security and defence policy (CSDP), which was established as the European security and defence policy (ESDP) in 2000 7 , is a key instrument for external action and includes the progressive framing of a common Union defence policy 8 . The Lisbon Treaty, which came into force in December 2009, was a milestone in the development of the CSDP. The Treaty on European Union (TEU), as amended by the Lisbon Treaty, includes a mutual assistance clause 9 and allowed Member States to strengthen their cooperation in military matters through ‘permanent structured cooperation’ (PESCO) 10 . The Lisbon Treaty also established the European External Action Service (EEAS), which assists the High Representative of the Union for Foreign Affairs and Security Policy in all her responsibilities, including the CSDP. The fact that the High Representative is also one of the Vice-Presidents of the Commission facilitates the bringing together of all necessary EU assets and the application of a comprehensive approach to EU crisis management. The EU Military Committee (EUMC), which was set up in 2001 11 , is the Council’s highest military body. It directs all military activities within the EU framework and advises on the planning and execution of military missions and operations under the CSDP, and on the development of military capabilities. Also established in 2001 12 and working under the military direction of the EUMC, the European Union Military Staff (EUMS) is the source of the EU’s military expertise 13 . It provides early warning, situation assessment and strategic planning for missions and tasks referred to in Articles 42(1) and 43(1) TEU. It also contributes to the elaboration, assessment and review of the capability goals. In June 2016, the global strategy for the European Union’s foreign and security policy (EUGS) 14 laid the ground for developing CSDP further towards three core priorities: responding to external conflicts and crises, building the capabilities of partners and protecting the Union and its citizens. In December 2017 15 , the European Council invited the High Representative, the Commission and the Member States to bring forward work on military mobility, both under PESCO and in the context of EU NATO cooperation. In March 2018, as a follow-up to their November 2017 Joint Communication on improving military mobility in the EU 16 , the Commission and the High Representative presented a Joint Communication on the action plan on military mobility 17 . The action plan recognises the need for equal treatment of defence efforts with a view to reducing administrative burden and thus delays and costs in military mobility, and providing Member States with an incentive to cooperate 18 . It requires the Commission to assess the feasibility of aligning the VAT treatment of defence efforts in the EU framework and under the NATO umbrella. On 19 November 2018, the Council concluded on Security and Defence in the context of the EUGS 19 . The Council welcomed the substantive progress made in the area of security and defence during the previous two years and stressed the importance of keeping the momentum through the continued engagement of the Member States and EU institutions. In particular, the Council welcomed the progress in the implementation of PESCO and the ongoing implementation of efforts to improve the mobility of military personnel, materiel and equipment for routine activities and during crisis and conflict, within and beyond the EU. In line with the action plan and the Council conclusions, the objective of this proposal is to align the VAT treatment of defence efforts in the EU and NATO frameworks as far as is feasible. The proposal has to acknowledge that, while there is a collective defence effort under the North Atlantic Treaty, no common Union defence policy exists as yet. The arrangements for exemptions from excise duties, as provided for in the Excise Directive, should be aligned in a similar way.
Revised version (Article 168 ):
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay: (a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person; (b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18(a) and Article 27; (d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22; (e) the VAT due or paid in respect of the importation of goods into that Member State.
Article 168a 
1. In the case of immovable property forming part of the business assets of a taxable person and used both for purposes of the taxable person’s business and for his private use or that of his staff, or, more generally, for purposes other than those of his business, VAT on expenditure related to this property shall be deductible in accordance with the principles set out in Articles 167, 168, 169 and 173 only up to the proportion of the property’s use for purposes of the taxable person’s business. By way of derogation from Article 26, changes in the proportion of use of immovable property referred to in the first subparagraph shall be taken into account in accordance with the principles provided for in Articles 184 to 192 as applied in the respective Member State. 2. Member States may also apply paragraph 1 in relation to VAT on expenditure related to other goods forming part of the business assets as they specify.
Article 169 
In addition to the deduction referred to in Article 168, the taxable person shall be entitled to deduct the VAT referred to therein in so far as the goods and services are used for the purposes of the following: (a) transactions relating to the activities referred to in the second subparagraph of Article 9(1), carried out outside the Member State in which that tax is due or paid, in respect of which VAT would be deductible if they had been carried out within that Member State; (b) transactions which are exempt pursuant to Articles 138, 142 or 144, Articles 146 to 149, Articles 151, 152, 153 or 156, Article 157(1)(b), Articles 158 to 161 or Article 164; (c) transactions which are exempt pursuant to points (a) to (f) of Article 135(1), where the customer is established outside the Community or where those transactions relate directly to goods to be exported out of the Community.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Value added tax (VAT) is a general consumption tax borne ultimately by the final consumer but collected by businesses supplying goods or services. The scope of VAT, as set out in Article 2 of the VAT Directive 1 , is very broad, covering any supply of goods and services for consideration by a taxable person within the territory of a Member State and any importation of goods into the European Union (EU). One of the aims of the VAT Directive was to draw up a common list of VAT exemptions so that EU own resources could be collected in a uniform manner in all Member States 2 . That is why the exemption of any transaction from VAT requires a specific provision in the VAT Directive. The VAT Directive does not provide for any general exemption for the supply of goods or services for security and defence purposes. In principle, goods or services supplied to, or goods imported by, armed forces will therefore carry VAT 3 . The cost of VAT is reflected in an increase in the revenues that the tax generates for the state treasury (as public bodies, the military forces are unable to recuperate such VAT), which in turn feed into the budget that finances activities such as national defence. The Directive does provide for an exemption for supplies to the armed forces of any state party to the North Atlantic Treaty that are taking part in a common defence effort outside their own state. This exemption was established to address situations in which the circle of revenue and expenditure flow is broken, because VAT on such supplies would normally constitute revenue for the state in which the armed forces are located, rather than their own. The Excise Directive 4 provides for a similar exemption from excise duty 5 for movements of excise goods to the armed forces of any North Atlantic Treaty Organisation (NATO) member. While NATO defence effort has been covered by the VAT Directive since 1977 6 and the Excise Directive since 1993, neither of the exemptions covers supplies linked to the common defence effort within the Union framework, because there is as yet no common Union defence policy. However, the common security and defence policy (CSDP), which was established as the European security and defence policy (ESDP) in 2000 7 , is a key instrument for external action and includes the progressive framing of a common Union defence policy 8 . The Lisbon Treaty, which came into force in December 2009, was a milestone in the development of the CSDP. The Treaty on European Union (TEU), as amended by the Lisbon Treaty, includes a mutual assistance clause 9 and allowed Member States to strengthen their cooperation in military matters through ‘permanent structured cooperation’ (PESCO) 10 . The Lisbon Treaty also established the European External Action Service (EEAS), which assists the High Representative of the Union for Foreign Affairs and Security Policy in all her responsibilities, including the CSDP. The fact that the High Representative is also one of the Vice-Presidents of the Commission facilitates the bringing together of all necessary EU assets and the application of a comprehensive approach to EU crisis management. The EU Military Committee (EUMC), which was set up in 2001 11 , is the Council’s highest military body. It directs all military activities within the EU framework and advises on the planning and execution of military missions and operations under the CSDP, and on the development of military capabilities. Also established in 2001 12 and working under the military direction of the EUMC, the European Union Military Staff (EUMS) is the source of the EU’s military expertise 13 . It provides early warning, situation assessment and strategic planning for missions and tasks referred to in Articles 42(1) and 43(1) TEU. It also contributes to the elaboration, assessment and review of the capability goals. In June 2016, the global strategy for the European Union’s foreign and security policy (EUGS) 14 laid the ground for developing CSDP further towards three core priorities: responding to external conflicts and crises, building the capabilities of partners and protecting the Union and its citizens. In December 2017 15 , the European Council invited the High Representative, the Commission and the Member States to bring forward work on military mobility, both under PESCO and in the context of EU NATO cooperation. In March 2018, as a follow-up to their November 2017 Joint Communication on improving military mobility in the EU 16 , the Commission and the High Representative presented a Joint Communication on the action plan on military mobility 17 . The action plan recognises the need for equal treatment of defence efforts with a view to reducing administrative burden and thus delays and costs in military mobility, and providing Member States with an incentive to cooperate 18 . It requires the Commission to assess the feasibility of aligning the VAT treatment of defence efforts in the EU framework and under the NATO umbrella. On 19 November 2018, the Council concluded on Security and Defence in the context of the EUGS 19 . The Council welcomed the substantive progress made in the area of security and defence during the previous two years and stressed the importance of keeping the momentum through the continued engagement of the Member States and EU institutions. In particular, the Council welcomed the progress in the implementation of PESCO and the ongoing implementation of efforts to improve the mobility of military personnel, materiel and equipment for routine activities and during crisis and conflict, within and beyond the EU. In line with the action plan and the Council conclusions, the objective of this proposal is to align the VAT treatment of defence efforts in the EU and NATO frameworks as far as is feasible. The proposal has to acknowledge that, while there is a collective defence effort under the North Atlantic Treaty, no common Union defence policy exists as yet. The arrangements for exemptions from excise duties, as provided for in the Excise Directive, should be aligned in a similar way.
Revised version (Article 169 ):
In addition to the deduction referred to in Article 168, the taxable person shall be entitled to deduct the VAT referred to therein in so far as the goods and services are used for the purposes of the following: (a) transactions relating to the activities referred to in the second subparagraph of Article 9(1), carried out outside the Member State in which that tax is due or paid, in respect of which VAT would be deductible if they had been carried out within that Member State; transactions which are exempt pursuant to Articles 138, 142 or 144, Articles 146 to 149, Articles 151, 152, 153 or 156, Article 157(1)(b), Articles 158 to 161 or Article 164; (c) transactions which are exempt pursuant to points (a) to (f) of Article 135(1), where the customer is established outside the Community or where those transactions relate directly to goods to be exported out of the Community.
Article 170 
All taxable persons who, within the meaning of Article 1 of Directive 86/560/EEC ( 8 ), Article 2(1) and Article 3 of Directive 2008/9/EC ( 9 ) and Article 171 of this Directive, are not established in the Member State in which they purchase goods and services or import goods subject to VAT shall be entitled to obtain a refund of that VAT insofar as the goods and services are used for the purposes of the following: (a) transactions referred to in Article 169; (b) transactions for which the tax is solely payable by the customer in accordance with Articles 194 to 197 or Article 199.
Article 171 
1. VAT shall be refunded to taxable persons who are not established in the Member State in which they purchase goods and services or import goods subject to VAT but who are established in another Member State, in accordance with the detailed rules laid down in Directive 2008/9/EC. 2. VAT shall be refunded to taxable persons who are not established within the territory of the Community in accordance with the detailed implementing rules laid down in Directive 86/560/EEC. The taxable persons referred to in Article 1 of Directive 86/560/EEC shall also, for the purposes of applying that Directive, be regarded as taxable persons who are not established in the Community where, in the Member State in which they purchase goods and services or import goods subject to VAT, they have only carried out the supply of goods or services to a person designated in accordance with Articles 194 to 197 or Article 199 as liable for payment of VAT. 3. Directive 86/560/EEC shall not apply to: (a) amounts of VAT which according to the legislation of the Member State of refund have been incorrectly invoiced; (b) invoiced amounts of VAT in respect of supplies of goods the supply of which is, or may be, exempt pursuant to Article 138 or Article 146(1)(b).
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The purpose of the current proposal for a Directive amending Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax 1 (hereafter the ‘ VAT Directive ’ ) is to prolong: 1) the possibility for Member States to apply the reverse charge mechanism to combat existing fraud in supplies of goods and services included in Article 199a(1) of the VAT Directive and 2) the possibility to use the Quick Reaction Mechanism (QRM) , as set out in Article 199b of the VAT Directive , to combat fraud via the application of the reverse charge mechanism in very specific cases . As a general rule, Article 193 of the VAT Directive stipulates that the taxable person supplying goods or services is liable to pay VAT. As a derogation, the reverse charge mechanism allows to designate the recipient of the supply as the person liable for the payment of VAT. Under this reverse charge mechanism, VAT is not charged by the supplier but accounted for by the customer (a taxable person) in his VAT return. This VAT is then deducted in that same VAT return and, therefore, insofar this person has a full right of deduction, the result is nil. The reverse charge mechanism is used to combat fraud and in particular Missing Trader Intra-Community (MTIC) fraud. This type of fraud occurs when a trader acquires goods, transported or dispatched from another Member State, by means of a supply exempt from VAT, and sells them on including VAT on the invoice to the customer. After having received the VAT amount from the customer such trader disappears before paying the VAT due to the tax authorities. At the same time, the customer acting in good faith can normally deduct the VAT he paid to the supplier through his VAT return. Hence, under the reverse charge mechanism VAT is not effectively paid to the supplier. The reverse charge mechanism based on Article 199a o f the VAT Directive is optional for Member States to apply. It allows them to fight this type of fraud in the pre-defined sensitive areas where it typically occurs 2 on their territory . Once suppliers are obliged to use the reverse charge mechanism for such domestic supplies, t he y cann ot charge VAT on their invoice. They will subsequently not receive the VAT amount from their customer and , as a result , such traders cannot disappear with the amount of VAT received. The QRM of Article 199b is an exceptional measure allowing Member States to quickly introduce , in cases of imperative urgency, a temporary reverse charge mechanism for supplies of goods and services in sectors where sudden and massive fraud occurred and which are not listed in Article 199a of the VAT Directive. This procedure is exceptional and extremely quick as the Commission has to react within one month, either with a negative opinion or to confirm in writing to the Member State concerned that it does not object the measure. The Member State may adopt the QRM special measure from the date of receipt of that confirmation. By u sing this mechanism , Member States can bridge the p eriod required for obtaining a ‘ normal ’ derogation under A rticle 395 of the VAT Directive, which can take up to six months . Such a derogation requires a proposal from the Commission and unanimous adoption by Council. Article 199a of the VAT Directive was introduced 3 for the period 2010 until 30 June 2015 and was a first time extended 4 , with amendments, until 31 December 2018. Article 199b of the VAT Directive was introduced 5 for the period 2013 until 31 December 2018. Both Article s 199a and 199b of the VAT Directive were subsequently extended 6 until 30 June 2022 in order to coincide with the initially foreseen date on which the VAT definitive system would enter into force (see more details below) . At the time the application period of Articles 199a and 199b of the VAT Directive would be extended until 30 June 2022 , the Commission presented a r eport on the effects of the mechanisms i ncluded in these articles 7 and concluded, on the basis of contributions of tax administrations and business stakeholders, that the measures in these articles were useful in the fight against fraud. In order to deal with the issue of (MTIC) fraud in a more structural manner , the Commission made a proposal for the introduction of the so-called definitive VAT system, a simpler and fraud-proof system for intra-Union trade of goods 8 . These arrangements, which the Commission proposed to enter into force on 1 July 2022, provide a fundamental response to MTIC fraud. However, the state of play of the ongoing negotiations in the Council indicates that it will not be possible for the definitive VAT system to enter into force on 1 July 2022. In order to allow the negotiations on the definitive system to continue, without putting at risk the available tools in order to combat VAT fraud, it is appropriate to prolong the anti-fraud measures contained in the said articles for another limited period. To extend the application period of Articles 199a and 199b would also allow developing further tools to fight tax evasion. To that end, and in accordance with the Tax Package 9 , the C ommission is prepar ing a proposal in order to modernise the current VAT rules, taking into account the opportunities offered by digital technologies. Under the heading ‘VAT in the digital age’, the Commission will assess VAT reporting obligations, possibly including on Transaction-B ased R eporting (TBR) and a n enhanced system of e-invoicing . This should provide quicker and more detailed information on individual transactions to tax administrations and therefore lower the risk of fraud . Based on such legislative developments, the need to further extend Articles 199a and 199b should be reassessed in the future. 
Revised version (Article 171 ):
1. VAT shall be refunded to taxable persons who are not established in the Member State in which they purchase goods and services or import goods subject to VAT but who are established in another Member State, in accordance with the detailed rules laid down in Directive 2008/9/EC. 2. VAT shall be refunded to taxable persons who are not established within the territory of the Community in accordance with the detailed implementing rules laid down in Directive 86/560/EEC. The taxable persons referred to in Article 1 of Directive 86/560/EEC shall also, for the purposes of applying that Directive, be regarded as taxable persons who are not established in the Community where, in the Member State in which they purchase goods and services or import goods subject to VAT, they have only carried out the supply of goods or services to a person designated in accordance with Articles 194 to 197 or Article 199 as liable for payment of VAT.
Article 171a 
Member States may, instead of granting a refund of VAT pursuant to Directives 86/560/EEC or 2008/9/EC on those supplies of goods or services to a taxable person in respect of which the taxable person is liable to pay the tax in accordance with Articles 194 to 197 or Article 199, allow deduction of this tax pursuant to the procedure laid down in Article 168. The existing restrictions pursuant to Article 2(2) and Article 4(2) of Directive 86/560/EEC may be retained. To that end, Member States may exclude the taxable person who is liable to pay the tax from the refund procedure pursuant to Directives 86/560/EEC or 2008/9/EC.
Article 172 
1. Any person who is regarded as a taxable person by reason of the fact that he supplies, on an occasional basis, a new means of transport in accordance with the conditions specified in Article 138(1) and (2)(a) shall, in the Member State in which the supply takes place, be entitled to deduct the VAT included in the purchase price or paid in respect of the importation or the intra-Community acquisition of this means of transport, up to an amount not exceeding the amount of VAT for which he would be liable if the supply were not exempt. A right of deduction shall arise and may be exercised only at the time of supply of the new means of transport. 2. Member States shall lay down detailed rules for the implementation of paragraph 1.
Article 173 
1. In the case of goods or services used by a taxable person both for transactions in respect of which VAT is deductible pursuant to Articles 168, 169 and 170, and for transactions in respect of which VAT is not deductible, only such proportion of the VAT as is attributable to the former transactions shall be deductible. The deductible proportion shall be determined, in accordance with Articles 174 and 175, for all the transactions carried out by the taxable person. 2. Member States may take the following measures: (a) authorise the taxable person to determine a proportion for each sector of his business, provided that separate accounts are kept for each sector; (b) require the taxable person to determine a proportion for each sector of his business and to keep separate accounts for each sector; (c) authorise or require the taxable person to make the deduction on the basis of the use made of all or part of the goods and services; (d) authorise or require the taxable person to make the deduction in accordance with the rule laid down in the first subparagraph of paragraph 1, in respect of all goods and services used for all transactions referred to therein; (e) provide that, where the VAT which is not deductible by the taxable person is insignificant, it is to be treated as nil.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The purpose of the current proposal for a Directive amending Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax 1 (hereafter the ‘ VAT Directive ’ ) is to prolong: 1) the possibility for Member States to apply the reverse charge mechanism to combat existing fraud in supplies of goods and services included in Article 199a(1) of the VAT Directive and 2) the possibility to use the Quick Reaction Mechanism (QRM) , as set out in Article 199b of the VAT Directive , to combat fraud via the application of the reverse charge mechanism in very specific cases . As a general rule, Article 193 of the VAT Directive stipulates that the taxable person supplying goods or services is liable to pay VAT. As a derogation, the reverse charge mechanism allows to designate the recipient of the supply as the person liable for the payment of VAT. Under this reverse charge mechanism, VAT is not charged by the supplier but accounted for by the customer (a taxable person) in his VAT return. This VAT is then deducted in that same VAT return and, therefore, insofar this person has a full right of deduction, the result is nil. The reverse charge mechanism is used to combat fraud and in particular Missing Trader Intra-Community (MTIC) fraud. This type of fraud occurs when a trader acquires goods, transported or dispatched from another Member State, by means of a supply exempt from VAT, and sells them on including VAT on the invoice to the customer. After having received the VAT amount from the customer such trader disappears before paying the VAT due to the tax authorities. At the same time, the customer acting in good faith can normally deduct the VAT he paid to the supplier through his VAT return. Hence, under the reverse charge mechanism VAT is not effectively paid to the supplier. The reverse charge mechanism based on Article 199a o f the VAT Directive is optional for Member States to apply. It allows them to fight this type of fraud in the pre-defined sensitive areas where it typically occurs 2 on their territory . Once suppliers are obliged to use the reverse charge mechanism for such domestic supplies, t he y cann ot charge VAT on their invoice. They will subsequently not receive the VAT amount from their customer and , as a result , such traders cannot disappear with the amount of VAT received. The QRM of Article 199b is an exceptional measure allowing Member States to quickly introduce , in cases of imperative urgency, a temporary reverse charge mechanism for supplies of goods and services in sectors where sudden and massive fraud occurred and which are not listed in Article 199a of the VAT Directive. This procedure is exceptional and extremely quick as the Commission has to react within one month, either with a negative opinion or to confirm in writing to the Member State concerned that it does not object the measure. The Member State may adopt the QRM special measure from the date of receipt of that confirmation. By u sing this mechanism , Member States can bridge the p eriod required for obtaining a ‘ normal ’ derogation under A rticle 395 of the VAT Directive, which can take up to six months . Such a derogation requires a proposal from the Commission and unanimous adoption by Council. Article 199a of the VAT Directive was introduced 3 for the period 2010 until 30 June 2015 and was a first time extended 4 , with amendments, until 31 December 2018. Article 199b of the VAT Directive was introduced 5 for the period 2013 until 31 December 2018. Both Article s 199a and 199b of the VAT Directive were subsequently extended 6 until 30 June 2022 in order to coincide with the initially foreseen date on which the VAT definitive system would enter into force (see more details below) . At the time the application period of Articles 199a and 199b of the VAT Directive would be extended until 30 June 2022 , the Commission presented a r eport on the effects of the mechanisms i ncluded in these articles 7 and concluded, on the basis of contributions of tax administrations and business stakeholders, that the measures in these articles were useful in the fight against fraud. In order to deal with the issue of (MTIC) fraud in a more structural manner , the Commission made a proposal for the introduction of the so-called definitive VAT system, a simpler and fraud-proof system for intra-Union trade of goods 8 . These arrangements, which the Commission proposed to enter into force on 1 July 2022, provide a fundamental response to MTIC fraud. However, the state of play of the ongoing negotiations in the Council indicates that it will not be possible for the definitive VAT system to enter into force on 1 July 2022. In order to allow the negotiations on the definitive system to continue, without putting at risk the available tools in order to combat VAT fraud, it is appropriate to prolong the anti-fraud measures contained in the said articles for another limited period. To extend the application period of Articles 199a and 199b would also allow developing further tools to fight tax evasion. To that end, and in accordance with the Tax Package 9 , the C ommission is prepar ing a proposal in order to modernise the current VAT rules, taking into account the opportunities offered by digital technologies. Under the heading ‘VAT in the digital age’, the Commission will assess VAT reporting obligations, possibly including on Transaction-B ased R eporting (TBR) and a n enhanced system of e-invoicing . This should provide quicker and more detailed information on individual transactions to tax administrations and therefore lower the risk of fraud . Based on such legislative developments, the need to further extend Articles 199a and 199b should be reassessed in the future. 
Revised version (Article 173 ):
1. In the case of goods or services used by a taxable person both for transactions in respect of which VAT is deductible pursuant to Articles 168, 169 and 170, and for transactions in respect of which VAT is not deductible, only such proportion of the VAT as is attributable to the former transactions shall be deductible. The deductible proportion shall be determined, in accordance with Articles 174 and 175, for all the transactions carried out by the taxable person.
Article 174 
1. The deductible proportion shall be made up of a fraction comprising the following amounts: (a) as numerator, the total amount, exclusive of VAT, of turnover per year attributable to transactions in respect of which VAT is deductible pursuant to Articles 168 and 169; (b) as denominator, the total amount, exclusive of VAT, of turnover per year attributable to transactions included in the numerator and to transactions in respect of which VAT is not deductible. Member States may include in the denominator the amount of subsidies, other than those directly linked to the price of supplies of goods or services referred to in Article 73. 2. By way of derogation from paragraph 1, the following amounts shall be excluded from the calculation of the deductible proportion: (a) the amount of turnover attributable to supplies of capital goods used by the taxable person for the purposes of his business; (b) the amount of turnover attributable to incidental real estate and financial transactions; (c) the amount of turnover attributable to the transactions specified in points (b) to (g) of Article 135(1) in so far as those transactions are incidental. 3. Where Member States exercise the option under Article 191 not to require adjustment in respect of capital goods, they may include disposals of capital goods in the calculation of the deductible proportion.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The current initiative aims at enabling Member States to temporarily exempt the supply of COVID‑19 vaccines and in vitro diagnostic medical devices ( testing kits) as well as services closely linked to such vaccines and such devices from value added tax (VAT). It also enables Member States, as is already the case for vaccines, to apply a reduced VAT rate to COVID‑19 in vitro diagnostic medical devices and closely linked services. On 30 January 2020, the World Health Organization (WHO) declared the COVID ‑19 outbreak as a public health emergency of international concern. Then, on 11 March 2020, the WHO characterised the situation of the COVID ‑19 outbreak as a pandemic. Since the beginning of the COVID ‑19 outbreak, the European Union has taken unparalleled action to protect lives and livelihoods and limit the impact of the virus on the economy. The Union is leading the global effort for universal testing, treatment and vaccination by mobilising resources through international pledging and by joining forces with countries and global health organisations through the Access to COVID ‑19 Tools (ACT) Accelerator collaborative framework 1 . The latter was launched on 24 April 2020 by the WHO and a group of global actors. It is a call for action in a landmark global collaboration aiming at accelerating equitable global access to safe, quality, effective, and affordable COVID‑19 diagnostics, therapeutics and vaccines. On 4 May 2020, Commission President von der Leyen launched the Coronavirus Global Response as the Union’s response to this call for action. In the Commission President’s words, “[t] he world will only be freed from this pandemic when vaccines, testing kits and treatments are available and affordable to everyone who needs them” . The pledging campaign under the Coronavirus Global Response has raised almost EUR 16 billion to date, including EUR 11.9 billion pledged by the Member States, the Commission and the European Investment Bank. On 18 September 2020, the Commission confirmed its participation in the COVAX Facility, following the announcement, on 31 August 2020, of a EUR 400 million contribution in guarantees to support COVAX and its objectives in the context of the Coronavirus Global Response. The COVAX Facility is the vaccines pillar of the ACT Accelerator and aims to speed up development and manufacture of COVID‑19 vaccines and to guarantee fair and equitable access for every country in the world. It is co-led by Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations (CEPI) and WHO. As part of the effort to help protect people everywhere in the world, and in the Union in particular, the Commission put forward on 17 June 2020 an EU strategy for COVID ‑19 vaccines 2 . The proposed EU approach to secure vaccines for EU people complements the Union’s action for universal access to affordable coronavirus vaccination, treatment and testing. The aim is to accelerate the development, manufacturing and deployment of vaccines against the virus and make sure that in the fight against COVID ‑19 no one in the Union is left behind. The EU vaccine strategy has among its objectives to ensure equitable and affordable access to the supplies of COVID‑19 vaccines for all EU people as early as possible. Generally, an effective and safe vaccine against COVID‑19 is seen as the most likely permanent solution to the pandemic, as it will facilitate control of COVID‑19 disease and will reduce mortality. However, there is no guarantee that such vaccine will be available soon. Therefore, the development and deployment of COVID‑19 in vitro diagnostic medical devices remain crucial. The Commission will implement the EU strategy for COVID‑19 vaccines together with the Member States. This increases the likelihood that all in the EU, as well as in the European Economic Area (EEA), gain equitable and affordable access to those vaccines in the shortest possible period. An important step towards joint action between Member States has been taken by the creation of an inclusive Vaccine Alliance by France, Germany, Italy, and the Netherlands. This alliance was formed to pool the national resources of those countries and secure fair access to vaccine supplies for the European population. The Union will materialise its strategy for COVID ‑19 vaccines in two ways. First, by securing sufficient production of vaccines in the EU - and thereby sufficient supplies for its Member States - through Advance Purchase Agreements (APAs) with vaccine producers. The related funding will come from the Emergency Support Instrument (ESI 3 ). Second, by making use of existing regulatory, financial, advisory and other tools at its disposal while adapting the Union’s regulatory framework to the current urgency. The contracts with vaccine producing companies will be concluded through a procurement process run by the Commission on behalf of all participating Member States. Once any of the vaccines supported proves successful, Member States will be able to acquire that vaccine directly from the producer based on the conditions laid down in the APA. As the ultimate acquirers of the vaccines, Member States will participate in the process from the outset. In the framework of the EU vaccine strategy, the Commission already concluded agreements to purchase potential COVID ‑19 vaccines with some pharmaceutical companies, while exploratory talks intended to result in APAs have been concluded or will be conducted with others. On 30 September 2020, the WHO issued a draft landscape document of COVID ‑19 candidate vaccines 4 , listing 41 candidate vaccines in clinical evaluation. Since the emergence of the COVID‑19 pandemic and awaiting a vaccine, healthcare professionals have created numerous tests. These tests detect either the presence of the virus or the presence of antibodies against the virus. The most common COVID‑19 tests marketed on the European market are as follows: · Nucleic acid test (e.g. PCR), primarily involving a swab of the nose and throat. The presence of the virus is then detected in the sample taken. · Antigen test, also involving a swab of the nose and throat. This test also detects the presence of the virus. – There are “rapid” antigen tests, where the sample is placed on a plate and the result appears after a few minutes. – There are also ELISA (enzyme-linked immunosorbent assay) or “ELISA-like” tests which are more complex but offer a more reliable and qualitative method. · Antibody test (IgG/IgM/IgA) via a blood sample. This test makes it possible to detect antibodies against the virus in the sample taken. Antibody tests can also be performed via “rapid” tests, or via ELISA or “ELISA-like” tests. Member States are responsible for the strategy and criteria to determine which people are tested and what types of COVID‑19 in vitro diagnostic medical devices are deployed. In the face of the COVID ‑19 pandemic, the Commission has taken exceptional measures in the area of VAT to help victims of the outbreak. On 3 April 2020, the Commission adopted Decision (EU) 2020/491 5 enabling Member States to temporarily exempt from VAT (and relieve from customs duties) vital goods needed to combat the effects of the COVID ‑19 o utbreak (covering among other personal protective equipment, in vitro diagnostic medical devices, medical devices such as ventilators and a limited number of medicines 6 ) . This decision covers only importation and not intra-Community or domestic supplies, because the autonomous powers of the Commission are limited to this field. The initial measure applied for a period of six months, and was further extended by three months until 31 October 2020 7 . A further prolongation until the end of April 2021 has been decided. The current VAT rules contain two main tools that already allow Member States to alleviate the cost of COVID‑19 vaccines and in vitro diagnostic medical devices. First, Council Directive 2006/112/EC 8 (the VAT Directive) provides exemptions without deductibility for hospital and medical care 9 . The objective of those exemptions is to reduce the cost of medical care and to make it more accessible to individuals. Preventive medical care, e.g. when the person concerned is not suffering from any disease or health disorder, may fall under the exemption. This would apply with regard to COVID ‑19 vaccination and testing supplied by way of hospital and medical care. However, the existing exemption would not apply to the supply of COVID ‑19 vaccines and in vitro diagnostic medical devices - including services closely linked thereto - to hospitals, medical practitioners, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature. They would thus be burdened with the VAT cost when acquiring such vaccines and in vitro diagnostic medical devices. Hence, although COVID‑19 vaccination and testing supplied in the context of hospital and medical care would be exempt from VAT, supplies of such vaccines and in vitro diagnostic medical devices acquired by hospitals, medical practitioners, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature would not be covered by this exemption. Therefore, the VAT burden would remain for those. Second, u nder the current VAT rules, Member States may apply a reduced (that is, no lower than 5%) VAT rate to “ pharmaceutical products normally used for health care, prevention of illnesses and as treatment for medical […] purposes ” 10 . The concept of "pharmaceutical products" is not defined in the VAT Directive but has always been understood to cover pharmaceutical products as defined by the Combined Nomenclature 11 . The pharmaceutical products contained in the Combined Nomenclature (Chapter 30) include vaccines. Therefore, vaccines are currently eligible for reduced VAT rates. Moreover, based on historical standstill derogations, certain Member States may continue to apply super-reduced rates (namely lower than 5%) or exemptions with the deductibility of the VAT paid at the preceding stage (zero rate) to pharmaceutical products, including vaccines. However, there is no general provision in the VAT Directive allowing a zero rate to pharmaceutical products that could apply in the case of COVID ‑19 vaccines. In contrast to vaccines, the general VAT rules of the VAT Directive would not allow reduced rates to apply to COVID ‑19 in vitro diagnostic medical devices 12 . Moreover, while Decision (EU) 2020/491 enabled Member States to temporarily exempt from VAT the importation of in vitro diagnostic medical devices among other, there is no explicit provision in the EU VAT rules allowing to exempt from VAT the intra-Community and domestic supply of such devices. In conclusion, although the current VAT rules allow partly alleviating the cost of COVID ‑19 vaccination and testing, they do not permit the application of a zero rate to such vaccines and services closely linked thereto. Likewise, they do not permit the application of either a reduced or a zero rate to in vitro diagnostic medical devices, including services closely linked thereto. The 2018 Commission proposal 13 to amend the VAT Directive as regards VAT rates, which is pending before the Council, could provide a satisfactory solution in lifting VAT from the overall supply of COVID ‑19 vaccination and testing. If adopted unanimously by Council , it would allow Member States to apply a reduced rate or even a zero rate to supplies of COVID ‑19 vaccines and in vitro diagnostic medical devices, including services closely linked thereto, if such supplies benefit only the final consumer and pursue an objective of general interest. However, there is a need for immediate action in fighting the pandemic. Given the urgency, a swift adaptation of the EU VAT rules is necessary in order to ensure that COVID‑19 vaccines and in vitro diagnostic medical devices become more affordable for Europeans by reducing their cost of provision by the health system, thus enhancing the potential for COVID‑19 prevention and screening in the Union. This is a prerequisite for ensuring that full societal and economic activity may be restored in the near term. It is imperative that such measure be of temporary character with the aim to exempt from VAT the supply of COVID‑19 vaccines and in vitro diagnostic medical devices while also allowing a reduced VAT rate for the latter. This measure should remain in place until the COVID‑19 health crisis comes to an end. In concrete terms, the measure in question should not go beyond 31 December 2022. Before the end of this period, the situation will be reviewed and, if necessary, the period of application of the measure may be extended. Pursuant to Article 94(2) of the VAT Directive, the potential reduced rate and the VAT exemption in the form of zero rate applied to the above supplies within the territory of a Member State will also be applicable to the intra-Community supply to or importation into that Member State of COVID‑19 vaccines and in vitro diagnostic medical devices. 
Revised version (Article 174 ):
1. The deductible proportion shall be made up of a fraction comprising the following amounts: (a) as numerator, the total amount, exclusive of VAT, of turnover per year attributable to transactions in respect of which VAT is deductible pursuant to Articles 168 and 169; (b) as denominator, the total amount, exclusive of VAT, of turnover per year attributable to transactions included in the numerator and to transactions in respect of which VAT is not deductible. The deductible proportion shall be made up of a fraction comprising the following amounts: (a) as numerator, the total amount, exclusive of VAT, of turnover per year attributable to transactions in respect of which VAT is deductible pursuant to Articles 168 and 169; (b) as denominator, the total amount, exclusive of VAT, of turnover per year attributable to transactions included in the numerator and to transactions in respect of which VAT is not deductible. Member States may include in the denominator the amount of subsidies, other than those directly linked to the price of supplies of goods or services referred to in Article 73. By way of derogation from paragraph 1, the following amounts shall be excluded from the calculation of the deductible proportion: (a) the amount of turnover attributable to supplies of capital goods used by the taxable person for the purposes of his business; (b) the amount of turnover attributable to incidental real estate and financial transactions; (c) the amount of turnover attributable to the transactions specified in points (b) to (g) of Article 135(1) in so far as those transactions are incidental. 3. Where Member States exercise the option under Article 191 not to require adjustment in respect of capital goods, they may include disposals of capital goods in the calculation of the deductible proportion.
Article 175 
1. The deductible proportion shall be determined on an annual basis, fixed as a percentage and rounded up to a figure not exceeding the next whole number. 2. The provisional proportion for a year shall be that calculated on the basis of the preceding year's transactions. In the absence of any such transactions to refer to, or where they were insignificant in amount, the deductible proportion shall be estimated provisionally, under the supervision of the tax authorities, by the taxable person on the basis of his own forecasts. However, Member States may retain the rules in force at 1 January 1979 or, in the case of the Member States which acceded to the Community after that date, on the date of their accession. 3. Deductions made on the basis of such provisional proportions shall be adjusted when the final proportion is fixed during the following year.
Article 176 
The Council, acting unanimously on a proposal from the Commission, shall determine the expenditure in respect of which VAT shall not be deductible. VAT shall in no circumstances be deductible in respect of expenditure which is not strictly business expenditure, such as that on luxuries, amusements or entertainment. Pending the entry into force of the provisions referred to in the first paragraph, Member States may retain all the exclusions provided for under their national laws at 1 January 1979 or, in the case of the Member States which acceded to the Community after that date, on the date of their accession.
Article 177 
After consulting the VAT Committee, each Member State may, for cyclical economic reasons, totally or partly exclude all or some capital goods or other goods from the system of deductions. In order to maintain identical conditions of competition, Member States may, instead of refusing deduction, tax goods manufactured by the taxable person himself or goods which he has purchased within the Community, or imported, in such a way that the tax does not exceed the amount of VAT which would be charged on the acquisition of similar goods.
Article 178 
In order to exercise the right of deduction, a taxable person must meet the following conditions: (a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Articles 220 to 236 and Articles 238, 239 and 240; (b) for the purposes of deductions pursuant to Article 168(b), in respect of transactions treated as the supply of goods or services, he must comply with the formalities as laid down by each Member State; (c) for the purposes of deductions pursuant to Article 168(c), in respect of the intra-Community acquisition of goods, he must set out in the VAT return provided for in Article 250 all the information needed for the amount of the VAT due on his intra-Community acquisitions of goods to be calculated and he must hold an invoice drawn up in accordance with Articles 220 to 236; (d) for the purposes of deductions pursuant to Article 168(d), in respect of transactions treated as intra-Community acquisitions of goods, he must complete the formalities as laid down by each Member State; (e) for the purposes of deductions pursuant to Article 168(e), in respect of the importation of goods, he must hold an import document specifying him as consignee or importer, and stating the amount of VAT due or enabling that amount to be calculated; (f) when required to pay VAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down by each Member State.
Amendment rationale: CONTEXT OF THE PROPOSAL 1. Article 97(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax[1] (hereinafter "the VAT Directive") provides that from 1 January 2006 until 31 December 2010 the standard rate may not be less than 15% and Article 97(2) stipulates that the Council shall decide, in accordance with Article 93 of the Treaty, on the level of the standard rate of value added tax (VAT) to be applied after 31 December 2010. 2. This provision was based on Article 93 of the Treaty establishing the European Community (the EC Treaty). As from 1 December 2009, Article 93 of the EC Treaty is replaced by Article 113 of the Treaty on the Functioning of the European Union (TFEU). Article 113 TFEU stipulates that the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes to the extent that such harmonisation is necessary to ensure the establishment and functioning of the internal market and to avoid distortion of competition. 3. With a view to establishing the internal market on 1 January 1993, the Commission presented proposals intended to set up a definitive system of tax harmonisation. 4. However, when it became clear that it would be impossible to adopt the Commission's proposals before 1 January 1993, the Council decided to adopt a transitional system. With regard to VAT rates, it adopted Directive 92/77/EEC[2]. 5. That Directive introduced a system of minimum rates. It stipulated that from 1 January 1993 to 31 December 1996, the standard rate could not be set lower than 15%. This provision has been extended four times and applies until 31 December 2010. 6. To maintain the degree of harmonisation of rates already achieved, the Commission has twice presented proposals providing for a standard rate band with a minimum rate of 15% and a maximum rate of 25%[3]. The band was derived from the rates applied in practice in Member States, where standard rates have always varied between 15% and 25%. 7. In both cases, the proposals to approximate rates were amended by the Council,[4] which kept only the principle of a minimum rate, referring to a 15% minimum rate comparable to the system introduced by the 1992 Directive. 8. However, these Council Directives were adopted with a statement for the Council minutes mentioning Member States' efforts to avoid widening the 10 percentage point span between the lowest and highest rates applied. This demonstrates the continued concerns of Member States about distortions between high and low rate countries and the possible budgetary effects of different levels of VAT rates. In the light of the current economic crisis, there are further arguments for keeping a minimum standard rate to be laid down in the VAT Directive. 9. Despite various improvements to the common VAT system based on the Commission's pragmatic, phased VAT strategy launched in 2000[5] and updated in 2003[6], the VAT system continues to suffer from shortcomings and high administrative burdens. This means it needs to be fundamentally reassessed. New economic realities, technological processes, fraud patterns etc. also give rise to new challenges. That is why the Commission plans to publish a consultative green paper soon on a new VAT strategy. This will launch a consultation on future tax harmonisation. Only in the light of the outcome of that process can an appropriate decision be taken on the level of standard rates of VAT in the EU. 10. Moreover, recent modifications to the VAT Directive[7] have favoured taxation at the place of consumption, as this results in fewer possibilities for cross-border transactions seeking lower VAT rates, leading to distortions of competition. However, it remains important to prevent growing divergence in standard VAT rates applied by Member States from leading to structural imbalances in the EU and distortions of competition in some sectors of activity. To this end, it is common practice in the field of indirect taxes, both for excise duties and VAT, to set minimum rates. Although no maximum rate is proposed, the span between the standard rates applied in the Member States can – as is currently the case – be expected to ensure the proper functioning of the internal market while acknowledging the possible need for new budgetary resources from consumption taxes. 11. The accession of new Member States on 1 May 2004 and on 1 January 2007 did not alter the situation regarding the standard rate. That still ranges from 15% to 25% in 27 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). 12. In these circumstances, it therefore appears appropriate to maintain the principle of a minimum standard VAT rate of 15%, and to propose that the current arrangements be extended. 13. To give businesses necessary legal certainty, and allow further evaluation of the appropriate level of the standard VAT rate at EU level, it seems appropriate to extend the provision for another five years, while the Commission reflects on a new VAT strategy and re-examines the standard VAT rate appropriate for a common approach. 14. Since the application of the minimum standard rate under Article 97(1) of Directive 2006/112/EC expires on 31 December 2010, the object of this proposal is to enable the Council to extend the period during which this rate applies. The minimum standard VAT rate is therefore set at 15% for five years from 1 January 2011 to 31 December 2015. The Commission would also expect the Council to renew the statement for the minutes agreed earlier on the span between the lowest and highest rates applied for that same period.
Revised version (Article 178 ):
In order to exercise the right of deduction, a taxable person must meet the following conditions: (a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI; (b) for the purposes of deductions pursuant to Article 168(b), in respect of transactions treated as the supply of goods or services, he must comply with the formalities as laid down by each Member State; (c) for the purposes of deductions pursuant to Article 168(c), in respect of the intra-Community acquisition of goods, he must set out in the VAT return provided for in Article 250 all the information needed for the amount of VAT due on his intra-Community acquisitions of goods to be calculated and he must hold an invoice drawn up in accordance with Sections 3 to 5 of Chapter 3 of Title XI; (d) for the purposes of deductions pursuant to Article 168(d), in respect of transactions treated as intra-Community acquisitions of goods, he must complete the formalities as laid down by each Member State; (e) for the purposes of deductions pursuant to Article 168(e), in respect of the importation of goods, he must hold an import document specifying him as consignee or importer, and stating the amount of VAT due or enabling that amount to be calculated; (f) when required to pay VAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down by each Member State.
Article 179 
The taxable person shall make the deduction by subtracting from the total amount of VAT due for a given tax period the total amount of VAT in respect of which, during the same period, the right of deduction has arisen and is exercised in accordance with Article 178. However, Member States may require that taxable persons who carry out occasional transactions, as defined in Article 12, exercise their right of deduction only at the time of supply.
Article 180 
Member States may authorise a taxable person to make a deduction which he has not made in accordance with Articles 178 and 179.
Article 181 
Member States may authorise a taxable person who does not hold an invoice drawn up in accordance with Articles 220 to 236 to make the deduction referred to in Article 168(c) in respect of his intra-Community acquisitions of goods.
Amendment rationale: CONTEXT OF THE PROPOSAL 1. Article 97(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax[1] (hereinafter "the VAT Directive") provides that from 1 January 2006 until 31 December 2010 the standard rate may not be less than 15% and Article 97(2) stipulates that the Council shall decide, in accordance with Article 93 of the Treaty, on the level of the standard rate of value added tax (VAT) to be applied after 31 December 2010. 2. This provision was based on Article 93 of the Treaty establishing the European Community (the EC Treaty). As from 1 December 2009, Article 93 of the EC Treaty is replaced by Article 113 of the Treaty on the Functioning of the European Union (TFEU). Article 113 TFEU stipulates that the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes to the extent that such harmonisation is necessary to ensure the establishment and functioning of the internal market and to avoid distortion of competition. 3. With a view to establishing the internal market on 1 January 1993, the Commission presented proposals intended to set up a definitive system of tax harmonisation. 4. However, when it became clear that it would be impossible to adopt the Commission's proposals before 1 January 1993, the Council decided to adopt a transitional system. With regard to VAT rates, it adopted Directive 92/77/EEC[2]. 5. That Directive introduced a system of minimum rates. It stipulated that from 1 January 1993 to 31 December 1996, the standard rate could not be set lower than 15%. This provision has been extended four times and applies until 31 December 2010. 6. To maintain the degree of harmonisation of rates already achieved, the Commission has twice presented proposals providing for a standard rate band with a minimum rate of 15% and a maximum rate of 25%[3]. The band was derived from the rates applied in practice in Member States, where standard rates have always varied between 15% and 25%. 7. In both cases, the proposals to approximate rates were amended by the Council,[4] which kept only the principle of a minimum rate, referring to a 15% minimum rate comparable to the system introduced by the 1992 Directive. 8. However, these Council Directives were adopted with a statement for the Council minutes mentioning Member States' efforts to avoid widening the 10 percentage point span between the lowest and highest rates applied. This demonstrates the continued concerns of Member States about distortions between high and low rate countries and the possible budgetary effects of different levels of VAT rates. In the light of the current economic crisis, there are further arguments for keeping a minimum standard rate to be laid down in the VAT Directive. 9. Despite various improvements to the common VAT system based on the Commission's pragmatic, phased VAT strategy launched in 2000[5] and updated in 2003[6], the VAT system continues to suffer from shortcomings and high administrative burdens. This means it needs to be fundamentally reassessed. New economic realities, technological processes, fraud patterns etc. also give rise to new challenges. That is why the Commission plans to publish a consultative green paper soon on a new VAT strategy. This will launch a consultation on future tax harmonisation. Only in the light of the outcome of that process can an appropriate decision be taken on the level of standard rates of VAT in the EU. 10. Moreover, recent modifications to the VAT Directive[7] have favoured taxation at the place of consumption, as this results in fewer possibilities for cross-border transactions seeking lower VAT rates, leading to distortions of competition. However, it remains important to prevent growing divergence in standard VAT rates applied by Member States from leading to structural imbalances in the EU and distortions of competition in some sectors of activity. To this end, it is common practice in the field of indirect taxes, both for excise duties and VAT, to set minimum rates. Although no maximum rate is proposed, the span between the standard rates applied in the Member States can – as is currently the case – be expected to ensure the proper functioning of the internal market while acknowledging the possible need for new budgetary resources from consumption taxes. 11. The accession of new Member States on 1 May 2004 and on 1 January 2007 did not alter the situation regarding the standard rate. That still ranges from 15% to 25% in 27 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). 12. In these circumstances, it therefore appears appropriate to maintain the principle of a minimum standard VAT rate of 15%, and to propose that the current arrangements be extended. 13. To give businesses necessary legal certainty, and allow further evaluation of the appropriate level of the standard VAT rate at EU level, it seems appropriate to extend the provision for another five years, while the Commission reflects on a new VAT strategy and re-examines the standard VAT rate appropriate for a common approach. 14. Since the application of the minimum standard rate under Article 97(1) of Directive 2006/112/EC expires on 31 December 2010, the object of this proposal is to enable the Council to extend the period during which this rate applies. The minimum standard VAT rate is therefore set at 15% for five years from 1 January 2011 to 31 December 2015. The Commission would also expect the Council to renew the statement for the minutes agreed earlier on the span between the lowest and highest rates applied for that same period.
Revised version (Article 181 ):
Member States may authorise a taxable person who does not hold an invoice drawn up in accordance with Sections 3 to 5 of Chapter 3 of Title XI to make the deduction referred to in Article 168(c) in respect of his intra-Community acquisitions of goods.
Article 182 
Member States shall determine the conditions and detailed rules for applying Articles 180 and 181.
Article 183 
Where, for a given tax period, the amount of deductions exceeds the amount of VAT due, the Member States may, in accordance with conditions which they shall determine, either make a refund or carry the excess forward to the following period. However, Member States may refuse to refund or carry forward if the amount of the excess is insignificant.
Article 184 
The initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled.
Article 185 
1. Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained. 2. By way of derogation from paragraph 1, no adjustment shall be made in the case of transactions remaining totally or partially unpaid or in the case of destruction, loss or theft of property duly proved or confirmed, or in the case of goods reserved for the purpose of making gifts of small value or of giving samples, as referred to in Article 16. However, in the case of transactions remaining totally or partially unpaid or in the case of theft, Member States may require adjustment to be made.
Article 186 
Member States shall lay down the detailed rules for applying Articles 184 and 185.
Article 187 
1. In the case of capital goods, adjustment shall be spread over five years including that in which the goods were acquired or manufactured. Member States may, however, base the adjustment on a period of five full years starting from the time at which the goods are first used. In the case of immovable property acquired as capital goods, the adjustment period may be extended up to 20 years. 2. The annual adjustment shall be made only in respect of one-fifth of the VAT charged on the capital goods, or, if the adjustment period has been extended, in respect of the corresponding fraction thereof. The adjustment referred to in the first subparagraph shall be made on the basis of the variations in the deduction entitlement in subsequent years in relation to that for the year in which the goods were acquired, manufactured or, where applicable, used for the first time.
Article 188 
1. If supplied during the adjustment period, capital goods shall be treated as if they had been applied to an economic activity of the taxable person up until expiry of the adjustment period. The economic activity shall be presumed to be fully taxed in cases where the supply of the capital goods is taxed. The economic activity shall be presumed to be fully exempt in cases where the supply of the capital goods is exempt. 2. The adjustment provided for in paragraph 1 shall be made only once in respect of all the time covered by the adjustment period that remains to run. However, where the supply of capital goods is exempt, Member States may waive the requirement for adjustment in so far as the purchaser is a taxable person using the capital goods in question solely for transactions in respect of which VAT is deductible.
Article 189 
For the purposes of applying Articles 187 and 188, Member States may take the following measures: (a) define the concept of capital goods; (b) specify the amount of the VAT which is to be taken into consideration for adjustment; (c) adopt any measures needed to ensure that adjustment does not give rise to any unjustified advantage; (d) permit administrative simplifications.
Article 190 
For the purposes of Articles 187, 188, 189 and 191, Member States may regard as capital goods those services which have characteristics similar to those normally attributed to capital goods.
Article 191 
If, in any Member State, the practical effect of applying Articles 187 and 188 is negligible, that Member State may, after consulting the VAT Committee, refrain from applying those provisions, having regard to the overall impact of VAT in the Member State concerned and the need for administrative simplification, and provided that no distortion of competition thereby arises.
Article 192 
Where a taxable person transfers from being taxed in the normal way to a special scheme or vice versa, Member States may take all measures necessary to ensure that the taxable person does not enjoy unjustified advantage or sustain unjustified harm.
Article 192a 
For the purposes of this Section, a taxable person who has a fixed establishment within the territory of the Member State where the tax is due shall be regarded as a taxable person who is not established within that Member State when the following conditions are met: (a) he makes a taxable supply of goods or of services within the territory of that Member State; (b) an establishment which the supplier has within the territory of that Member State does not intervene in that supply.
Article 193 
VAT shall be payable by any taxable person carrying out a taxable supply of goods or services, except where it is payable by another person in the cases referred to in Articles 194 to 199 and Article 202.
Article 194 
1. Where the taxable supply of goods or services is carried out by a taxable person who is not established in the Member State in which the VAT is due, Member States may provide that the person liable for payment of VAT is the person to whom the goods or services are supplied. 2. Member States shall lay down the conditions for implementation of paragraph 1.
Article 195 
VAT shall be payable by any person who is identified for VAT purposes in the Member State in which the tax is due and to whom goods are supplied in the circumstances specified in Articles 38 or 39, if the supplies are carried out by a taxable person not established within that Member State.
Article 196 
VAT shall be payable by any taxable person, or non-taxable legal person identified for VAT purposes, to whom the services referred to in Article 44 are supplied, if the services are supplied by a taxable person not established within the territory of the Member State.
Article 197 
1. VAT shall be payable by the person to whom the goods are supplied when the following conditions are met: (a) the taxable transaction is a supply of goods carried out in accordance with the conditions laid down in Article 141; (b) the person to whom the goods are supplied is another taxable person, or a non-taxable legal person, identified for VAT purposes in the Member State in which the supply is carried out; (c) the invoice issued by the taxable person not established in the Member State of the person to whom the goods are supplied is drawn up in accordance with Articles 220 to 236. 2. Where a tax representative is appointed as the person liable for payment of VAT pursuant to Article 204, Member States may provide for a derogation from paragraph 1 of this Article.
Amendment rationale: CONTEXT OF THE PROPOSAL 1. Article 97(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax[1] (hereinafter "the VAT Directive") provides that from 1 January 2006 until 31 December 2010 the standard rate may not be less than 15% and Article 97(2) stipulates that the Council shall decide, in accordance with Article 93 of the Treaty, on the level of the standard rate of value added tax (VAT) to be applied after 31 December 2010. 2. This provision was based on Article 93 of the Treaty establishing the European Community (the EC Treaty). As from 1 December 2009, Article 93 of the EC Treaty is replaced by Article 113 of the Treaty on the Functioning of the European Union (TFEU). Article 113 TFEU stipulates that the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes to the extent that such harmonisation is necessary to ensure the establishment and functioning of the internal market and to avoid distortion of competition. 3. With a view to establishing the internal market on 1 January 1993, the Commission presented proposals intended to set up a definitive system of tax harmonisation. 4. However, when it became clear that it would be impossible to adopt the Commission's proposals before 1 January 1993, the Council decided to adopt a transitional system. With regard to VAT rates, it adopted Directive 92/77/EEC[2]. 5. That Directive introduced a system of minimum rates. It stipulated that from 1 January 1993 to 31 December 1996, the standard rate could not be set lower than 15%. This provision has been extended four times and applies until 31 December 2010. 6. To maintain the degree of harmonisation of rates already achieved, the Commission has twice presented proposals providing for a standard rate band with a minimum rate of 15% and a maximum rate of 25%[3]. The band was derived from the rates applied in practice in Member States, where standard rates have always varied between 15% and 25%. 7. In both cases, the proposals to approximate rates were amended by the Council,[4] which kept only the principle of a minimum rate, referring to a 15% minimum rate comparable to the system introduced by the 1992 Directive. 8. However, these Council Directives were adopted with a statement for the Council minutes mentioning Member States' efforts to avoid widening the 10 percentage point span between the lowest and highest rates applied. This demonstrates the continued concerns of Member States about distortions between high and low rate countries and the possible budgetary effects of different levels of VAT rates. In the light of the current economic crisis, there are further arguments for keeping a minimum standard rate to be laid down in the VAT Directive. 9. Despite various improvements to the common VAT system based on the Commission's pragmatic, phased VAT strategy launched in 2000[5] and updated in 2003[6], the VAT system continues to suffer from shortcomings and high administrative burdens. This means it needs to be fundamentally reassessed. New economic realities, technological processes, fraud patterns etc. also give rise to new challenges. That is why the Commission plans to publish a consultative green paper soon on a new VAT strategy. This will launch a consultation on future tax harmonisation. Only in the light of the outcome of that process can an appropriate decision be taken on the level of standard rates of VAT in the EU. 10. Moreover, recent modifications to the VAT Directive[7] have favoured taxation at the place of consumption, as this results in fewer possibilities for cross-border transactions seeking lower VAT rates, leading to distortions of competition. However, it remains important to prevent growing divergence in standard VAT rates applied by Member States from leading to structural imbalances in the EU and distortions of competition in some sectors of activity. To this end, it is common practice in the field of indirect taxes, both for excise duties and VAT, to set minimum rates. Although no maximum rate is proposed, the span between the standard rates applied in the Member States can – as is currently the case – be expected to ensure the proper functioning of the internal market while acknowledging the possible need for new budgetary resources from consumption taxes. 11. The accession of new Member States on 1 May 2004 and on 1 January 2007 did not alter the situation regarding the standard rate. That still ranges from 15% to 25% in 27 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). 12. In these circumstances, it therefore appears appropriate to maintain the principle of a minimum standard VAT rate of 15%, and to propose that the current arrangements be extended. 13. To give businesses necessary legal certainty, and allow further evaluation of the appropriate level of the standard VAT rate at EU level, it seems appropriate to extend the provision for another five years, while the Commission reflects on a new VAT strategy and re-examines the standard VAT rate appropriate for a common approach. 14. Since the application of the minimum standard rate under Article 97(1) of Directive 2006/112/EC expires on 31 December 2010, the object of this proposal is to enable the Council to extend the period during which this rate applies. The minimum standard VAT rate is therefore set at 15% for five years from 1 January 2011 to 31 December 2015. The Commission would also expect the Council to renew the statement for the minutes agreed earlier on the span between the lowest and highest rates applied for that same period.
Revised version (Article 197 ):
1. VAT shall be payable by the person to whom the goods are supplied when the following conditions are met: (a) the taxable transaction is a supply of goods carried out in accordance with the conditions laid down in Article 141; (b) the person to whom the goods are supplied is another taxable person, or a non-taxable legal person, identified for VAT purposes in the Member State in which the supply is carried out; (c) the invoice issued by the taxable person not established in the Member State of the person to whom the goods are supplied is drawn up in accordance with Sections 3 to 5 of Chapter 3. 2. Where a tax representative is appointed as the person liable for payment of VAT pursuant to Article 204, Member States may provide for a derogation from paragraph 1 of this Article.
Article 198 
1. Where specific transactions relating to investment gold between a taxable person who is a member of a regulated gold bullion market and another taxable person who is not a member of that market are taxed pursuant to Article 352, Member States shall designate the customer as the person liable for payment of VAT. If the customer who is not a member of the regulated gold bullion market is a taxable person required to be identified for VAT purposes in the Member State in which the tax is due solely in respect of the transactions referred to in Article 352, the vendor shall fulfil the tax obligations on behalf of the customer, in accordance with the law of that Member State. 2. Where gold material or semi-manufactured products of a purity of 325 thousandths or greater, or investment gold as defined in Article 344(1) is supplied by a taxable person exercising one of the options under Articles 348, 349 and 350, Member States may designate the customer as the person liable for payment of VAT. 3. Member States shall lay down the procedures and conditions for implementation of paragraphs 1 and 2.
Article 199 
1. Member States may provide that the person liable for payment of VAT is the taxable person to whom any of the following supplies are made: (a) the supply of construction work, including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property, as well as the handing over of construction works regarded as a supply of goods pursuant to Article 14(3); (b) the supply of staff engaged in activities covered by point (a); (c) the supply of immovable property, as referred to in Article 135(1)(j) and (k), where the supplier has opted for taxation of the supply pursuant to Article 137; (d) the supply of used material, used material which cannot be re-used in the same state, scrap, industrial and non industrial waste, recyclable waste, part processed waste and certain goods and services, as listed in Annex VI; (e) the supply of goods provided as security by one taxable person to another in execution of that security; (f) the supply of goods following the cession of a reservation of ownership to an assignee and the exercising of this right by the assignee; (g) the supply of immovable property sold by a judgment debtor in a compulsory sale procedure. 2. When applying the option provided for in paragraph 1, Member States may specify the supplies of goods and services covered, and the categories of suppliers or recipients to whom these measures may apply. 3. For the purposes of paragraph 1, Member States may take the following measures: (a) provide that a taxable person who also carries out activities or transactions that are not considered to be taxable supplies of goods or services in accordance with Article 2 shall be regarded as a taxable person in respect of supplies received as referred to in paragraph 1 of this Article; (b) provide that a non-taxable body governed by public law, shall be regarded as a taxable person in respect of supplies received as referred to in points (e), (f) and (g) of paragraph 1. 4. Member States shall inform the VAT Committee of national legislative measures adopted pursuant to paragraph 1 in so far as these are not measures authorised by the Council prior to 13 August 2006 in accordance with Article 27(1) to (4) of Directive 77/388/EEC, and which are continued under paragraph 1 of this Article.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Value added tax (VAT) is a general consumption tax borne ultimately by the final consumer but collected by businesses supplying goods or services. The scope of VAT, as set out in Article 2 of the VAT Directive 1 , is very broad, covering any supply of goods and services for consideration by a taxable person within the territory of a Member State and any importation of goods into the European Union (EU). One of the aims of the VAT Directive was to draw up a common list of VAT exemptions so that EU own resources could be collected in a uniform manner in all Member States 2 . That is why the exemption of any transaction from VAT requires a specific provision in the VAT Directive. The VAT Directive does not provide for any general exemption for the supply of goods or services for security and defence purposes. In principle, goods or services supplied to, or goods imported by, armed forces will therefore carry VAT 3 . The cost of VAT is reflected in an increase in the revenues that the tax generates for the state treasury (as public bodies, the military forces are unable to recuperate such VAT), which in turn feed into the budget that finances activities such as national defence. The Directive does provide for an exemption for supplies to the armed forces of any state party to the North Atlantic Treaty that are taking part in a common defence effort outside their own state. This exemption was established to address situations in which the circle of revenue and expenditure flow is broken, because VAT on such supplies would normally constitute revenue for the state in which the armed forces are located, rather than their own. The Excise Directive 4 provides for a similar exemption from excise duty 5 for movements of excise goods to the armed forces of any North Atlantic Treaty Organisation (NATO) member. While NATO defence effort has been covered by the VAT Directive since 1977 6 and the Excise Directive since 1993, neither of the exemptions covers supplies linked to the common defence effort within the Union framework, because there is as yet no common Union defence policy. However, the common security and defence policy (CSDP), which was established as the European security and defence policy (ESDP) in 2000 7 , is a key instrument for external action and includes the progressive framing of a common Union defence policy 8 . The Lisbon Treaty, which came into force in December 2009, was a milestone in the development of the CSDP. The Treaty on European Union (TEU), as amended by the Lisbon Treaty, includes a mutual assistance clause 9 and allowed Member States to strengthen their cooperation in military matters through ‘permanent structured cooperation’ (PESCO) 10 . The Lisbon Treaty also established the European External Action Service (EEAS), which assists the High Representative of the Union for Foreign Affairs and Security Policy in all her responsibilities, including the CSDP. The fact that the High Representative is also one of the Vice-Presidents of the Commission facilitates the bringing together of all necessary EU assets and the application of a comprehensive approach to EU crisis management. The EU Military Committee (EUMC), which was set up in 2001 11 , is the Council’s highest military body. It directs all military activities within the EU framework and advises on the planning and execution of military missions and operations under the CSDP, and on the development of military capabilities. Also established in 2001 12 and working under the military direction of the EUMC, the European Union Military Staff (EUMS) is the source of the EU’s military expertise 13 . It provides early warning, situation assessment and strategic planning for missions and tasks referred to in Articles 42(1) and 43(1) TEU. It also contributes to the elaboration, assessment and review of the capability goals. In June 2016, the global strategy for the European Union’s foreign and security policy (EUGS) 14 laid the ground for developing CSDP further towards three core priorities: responding to external conflicts and crises, building the capabilities of partners and protecting the Union and its citizens. In December 2017 15 , the European Council invited the High Representative, the Commission and the Member States to bring forward work on military mobility, both under PESCO and in the context of EU NATO cooperation. In March 2018, as a follow-up to their November 2017 Joint Communication on improving military mobility in the EU 16 , the Commission and the High Representative presented a Joint Communication on the action plan on military mobility 17 . The action plan recognises the need for equal treatment of defence efforts with a view to reducing administrative burden and thus delays and costs in military mobility, and providing Member States with an incentive to cooperate 18 . It requires the Commission to assess the feasibility of aligning the VAT treatment of defence efforts in the EU framework and under the NATO umbrella. On 19 November 2018, the Council concluded on Security and Defence in the context of the EUGS 19 . The Council welcomed the substantive progress made in the area of security and defence during the previous two years and stressed the importance of keeping the momentum through the continued engagement of the Member States and EU institutions. In particular, the Council welcomed the progress in the implementation of PESCO and the ongoing implementation of efforts to improve the mobility of military personnel, materiel and equipment for routine activities and during crisis and conflict, within and beyond the EU. In line with the action plan and the Council conclusions, the objective of this proposal is to align the VAT treatment of defence efforts in the EU and NATO frameworks as far as is feasible. The proposal has to acknowledge that, while there is a collective defence effort under the North Atlantic Treaty, no common Union defence policy exists as yet. The arrangements for exemptions from excise duties, as provided for in the Excise Directive, should be aligned in a similar way.
Revised version (Article 199 ):
1. Member States may provide that the person liable for payment of VAT is the taxable person to whom any of the following supplies are made: (a) the supply of construction work, including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property, as well as the handing over of construction works regarded as a supply of goods pursuant to Article 14(3); (b) the supply of staff engaged in activities covered by point (a); (d) the supply of used material, used material which cannot be re-used in the same state, scrap, industrial and non industrial waste, recyclable waste, part processed waste and certain goods and services, as listed in Annex VI; (e) the supply of goods provided as security by one taxable person to another in execution of that security; (f) the supply of goods following the cession of a reservation of ownership to an assignee and the exercising of this right by the assignee; (g) the supply of immovable property sold by a judgment debtor in a compulsory sale procedure. 2. When applying the option provided for in paragraph 1, Member States may specify the supplies of goods and services covered, and the categories of suppliers or recipients to whom these measures may apply. 3. For the purposes of paragraph 1, Member States may take the following measures: (a) provide that a taxable person who also carries out activities or transactions that are not considered to be taxable supplies of goods or services in accordance with Article 2 shall be regarded as a taxable person in respect of supplies received as referred to in paragraph 1 of this Article; (b) provide that a non-taxable body governed by public law, shall be regarded as a taxable person in respect of supplies received as referred to in points (e), (f) and (g) of paragraph 1. 4. Member States shall inform the VAT Committee of national legislative measures adopted pursuant to paragraph 1 in so far as these are not measures authorised by the Council prior to 13 August 2006 in accordance with Article 27(1) to (4) of Directive 77/388/EEC, and which are continued under paragraph 1 of this Article.
Article 199a 
1. Member States may, until 30 June 2015 and for a minimum period of two years, provide that the person liable for payment of VAT is the taxable person to whom any of the following supplies are made: (a) the transfer of allowances to emit greenhouse gases as defined in Article 3 of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community ( 10 ), transferable in accordance with Article 12 of that Directive; (b) the transfer of other units that may be used by operators for compliance with the same Directive. 2. Member States shall inform the Commission of the application of the mechanism provided for in paragraph 1 on the introduction of any such mechanism and shall provide the following information to the Commission: (a) a statement on the scope of the measure applying the mechanism and a detailed description of accompanying measures, including any reporting obligations on taxable persons and any control measures; (b) evaluation criteria to enable comparison between fraudulent activities in relation to the services listed in paragraph 1 before and after the application of the mechanism, fraudulent activities in relation to other services before and after the application of the mechanism, and any increase in other types of fraudulent activities before and after the application of the mechanism; (c) the date of commencement and the period to be covered by the measure applying the mechanism. 3. Member States applying the mechanism provided for in paragraph 1 shall, on the basis of the evaluation criteria provided for under paragraph 2(b), submit a report to the Commission no later than 30 June 2014. The report shall clearly indicate the information to be treated as confidential and the information which may be published. The report shall provide a detailed assessment of the measure’s overall effectiveness and efficiency, in particular as regards: (a) the impact on fraudulent activities in relation to supplies of services covered by the measure; (b) the possible shift of fraudulent activities to goods or other services; (c) the compliance costs for taxable persons resulting from the measure. 4. Each Member State that has detected, as from the entry into force of this Article, a shift in trends of fraudulent activities in its territory in relation to the services listed in paragraph 1, shall submit a report to the Commission in that respect no later than 30 June 2014.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal On 7 April 2016, the Commission adopted the VAT Action Plan 1 which presents objectives and measures to modernise the EU VAT system. It builds on the work carried out since the Communication on the future of VAT 2 that followed the large consultation process initiated by the Commission with its Green Paper on the future of VAT 3 . The creation of a robust single European VAT area is one of the key actions announced by the Commission in its Action Plan. It will require the setting up of the definitive VAT system for intra-EU business-to-business (B2B) cross-border trade in order to replace the current system which was intended to be transitional. As agreed by the European Parliament and the Council, this definitive VAT system will be based on the principle of taxation in the country of destination of the goods (the so called “destination principle”) whereas the current system is based on exemption of supplies of goods in the Member State of departure. Therefore, the Commission announced its intention to present a legislative proposal in 2017 for the definitive VAT system for cross-border trade based on this “taxation” option. However, since preparing, adopting and implementing such a major change is likely to take some time, the Commission recognized the need to work in parallel on other initiatives, in particular on urgent measures to tackle VAT fraud and, subsequently, the VAT gap, the difference between the expected VAT revenue and the VAT actually collected by tax authorities. This VAT gap has reached an alarming level of nearly EUR 160 billion 4 of which cross-border fraud accounts for about EUR 50 billion of revenue loss each year 5 . As one of these urgent measures, the Commission considered, upon request of certain Member States, the possibility of allowing these Member States to implement a temporary generalised reverse charge mechanism (GRCM) that would derogate from one of the general principles of the VAT Directive 6 , which is the fractionated payment. To that end, the Commission agreed to thoroughly assess the political, legal and economic implications of such a temporary GRCM before presenting its conclusions. This in depth analysis at technical level of a GRCM, with an invoice threshold of EUR 10 000, has been carried out and presented during the ECOFIN meeting of 17 June 2016. In the context of a political agreement on the overall anti-fraud policy within the EU, the Commission made the following statement to the ECOFIN Minutes: "The Commission commits to present, before the end of the year, a legislative proposal allowing individual Member States to derogate from the common system of value added tax so as to apply a generalised reverse charge mechanism to domestic supplies above a defined threshold and preserving the Internal Market." Consistency with existing policy provisions in the policy area The purpose of the legislative proposal is limited in scope and in time and is without prejudice to the development of the definitive VAT system based upon the taxation of cross-border supplies.
Revised version (Article 199a ):
1. Member States may, until 31 December 2018 and for a minimum period of two years, provide that the person liable for payment of VAT is the taxable person to whom any of the following supplies are made: (a) the transfer of allowances to emit greenhouse gases as defined in Article 3 of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community ( 6 ), transferable in accordance with Article 12 of that Directive; (b) the transfer of other units that may be used by operators for compliance with the same Directive; (c) supplies of mobile telephones, being devices made or adapted for use in connection with a licensed network and operated on specified frequencies, whether or not they have any other use; (d) supplies of integrated circuit devices such as microprocessors and central processing units in a state prior to integration into end user products; (e) supplies of gas and electricity to a taxable dealer as defined in Article 38(2); (f) supplies of gas and electricity certificates; (g) supplies of telecommunication services as defined in Article 24(2); (h) supplies of game consoles, tablet PC's and laptops; (i) supplies of cereals and industrial crops including oil seeds and sugar beet, that are not normally used in the unaltered state for final consumption; (j) supplies of raw and semi-finished metals, including precious metals, where they are not otherwise covered by point (d) of Article 199(1), the special arrangements for second-hand goods, works of art, collector's items and antiques pursuant to Articles 311 to 343 or the special scheme for investment gold pursuant to Articles 344 to 356. 1a. Member States may lay down the conditions for the application of the mechanism provided for in paragraph 1. 1b. The application of the mechanism provided for in paragraph 1 to the supply of any of the goods or services listed in points (c) to (j) of that paragraph is subject to the introduction of appropriate and effective reporting obligations on taxable persons who supply the goods or services to which the mechanism provided for in paragraph 1 applies. 2. Member States shall inform the VAT Committee of the application of the mechanism provided for in paragraph 1 on the introduction of any such mechanism and shall provide the following information to the VAT Committee: (a) the scope of the measure applying the mechanism together with the type and the features of the fraud, and a detailed description of accompanying measures, including any reporting obligations on taxable persons and any control measures; (b) actions taken to inform the relevant taxable persons of the introduction of the application of the mechanism; (c) evaluation criteria to enable comparison between fraudulent activities in relation to the goods and services listed in paragraph 1 before and after the application of the mechanism, fraudulent activities in relation to other goods and services before and after the application of the mechanism, and any increase in other types of fraudulent activities before and after the application of the mechanism; (d) the date of commencement and the period to be covered by the measure applying the mechanism. 3. Member States applying the mechanism provided for in paragraph 1 shall, on the basis of the evaluation criteria provided for under point (c) of paragraph 2, submit a report to the Commission no later than 30 June 2017. e report shall clearly indicate the information to be treated as confidential and the information which may be published. The report shall provide a detailed assessment of the measure’s overall effectiveness and efficiency, in particular as regards: (a) the impact on fraudulent activities in relation to supplies of goods or services covered by the measure; (b) the possible shift of fraudulent activities to goods or other services; (c) the compliance costs for taxable persons resulting from the measure. 4. Each Member State that has detected a shift in trends of fraudulent activities in its territory in relation to the goods or services listed in paragraph 1 from the date of entry into force of this Article with respect to such goods or services, shall submit a report to the Commission in that respect no later than 30 June 2017. 5. Before 1 January 2018, the Commission shall present to the European Parliament and to the Council an overall assessment report on the effects of the mechanism provided for in paragraph 1 on combatting fraud.
Article 200 
VAT shall be payable by any person making a taxable intra-Community acquisition of goods.
Article 201 
On importation, VAT shall be payable by any person or persons designated or recognised as liable by the Member State of importation.
Article 202 
VAT shall be payable by any person who causes goods to cease to be covered by the arrangements or situations listed in Articles 156, 157, 158, 160 and 161.
Article 203 
VAT shall be payable by any person who enters the VAT on an invoice.
Article 204 
1. Where, pursuant to Articles 193 to 197 and Articles 199 and 200, the person liable for payment of VAT is a taxable person who is not established in the Member State in which the VAT is due, Member States may allow that person to appoint a tax representative as the person liable for payment of the VAT. Furthermore, where the taxable transaction is carried out by a taxable person who is not established in the Member State in which the VAT is due and no legal instrument exists, with the country in which that taxable person is established or has his seat, relating to mutual assistance similar in scope to that provided for in Directive 76/308/EEC ( 11 ) and Regulation (EC) No 1798/2003 ( 12 ), Member States may take measures to provide that the person liable for payment of VAT is to be a tax representative appointed by the non-established taxable person. However, Member States may not apply the option referred to in the second subparagraph to a non-established taxable person, within the meaning of point (1) of Article 358, who has opted for the special scheme for electronically supplied services. 2. The option under the first subparagraph of paragraph 1 shall be subject to the conditions and procedures laid down by each Member State.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal On 7 April 2016, the Commission adopted the VAT Action Plan 1 which presents objectives and measures to modernise the EU VAT system. It builds on the work carried out since the Communication on the future of VAT 2 that followed the large consultation process initiated by the Commission with its Green Paper on the future of VAT 3 . The creation of a robust single European VAT area is one of the key actions announced by the Commission in its Action Plan. It will require the setting up of the definitive VAT system for intra-EU business-to-business (B2B) cross-border trade in order to replace the current system which was intended to be transitional. As agreed by the European Parliament and the Council, this definitive VAT system will be based on the principle of taxation in the country of destination of the goods (the so called “destination principle”) whereas the current system is based on exemption of supplies of goods in the Member State of departure. Therefore, the Commission announced its intention to present a legislative proposal in 2017 for the definitive VAT system for cross-border trade based on this “taxation” option. However, since preparing, adopting and implementing such a major change is likely to take some time, the Commission recognized the need to work in parallel on other initiatives, in particular on urgent measures to tackle VAT fraud and, subsequently, the VAT gap, the difference between the expected VAT revenue and the VAT actually collected by tax authorities. This VAT gap has reached an alarming level of nearly EUR 160 billion 4 of which cross-border fraud accounts for about EUR 50 billion of revenue loss each year 5 . As one of these urgent measures, the Commission considered, upon request of certain Member States, the possibility of allowing these Member States to implement a temporary generalised reverse charge mechanism (GRCM) that would derogate from one of the general principles of the VAT Directive 6 , which is the fractionated payment. To that end, the Commission agreed to thoroughly assess the political, legal and economic implications of such a temporary GRCM before presenting its conclusions. This in depth analysis at technical level of a GRCM, with an invoice threshold of EUR 10 000, has been carried out and presented during the ECOFIN meeting of 17 June 2016. In the context of a political agreement on the overall anti-fraud policy within the EU, the Commission made the following statement to the ECOFIN Minutes: "The Commission commits to present, before the end of the year, a legislative proposal allowing individual Member States to derogate from the common system of value added tax so as to apply a generalised reverse charge mechanism to domestic supplies above a defined threshold and preserving the Internal Market." Consistency with existing policy provisions in the policy area The purpose of the legislative proposal is limited in scope and in time and is without prejudice to the development of the definitive VAT system based upon the taxation of cross-border supplies.
Revised version (Article 204 ):
1. Where, pursuant to Articles 193 to 197 and Articles 199 and 200, the person liable for payment of VAT is a taxable person who is not established in the Member State in which the VAT is due, Member States may allow that person to appoint a tax representative as the person liable for payment of the VAT. Furthermore, where the taxable transaction is carried out by a taxable person who is not established in the Member State in which the VAT is due and no legal instrument exists, with the country in which that taxable person is established or has his seat, relating to mutual assistance similar in scope to that provided for in Directive 76/308/EEC ( 9 ) and Regulation (EC) No 1798/2003 ( 10 ), Member States may take measures to provide that the person liable for payment of VAT is to be a tax representative appointed by the non-established taxable person. However, Member States may not apply the option referred to in the second subparagraph to a taxable person not established within the Community, within the meaning of point (1) of Article 358a, who has opted for the special scheme for telecommunications, broadcasting or electronic services. 2. The option under the first subparagraph of paragraph 1 shall be subject to the conditions and procedures laid down by each Member State.
Article 205 
In the situations referred to in Articles 193 to 200 and Articles 202, 203 and 204, Member States may provide that a person other than the person liable for payment of VAT is to be held jointly and severally liable for payment of VAT.
Article 206 
Any taxable person liable for payment of VAT must pay the net amount of the VAT when submitting the VAT return provided for in Article 250. Member States may, however, set a different date for payment of that amount or may require interim payments to be made.
Article 207 
Member States shall take the measures necessary to ensure that persons who are regarded as liable for payment of VAT in the stead of a taxable person not established in their respective territory, in accordance with Articles 194 to 197 and Articles 199 and 204, comply with the payment obligations set out in this Section. Member States shall also take the measures necessary to ensure that those persons who, in accordance with Article 205, are held to be jointly and severally liable for payment of the VAT comply with these payment obligations.
Article 208 
Where Member States designate the customer for investment gold as the person liable for payment of VAT pursuant to Article 198(1) or if, in the case of gold material, semi-manufactured products, or investment gold as defined in Article 344(1), they exercise the option provided for in Article 198(2) of designating the customer as the person liable for payment of VAT, they shall take the measures necessary to ensure that he complies with the payment obligations set out in this Section.
Article 209 
Member States shall take the measures necessary to ensure that non-taxable legal persons who are liable for payment of VAT due in respect of intra-Community acquisitions of goods, as referred to in Article 2(1)(b)(i), comply with the payment obligations set out in this Section.
Article 210 
Member States shall adopt arrangements for payment of VAT on intra-Community acquisitions of new means of transport, as referred to in Article 2(1)(b)(ii), and on intra-Community acquisitions of products subject to excise duty, as referred to in Article 2(1)(b)(iii).
Article 211 
Member States shall lay down the detailed rules for payment in respect of the importation of goods. In particular, Member States may provide that, in the case of the importation of goods by taxable persons or certain categories thereof, or by persons liable for payment of VAT or certain categories thereof, the VAT due by reason of the importation need not be paid at the time of importation, on condition that it is entered as such in the VAT return to be submitted in accordance with Article 250.
Article 212 
Member States may release taxable persons from payment of the VAT due where the amount is insignificant.
Article 213 
1. Every taxable person shall state when his activity as a taxable person commences, changes or ceases. Member States shall allow, and may require, the statement to be made by electronic means, in accordance with conditions which they lay down. 2. Without prejudice to the first subparagraph of paragraph 1, every taxable person or non-taxable legal person who makes intra-Community acquisitions of goods which are not subject to VAT pursuant to Article 3(1) must state that he makes such acquisitions if the conditions, laid down in that provision, for not making such transactions subject to VAT cease to be fulfilled.
Article 214 
1. Member States shall take the measures necessary to ensure that the following persons are identified by means of an individual number: (a) every taxable person, with the exception of those referred to in Article 9(2), who within their respective territory carries out supplies of goods or services in respect of which VAT is deductible, other than supplies of goods or services in respect of which VAT is payable solely by the customer or the person for whom the goods or services are intended, in accordance with Articles 194 to 197 and Article 199; (b) every taxable person, or non-taxable legal person, who makes intra-Community acquisitions of goods subject to VAT pursuant to Article 2(1)(b) and every taxable person, or non-taxable legal person, who exercises the option under Article 3(3) of making their intra-Community acquisitions subject to VAT; (c) every taxable person who, within their respective territory, makes intra-Community acquisitions of goods for the purposes of transactions which relate to the activities referred to in the second subparagraph of Article 9(1) and which are carried out outside that territory; (d) every taxable person who within their respective territory receives services for which he is liable to pay VAT pursuant to Article 196; (e) every taxable person, established within their respective territory, who supplies services within the territory of another Member State for which VAT is payable solely by the recipient pursuant to Article 196. 2. Member States need not identify certain taxable persons who carry out transactions on an occasional basis, as referred to in Article 12.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Value added tax (VAT) is a general consumption tax borne ultimately by the final consumer but collected by businesses supplying goods or services. The scope of VAT, as set out in Article 2 of the VAT Directive 1 , is very broad, covering any supply of goods and services for consideration by a taxable person within the territory of a Member State and any importation of goods into the European Union (EU). One of the aims of the VAT Directive was to draw up a common list of VAT exemptions so that EU own resources could be collected in a uniform manner in all Member States 2 . That is why the exemption of any transaction from VAT requires a specific provision in the VAT Directive. The VAT Directive does not provide for any general exemption for the supply of goods or services for security and defence purposes. In principle, goods or services supplied to, or goods imported by, armed forces will therefore carry VAT 3 . The cost of VAT is reflected in an increase in the revenues that the tax generates for the state treasury (as public bodies, the military forces are unable to recuperate such VAT), which in turn feed into the budget that finances activities such as national defence. The Directive does provide for an exemption for supplies to the armed forces of any state party to the North Atlantic Treaty that are taking part in a common defence effort outside their own state. This exemption was established to address situations in which the circle of revenue and expenditure flow is broken, because VAT on such supplies would normally constitute revenue for the state in which the armed forces are located, rather than their own. The Excise Directive 4 provides for a similar exemption from excise duty 5 for movements of excise goods to the armed forces of any North Atlantic Treaty Organisation (NATO) member. While NATO defence effort has been covered by the VAT Directive since 1977 6 and the Excise Directive since 1993, neither of the exemptions covers supplies linked to the common defence effort within the Union framework, because there is as yet no common Union defence policy. However, the common security and defence policy (CSDP), which was established as the European security and defence policy (ESDP) in 2000 7 , is a key instrument for external action and includes the progressive framing of a common Union defence policy 8 . The Lisbon Treaty, which came into force in December 2009, was a milestone in the development of the CSDP. The Treaty on European Union (TEU), as amended by the Lisbon Treaty, includes a mutual assistance clause 9 and allowed Member States to strengthen their cooperation in military matters through ‘permanent structured cooperation’ (PESCO) 10 . The Lisbon Treaty also established the European External Action Service (EEAS), which assists the High Representative of the Union for Foreign Affairs and Security Policy in all her responsibilities, including the CSDP. The fact that the High Representative is also one of the Vice-Presidents of the Commission facilitates the bringing together of all necessary EU assets and the application of a comprehensive approach to EU crisis management. The EU Military Committee (EUMC), which was set up in 2001 11 , is the Council’s highest military body. It directs all military activities within the EU framework and advises on the planning and execution of military missions and operations under the CSDP, and on the development of military capabilities. Also established in 2001 12 and working under the military direction of the EUMC, the European Union Military Staff (EUMS) is the source of the EU’s military expertise 13 . It provides early warning, situation assessment and strategic planning for missions and tasks referred to in Articles 42(1) and 43(1) TEU. It also contributes to the elaboration, assessment and review of the capability goals. In June 2016, the global strategy for the European Union’s foreign and security policy (EUGS) 14 laid the ground for developing CSDP further towards three core priorities: responding to external conflicts and crises, building the capabilities of partners and protecting the Union and its citizens. In December 2017 15 , the European Council invited the High Representative, the Commission and the Member States to bring forward work on military mobility, both under PESCO and in the context of EU NATO cooperation. In March 2018, as a follow-up to their November 2017 Joint Communication on improving military mobility in the EU 16 , the Commission and the High Representative presented a Joint Communication on the action plan on military mobility 17 . The action plan recognises the need for equal treatment of defence efforts with a view to reducing administrative burden and thus delays and costs in military mobility, and providing Member States with an incentive to cooperate 18 . It requires the Commission to assess the feasibility of aligning the VAT treatment of defence efforts in the EU framework and under the NATO umbrella. On 19 November 2018, the Council concluded on Security and Defence in the context of the EUGS 19 . The Council welcomed the substantive progress made in the area of security and defence during the previous two years and stressed the importance of keeping the momentum through the continued engagement of the Member States and EU institutions. In particular, the Council welcomed the progress in the implementation of PESCO and the ongoing implementation of efforts to improve the mobility of military personnel, materiel and equipment for routine activities and during crisis and conflict, within and beyond the EU. In line with the action plan and the Council conclusions, the objective of this proposal is to align the VAT treatment of defence efforts in the EU and NATO frameworks as far as is feasible. The proposal has to acknowledge that, while there is a collective defence effort under the North Atlantic Treaty, no common Union defence policy exists as yet. The arrangements for exemptions from excise duties, as provided for in the Excise Directive, should be aligned in a similar way.
Revised version (Article 214 ):
1. Member States shall take the measures necessary to ensure that the following persons are identified by means of an individual number: (a) every taxable person, with the exception of those referred to in Article 9(2), who within their respective territory carries out supplies of goods or services in respect of which VAT is deductible, other than supplies of goods or services in respect of which VAT is payable solely by the customer or the person for whom the goods or services are intended, in accordance with Articles 194 to 197 and Article 199; (c) every taxable person who, within their respective territory, makes intra-Community acquisitions of goods for the purposes of transactions which relate to the activities referred to in the second subparagraph of Article 9(1) and which are carried out outside that territory; (d) every taxable person who within their respective territory receives services for which he is liable to pay VAT pursuant to Article 196; (e) every taxable person, established within their respective territory, who supplies services within the territory of another Member State for which VAT is payable solely by the recipient pursuant to Article 196. 2. Member States need not identify certain taxable persons who carry out transactions on an occasional basis, as referred to in Article 12.
Article 215 
Each individual VAT identification number shall have a prefix in accordance with ISO code 3166 — alpha 2 — by which the Member State of issue may be identified. Nevertheless, Greece may use the prefix ‘EL’.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The current initiative aims at enabling Member States to temporarily exempt the supply of COVID‑19 vaccines and in vitro diagnostic medical devices ( testing kits) as well as services closely linked to such vaccines and such devices from value added tax (VAT). It also enables Member States, as is already the case for vaccines, to apply a reduced VAT rate to COVID‑19 in vitro diagnostic medical devices and closely linked services. On 30 January 2020, the World Health Organization (WHO) declared the COVID ‑19 outbreak as a public health emergency of international concern. Then, on 11 March 2020, the WHO characterised the situation of the COVID ‑19 outbreak as a pandemic. Since the beginning of the COVID ‑19 outbreak, the European Union has taken unparalleled action to protect lives and livelihoods and limit the impact of the virus on the economy. The Union is leading the global effort for universal testing, treatment and vaccination by mobilising resources through international pledging and by joining forces with countries and global health organisations through the Access to COVID ‑19 Tools (ACT) Accelerator collaborative framework 1 . The latter was launched on 24 April 2020 by the WHO and a group of global actors. It is a call for action in a landmark global collaboration aiming at accelerating equitable global access to safe, quality, effective, and affordable COVID‑19 diagnostics, therapeutics and vaccines. On 4 May 2020, Commission President von der Leyen launched the Coronavirus Global Response as the Union’s response to this call for action. In the Commission President’s words, “[t] he world will only be freed from this pandemic when vaccines, testing kits and treatments are available and affordable to everyone who needs them” . The pledging campaign under the Coronavirus Global Response has raised almost EUR 16 billion to date, including EUR 11.9 billion pledged by the Member States, the Commission and the European Investment Bank. On 18 September 2020, the Commission confirmed its participation in the COVAX Facility, following the announcement, on 31 August 2020, of a EUR 400 million contribution in guarantees to support COVAX and its objectives in the context of the Coronavirus Global Response. The COVAX Facility is the vaccines pillar of the ACT Accelerator and aims to speed up development and manufacture of COVID‑19 vaccines and to guarantee fair and equitable access for every country in the world. It is co-led by Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations (CEPI) and WHO. As part of the effort to help protect people everywhere in the world, and in the Union in particular, the Commission put forward on 17 June 2020 an EU strategy for COVID ‑19 vaccines 2 . The proposed EU approach to secure vaccines for EU people complements the Union’s action for universal access to affordable coronavirus vaccination, treatment and testing. The aim is to accelerate the development, manufacturing and deployment of vaccines against the virus and make sure that in the fight against COVID ‑19 no one in the Union is left behind. The EU vaccine strategy has among its objectives to ensure equitable and affordable access to the supplies of COVID‑19 vaccines for all EU people as early as possible. Generally, an effective and safe vaccine against COVID‑19 is seen as the most likely permanent solution to the pandemic, as it will facilitate control of COVID‑19 disease and will reduce mortality. However, there is no guarantee that such vaccine will be available soon. Therefore, the development and deployment of COVID‑19 in vitro diagnostic medical devices remain crucial. The Commission will implement the EU strategy for COVID‑19 vaccines together with the Member States. This increases the likelihood that all in the EU, as well as in the European Economic Area (EEA), gain equitable and affordable access to those vaccines in the shortest possible period. An important step towards joint action between Member States has been taken by the creation of an inclusive Vaccine Alliance by France, Germany, Italy, and the Netherlands. This alliance was formed to pool the national resources of those countries and secure fair access to vaccine supplies for the European population. The Union will materialise its strategy for COVID ‑19 vaccines in two ways. First, by securing sufficient production of vaccines in the EU - and thereby sufficient supplies for its Member States - through Advance Purchase Agreements (APAs) with vaccine producers. The related funding will come from the Emergency Support Instrument (ESI 3 ). Second, by making use of existing regulatory, financial, advisory and other tools at its disposal while adapting the Union’s regulatory framework to the current urgency. The contracts with vaccine producing companies will be concluded through a procurement process run by the Commission on behalf of all participating Member States. Once any of the vaccines supported proves successful, Member States will be able to acquire that vaccine directly from the producer based on the conditions laid down in the APA. As the ultimate acquirers of the vaccines, Member States will participate in the process from the outset. In the framework of the EU vaccine strategy, the Commission already concluded agreements to purchase potential COVID ‑19 vaccines with some pharmaceutical companies, while exploratory talks intended to result in APAs have been concluded or will be conducted with others. On 30 September 2020, the WHO issued a draft landscape document of COVID ‑19 candidate vaccines 4 , listing 41 candidate vaccines in clinical evaluation. Since the emergence of the COVID‑19 pandemic and awaiting a vaccine, healthcare professionals have created numerous tests. These tests detect either the presence of the virus or the presence of antibodies against the virus. The most common COVID‑19 tests marketed on the European market are as follows: · Nucleic acid test (e.g. PCR), primarily involving a swab of the nose and throat. The presence of the virus is then detected in the sample taken. · Antigen test, also involving a swab of the nose and throat. This test also detects the presence of the virus. – There are “rapid” antigen tests, where the sample is placed on a plate and the result appears after a few minutes. – There are also ELISA (enzyme-linked immunosorbent assay) or “ELISA-like” tests which are more complex but offer a more reliable and qualitative method. · Antibody test (IgG/IgM/IgA) via a blood sample. This test makes it possible to detect antibodies against the virus in the sample taken. Antibody tests can also be performed via “rapid” tests, or via ELISA or “ELISA-like” tests. Member States are responsible for the strategy and criteria to determine which people are tested and what types of COVID‑19 in vitro diagnostic medical devices are deployed. In the face of the COVID ‑19 pandemic, the Commission has taken exceptional measures in the area of VAT to help victims of the outbreak. On 3 April 2020, the Commission adopted Decision (EU) 2020/491 5 enabling Member States to temporarily exempt from VAT (and relieve from customs duties) vital goods needed to combat the effects of the COVID ‑19 o utbreak (covering among other personal protective equipment, in vitro diagnostic medical devices, medical devices such as ventilators and a limited number of medicines 6 ) . This decision covers only importation and not intra-Community or domestic supplies, because the autonomous powers of the Commission are limited to this field. The initial measure applied for a period of six months, and was further extended by three months until 31 October 2020 7 . A further prolongation until the end of April 2021 has been decided. The current VAT rules contain two main tools that already allow Member States to alleviate the cost of COVID‑19 vaccines and in vitro diagnostic medical devices. First, Council Directive 2006/112/EC 8 (the VAT Directive) provides exemptions without deductibility for hospital and medical care 9 . The objective of those exemptions is to reduce the cost of medical care and to make it more accessible to individuals. Preventive medical care, e.g. when the person concerned is not suffering from any disease or health disorder, may fall under the exemption. This would apply with regard to COVID ‑19 vaccination and testing supplied by way of hospital and medical care. However, the existing exemption would not apply to the supply of COVID ‑19 vaccines and in vitro diagnostic medical devices - including services closely linked thereto - to hospitals, medical practitioners, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature. They would thus be burdened with the VAT cost when acquiring such vaccines and in vitro diagnostic medical devices. Hence, although COVID‑19 vaccination and testing supplied in the context of hospital and medical care would be exempt from VAT, supplies of such vaccines and in vitro diagnostic medical devices acquired by hospitals, medical practitioners, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature would not be covered by this exemption. Therefore, the VAT burden would remain for those. Second, u nder the current VAT rules, Member States may apply a reduced (that is, no lower than 5%) VAT rate to “ pharmaceutical products normally used for health care, prevention of illnesses and as treatment for medical […] purposes ” 10 . The concept of "pharmaceutical products" is not defined in the VAT Directive but has always been understood to cover pharmaceutical products as defined by the Combined Nomenclature 11 . The pharmaceutical products contained in the Combined Nomenclature (Chapter 30) include vaccines. Therefore, vaccines are currently eligible for reduced VAT rates. Moreover, based on historical standstill derogations, certain Member States may continue to apply super-reduced rates (namely lower than 5%) or exemptions with the deductibility of the VAT paid at the preceding stage (zero rate) to pharmaceutical products, including vaccines. However, there is no general provision in the VAT Directive allowing a zero rate to pharmaceutical products that could apply in the case of COVID ‑19 vaccines. In contrast to vaccines, the general VAT rules of the VAT Directive would not allow reduced rates to apply to COVID ‑19 in vitro diagnostic medical devices 12 . Moreover, while Decision (EU) 2020/491 enabled Member States to temporarily exempt from VAT the importation of in vitro diagnostic medical devices among other, there is no explicit provision in the EU VAT rules allowing to exempt from VAT the intra-Community and domestic supply of such devices. In conclusion, although the current VAT rules allow partly alleviating the cost of COVID ‑19 vaccination and testing, they do not permit the application of a zero rate to such vaccines and services closely linked thereto. Likewise, they do not permit the application of either a reduced or a zero rate to in vitro diagnostic medical devices, including services closely linked thereto. The 2018 Commission proposal 13 to amend the VAT Directive as regards VAT rates, which is pending before the Council, could provide a satisfactory solution in lifting VAT from the overall supply of COVID ‑19 vaccination and testing. If adopted unanimously by Council , it would allow Member States to apply a reduced rate or even a zero rate to supplies of COVID ‑19 vaccines and in vitro diagnostic medical devices, including services closely linked thereto, if such supplies benefit only the final consumer and pursue an objective of general interest. However, there is a need for immediate action in fighting the pandemic. Given the urgency, a swift adaptation of the EU VAT rules is necessary in order to ensure that COVID‑19 vaccines and in vitro diagnostic medical devices become more affordable for Europeans by reducing their cost of provision by the health system, thus enhancing the potential for COVID‑19 prevention and screening in the Union. This is a prerequisite for ensuring that full societal and economic activity may be restored in the near term. It is imperative that such measure be of temporary character with the aim to exempt from VAT the supply of COVID‑19 vaccines and in vitro diagnostic medical devices while also allowing a reduced VAT rate for the latter. This measure should remain in place until the COVID‑19 health crisis comes to an end. In concrete terms, the measure in question should not go beyond 31 December 2022. Before the end of this period, the situation will be reviewed and, if necessary, the period of application of the measure may be extended. Pursuant to Article 94(2) of the VAT Directive, the potential reduced rate and the VAT exemption in the form of zero rate applied to the above supplies within the territory of a Member State will also be applicable to the intra-Community supply to or importation into that Member State of COVID‑19 vaccines and in vitro diagnostic medical devices. 
Revised version (Article 215 ):
Each individual VAT identification number shall have a prefix in accordance with ISO code 3166 — alpha 2 — by which the Member State of issue may be identified. Nevertheless, Greece may use the prefix ‘EL’. The prefix ‘XI’ shall be used for Northern Ireland.
Article 216 
Member States shall take the measures necessary to ensure that their identification systems enable the taxable persons referred to in Article 214 to be identified and to ensure the correct application of the transitional arrangements for the taxation of intra-Community transactions, as referred to in Article 402.
Article 217 
For the purposes of this Chapter, ‘transmission or provision by electronic means’ shall mean transmission or provision to the addressee of data using electronic equipment for processing (including digital compression) and storage, and employing wire, radio, optical or other electromagnetic means.
Amendment rationale: CONTEXT OF THE PROPOSAL 1. Article 97(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax[1] (hereinafter "the VAT Directive") provides that from 1 January 2006 until 31 December 2010 the standard rate may not be less than 15% and Article 97(2) stipulates that the Council shall decide, in accordance with Article 93 of the Treaty, on the level of the standard rate of value added tax (VAT) to be applied after 31 December 2010. 2. This provision was based on Article 93 of the Treaty establishing the European Community (the EC Treaty). As from 1 December 2009, Article 93 of the EC Treaty is replaced by Article 113 of the Treaty on the Functioning of the European Union (TFEU). Article 113 TFEU stipulates that the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes to the extent that such harmonisation is necessary to ensure the establishment and functioning of the internal market and to avoid distortion of competition. 3. With a view to establishing the internal market on 1 January 1993, the Commission presented proposals intended to set up a definitive system of tax harmonisation. 4. However, when it became clear that it would be impossible to adopt the Commission's proposals before 1 January 1993, the Council decided to adopt a transitional system. With regard to VAT rates, it adopted Directive 92/77/EEC[2]. 5. That Directive introduced a system of minimum rates. It stipulated that from 1 January 1993 to 31 December 1996, the standard rate could not be set lower than 15%. This provision has been extended four times and applies until 31 December 2010. 6. To maintain the degree of harmonisation of rates already achieved, the Commission has twice presented proposals providing for a standard rate band with a minimum rate of 15% and a maximum rate of 25%[3]. The band was derived from the rates applied in practice in Member States, where standard rates have always varied between 15% and 25%. 7. In both cases, the proposals to approximate rates were amended by the Council,[4] which kept only the principle of a minimum rate, referring to a 15% minimum rate comparable to the system introduced by the 1992 Directive. 8. However, these Council Directives were adopted with a statement for the Council minutes mentioning Member States' efforts to avoid widening the 10 percentage point span between the lowest and highest rates applied. This demonstrates the continued concerns of Member States about distortions between high and low rate countries and the possible budgetary effects of different levels of VAT rates. In the light of the current economic crisis, there are further arguments for keeping a minimum standard rate to be laid down in the VAT Directive. 9. Despite various improvements to the common VAT system based on the Commission's pragmatic, phased VAT strategy launched in 2000[5] and updated in 2003[6], the VAT system continues to suffer from shortcomings and high administrative burdens. This means it needs to be fundamentally reassessed. New economic realities, technological processes, fraud patterns etc. also give rise to new challenges. That is why the Commission plans to publish a consultative green paper soon on a new VAT strategy. This will launch a consultation on future tax harmonisation. Only in the light of the outcome of that process can an appropriate decision be taken on the level of standard rates of VAT in the EU. 10. Moreover, recent modifications to the VAT Directive[7] have favoured taxation at the place of consumption, as this results in fewer possibilities for cross-border transactions seeking lower VAT rates, leading to distortions of competition. However, it remains important to prevent growing divergence in standard VAT rates applied by Member States from leading to structural imbalances in the EU and distortions of competition in some sectors of activity. To this end, it is common practice in the field of indirect taxes, both for excise duties and VAT, to set minimum rates. Although no maximum rate is proposed, the span between the standard rates applied in the Member States can – as is currently the case – be expected to ensure the proper functioning of the internal market while acknowledging the possible need for new budgetary resources from consumption taxes. 11. The accession of new Member States on 1 May 2004 and on 1 January 2007 did not alter the situation regarding the standard rate. That still ranges from 15% to 25% in 27 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). 12. In these circumstances, it therefore appears appropriate to maintain the principle of a minimum standard VAT rate of 15%, and to propose that the current arrangements be extended. 13. To give businesses necessary legal certainty, and allow further evaluation of the appropriate level of the standard VAT rate at EU level, it seems appropriate to extend the provision for another five years, while the Commission reflects on a new VAT strategy and re-examines the standard VAT rate appropriate for a common approach. 14. Since the application of the minimum standard rate under Article 97(1) of Directive 2006/112/EC expires on 31 December 2010, the object of this proposal is to enable the Council to extend the period during which this rate applies. The minimum standard VAT rate is therefore set at 15% for five years from 1 January 2011 to 31 December 2015. The Commission would also expect the Council to renew the statement for the minutes agreed earlier on the span between the lowest and highest rates applied for that same period.
Revised version (Article 217 ):
For the purposes of this Directive, ‘electronic invoice’ means an invoice that contains the information required in this Directive, and which has been issued and received in any electronic format.
Article 218 
For the purposes of this Directive, Member States shall accept documents or messages on paper or in electronic form as invoices if they meet the conditions laid down in this Chapter.
Article 219 
Any document or message that amends and refers specifically and unambiguously to the initial invoice shall be treated as an invoice.
Article 220 
Every taxable person shall ensure that, in respect of the following, an invoice is issued, either by himself or by his customer or, in his name and on his behalf, by a third party: (1) supplies of goods or services which he has made to another taxable person or to a non-taxable legal person; (2) supplies of goods as referred to in Article 33; (3) supplies of goods carried out in accordance with the conditions specified in Article 138; (4) any payment on account made to him before one of the supplies of goods referred to in points (1), (2) and (3) was carried out; (5) any payment on account made to him by another taxable person or non-taxable legal person before the provision of services was completed.
Amendment rationale: CONTEXT OF THE PROPOSAL 1. Article 97(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax[1] (hereinafter "the VAT Directive") provides that from 1 January 2006 until 31 December 2010 the standard rate may not be less than 15% and Article 97(2) stipulates that the Council shall decide, in accordance with Article 93 of the Treaty, on the level of the standard rate of value added tax (VAT) to be applied after 31 December 2010. 2. This provision was based on Article 93 of the Treaty establishing the European Community (the EC Treaty). As from 1 December 2009, Article 93 of the EC Treaty is replaced by Article 113 of the Treaty on the Functioning of the European Union (TFEU). Article 113 TFEU stipulates that the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes to the extent that such harmonisation is necessary to ensure the establishment and functioning of the internal market and to avoid distortion of competition. 3. With a view to establishing the internal market on 1 January 1993, the Commission presented proposals intended to set up a definitive system of tax harmonisation. 4. However, when it became clear that it would be impossible to adopt the Commission's proposals before 1 January 1993, the Council decided to adopt a transitional system. With regard to VAT rates, it adopted Directive 92/77/EEC[2]. 5. That Directive introduced a system of minimum rates. It stipulated that from 1 January 1993 to 31 December 1996, the standard rate could not be set lower than 15%. This provision has been extended four times and applies until 31 December 2010. 6. To maintain the degree of harmonisation of rates already achieved, the Commission has twice presented proposals providing for a standard rate band with a minimum rate of 15% and a maximum rate of 25%[3]. The band was derived from the rates applied in practice in Member States, where standard rates have always varied between 15% and 25%. 7. In both cases, the proposals to approximate rates were amended by the Council,[4] which kept only the principle of a minimum rate, referring to a 15% minimum rate comparable to the system introduced by the 1992 Directive. 8. However, these Council Directives were adopted with a statement for the Council minutes mentioning Member States' efforts to avoid widening the 10 percentage point span between the lowest and highest rates applied. This demonstrates the continued concerns of Member States about distortions between high and low rate countries and the possible budgetary effects of different levels of VAT rates. In the light of the current economic crisis, there are further arguments for keeping a minimum standard rate to be laid down in the VAT Directive. 9. Despite various improvements to the common VAT system based on the Commission's pragmatic, phased VAT strategy launched in 2000[5] and updated in 2003[6], the VAT system continues to suffer from shortcomings and high administrative burdens. This means it needs to be fundamentally reassessed. New economic realities, technological processes, fraud patterns etc. also give rise to new challenges. That is why the Commission plans to publish a consultative green paper soon on a new VAT strategy. This will launch a consultation on future tax harmonisation. Only in the light of the outcome of that process can an appropriate decision be taken on the level of standard rates of VAT in the EU. 10. Moreover, recent modifications to the VAT Directive[7] have favoured taxation at the place of consumption, as this results in fewer possibilities for cross-border transactions seeking lower VAT rates, leading to distortions of competition. However, it remains important to prevent growing divergence in standard VAT rates applied by Member States from leading to structural imbalances in the EU and distortions of competition in some sectors of activity. To this end, it is common practice in the field of indirect taxes, both for excise duties and VAT, to set minimum rates. Although no maximum rate is proposed, the span between the standard rates applied in the Member States can – as is currently the case – be expected to ensure the proper functioning of the internal market while acknowledging the possible need for new budgetary resources from consumption taxes. 11. The accession of new Member States on 1 May 2004 and on 1 January 2007 did not alter the situation regarding the standard rate. That still ranges from 15% to 25% in 27 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). 12. In these circumstances, it therefore appears appropriate to maintain the principle of a minimum standard VAT rate of 15%, and to propose that the current arrangements be extended. 13. To give businesses necessary legal certainty, and allow further evaluation of the appropriate level of the standard VAT rate at EU level, it seems appropriate to extend the provision for another five years, while the Commission reflects on a new VAT strategy and re-examines the standard VAT rate appropriate for a common approach. 14. Since the application of the minimum standard rate under Article 97(1) of Directive 2006/112/EC expires on 31 December 2010, the object of this proposal is to enable the Council to extend the period during which this rate applies. The minimum standard VAT rate is therefore set at 15% for five years from 1 January 2011 to 31 December 2015. The Commission would also expect the Council to renew the statement for the minutes agreed earlier on the span between the lowest and highest rates applied for that same period.
Revised version (Article 220 ):
1. Every taxable person shall ensure that, in respect of the following, an invoice is issued, either by himself or by his customer or, in his name and on his behalf, by a third party: (1) supplies of goods or services which he has made to another taxable person or to a non-taxable legal person; (2) supplies of goods as referred to in Article 33; (3) supplies of goods carried out in accordance with the conditions specified in Article 138; (4) any payment on account made to him before one of the supplies of goods referred to in points (1) and (2) was carried out; (5) any payment on account made to him by another taxable person or non-taxable legal person before the provision of services was completed. 2. By way of derogation from paragraph 1, and without prejudice to Article 221(2), the issue of an invoice shall not be required in respect of supplies of services exempted under points (a) to (g) of Article 135(1).
Article 221 
1. Member States may impose on taxable persons an obligation to issue an invoice in respect of supplies of goods or services made in their territory, other than those referred to in Article 220. Member States may, in respect of the invoices referred to in the first subparagraph, impose fewer obligations than those laid down in Articles 226, 230, 233, 244 and 246. 2. Member States may release taxable persons from the obligation laid down in Article 220 to issue an invoice in respect of supplies of goods or services which they have made in their territory and which are exempt, with or without deductibility of the VAT paid at the preceding stage, pursuant to Articles 110 and 111, Article 125(1), Article 127, Article 128(1), Articles 132, 135, 136, 371, 375, 376 and 377, Article 378(2), Article 379(2) and Articles 380 to 390b .
Amendment rationale: CONTEXT OF THE PROPOSAL 1. Article 97(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax[1] (hereinafter "the VAT Directive") provides that from 1 January 2006 until 31 December 2010 the standard rate may not be less than 15% and Article 97(2) stipulates that the Council shall decide, in accordance with Article 93 of the Treaty, on the level of the standard rate of value added tax (VAT) to be applied after 31 December 2010. 2. This provision was based on Article 93 of the Treaty establishing the European Community (the EC Treaty). As from 1 December 2009, Article 93 of the EC Treaty is replaced by Article 113 of the Treaty on the Functioning of the European Union (TFEU). Article 113 TFEU stipulates that the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes to the extent that such harmonisation is necessary to ensure the establishment and functioning of the internal market and to avoid distortion of competition. 3. With a view to establishing the internal market on 1 January 1993, the Commission presented proposals intended to set up a definitive system of tax harmonisation. 4. However, when it became clear that it would be impossible to adopt the Commission's proposals before 1 January 1993, the Council decided to adopt a transitional system. With regard to VAT rates, it adopted Directive 92/77/EEC[2]. 5. That Directive introduced a system of minimum rates. It stipulated that from 1 January 1993 to 31 December 1996, the standard rate could not be set lower than 15%. This provision has been extended four times and applies until 31 December 2010. 6. To maintain the degree of harmonisation of rates already achieved, the Commission has twice presented proposals providing for a standard rate band with a minimum rate of 15% and a maximum rate of 25%[3]. The band was derived from the rates applied in practice in Member States, where standard rates have always varied between 15% and 25%. 7. In both cases, the proposals to approximate rates were amended by the Council,[4] which kept only the principle of a minimum rate, referring to a 15% minimum rate comparable to the system introduced by the 1992 Directive. 8. However, these Council Directives were adopted with a statement for the Council minutes mentioning Member States' efforts to avoid widening the 10 percentage point span between the lowest and highest rates applied. This demonstrates the continued concerns of Member States about distortions between high and low rate countries and the possible budgetary effects of different levels of VAT rates. In the light of the current economic crisis, there are further arguments for keeping a minimum standard rate to be laid down in the VAT Directive. 9. Despite various improvements to the common VAT system based on the Commission's pragmatic, phased VAT strategy launched in 2000[5] and updated in 2003[6], the VAT system continues to suffer from shortcomings and high administrative burdens. This means it needs to be fundamentally reassessed. New economic realities, technological processes, fraud patterns etc. also give rise to new challenges. That is why the Commission plans to publish a consultative green paper soon on a new VAT strategy. This will launch a consultation on future tax harmonisation. Only in the light of the outcome of that process can an appropriate decision be taken on the level of standard rates of VAT in the EU. 10. Moreover, recent modifications to the VAT Directive[7] have favoured taxation at the place of consumption, as this results in fewer possibilities for cross-border transactions seeking lower VAT rates, leading to distortions of competition. However, it remains important to prevent growing divergence in standard VAT rates applied by Member States from leading to structural imbalances in the EU and distortions of competition in some sectors of activity. To this end, it is common practice in the field of indirect taxes, both for excise duties and VAT, to set minimum rates. Although no maximum rate is proposed, the span between the standard rates applied in the Member States can – as is currently the case – be expected to ensure the proper functioning of the internal market while acknowledging the possible need for new budgetary resources from consumption taxes. 11. The accession of new Member States on 1 May 2004 and on 1 January 2007 did not alter the situation regarding the standard rate. That still ranges from 15% to 25% in 27 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). 12. In these circumstances, it therefore appears appropriate to maintain the principle of a minimum standard VAT rate of 15%, and to propose that the current arrangements be extended. 13. To give businesses necessary legal certainty, and allow further evaluation of the appropriate level of the standard VAT rate at EU level, it seems appropriate to extend the provision for another five years, while the Commission reflects on a new VAT strategy and re-examines the standard VAT rate appropriate for a common approach. 14. Since the application of the minimum standard rate under Article 97(1) of Directive 2006/112/EC expires on 31 December 2010, the object of this proposal is to enable the Council to extend the period during which this rate applies. The minimum standard VAT rate is therefore set at 15% for five years from 1 January 2011 to 31 December 2015. The Commission would also expect the Council to renew the statement for the minutes agreed earlier on the span between the lowest and highest rates applied for that same period.
Revised version (Article 221 ):
1. Member States may impose on taxable persons an obligation to issue an invoice in accordance with the details required under Article 226 or 226b in respect of supplies of goods or services other than those referred to in Article 220(1). 2. Member States may impose on taxable persons who have established their business in their territory or who have a fixed establishment in their territory from which the supply is made, an obligation to issue an invoice in accordance with the details required in Article 226 or 226b in respect of supplies of services exempted under points (a) to (g) of Article 135(1) which those taxable persons have made in their territory or outside the Community. 3. Member States may release taxable persons from the obligation laid down in Article 220(1) or in Article 220a to issue an invoice in respect of supplies of goods or services which they have made in their territory and which are exempt, with or without deductibility of the VAT paid in the preceding stage, pursuant to Articles 110 and 111, Article 125(1), Article 127, Article 128(1), Article 132, points (h) to (l) of Article 135(1), Articles 136, 371, 375, 376 and 377, Articles 378(2) and 379(2) and Articles 380 to 390b.
Article 222 
Member States may impose time limits on taxable persons for the issue of invoices when supplying goods or services in their territory.
Amendment rationale: CONTEXT OF THE PROPOSAL 1. Article 97(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax[1] (hereinafter "the VAT Directive") provides that from 1 January 2006 until 31 December 2010 the standard rate may not be less than 15% and Article 97(2) stipulates that the Council shall decide, in accordance with Article 93 of the Treaty, on the level of the standard rate of value added tax (VAT) to be applied after 31 December 2010. 2. This provision was based on Article 93 of the Treaty establishing the European Community (the EC Treaty). As from 1 December 2009, Article 93 of the EC Treaty is replaced by Article 113 of the Treaty on the Functioning of the European Union (TFEU). Article 113 TFEU stipulates that the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes to the extent that such harmonisation is necessary to ensure the establishment and functioning of the internal market and to avoid distortion of competition. 3. With a view to establishing the internal market on 1 January 1993, the Commission presented proposals intended to set up a definitive system of tax harmonisation. 4. However, when it became clear that it would be impossible to adopt the Commission's proposals before 1 January 1993, the Council decided to adopt a transitional system. With regard to VAT rates, it adopted Directive 92/77/EEC[2]. 5. That Directive introduced a system of minimum rates. It stipulated that from 1 January 1993 to 31 December 1996, the standard rate could not be set lower than 15%. This provision has been extended four times and applies until 31 December 2010. 6. To maintain the degree of harmonisation of rates already achieved, the Commission has twice presented proposals providing for a standard rate band with a minimum rate of 15% and a maximum rate of 25%[3]. The band was derived from the rates applied in practice in Member States, where standard rates have always varied between 15% and 25%. 7. In both cases, the proposals to approximate rates were amended by the Council,[4] which kept only the principle of a minimum rate, referring to a 15% minimum rate comparable to the system introduced by the 1992 Directive. 8. However, these Council Directives were adopted with a statement for the Council minutes mentioning Member States' efforts to avoid widening the 10 percentage point span between the lowest and highest rates applied. This demonstrates the continued concerns of Member States about distortions between high and low rate countries and the possible budgetary effects of different levels of VAT rates. In the light of the current economic crisis, there are further arguments for keeping a minimum standard rate to be laid down in the VAT Directive. 9. Despite various improvements to the common VAT system based on the Commission's pragmatic, phased VAT strategy launched in 2000[5] and updated in 2003[6], the VAT system continues to suffer from shortcomings and high administrative burdens. This means it needs to be fundamentally reassessed. New economic realities, technological processes, fraud patterns etc. also give rise to new challenges. That is why the Commission plans to publish a consultative green paper soon on a new VAT strategy. This will launch a consultation on future tax harmonisation. Only in the light of the outcome of that process can an appropriate decision be taken on the level of standard rates of VAT in the EU. 10. Moreover, recent modifications to the VAT Directive[7] have favoured taxation at the place of consumption, as this results in fewer possibilities for cross-border transactions seeking lower VAT rates, leading to distortions of competition. However, it remains important to prevent growing divergence in standard VAT rates applied by Member States from leading to structural imbalances in the EU and distortions of competition in some sectors of activity. To this end, it is common practice in the field of indirect taxes, both for excise duties and VAT, to set minimum rates. Although no maximum rate is proposed, the span between the standard rates applied in the Member States can – as is currently the case – be expected to ensure the proper functioning of the internal market while acknowledging the possible need for new budgetary resources from consumption taxes. 11. The accession of new Member States on 1 May 2004 and on 1 January 2007 did not alter the situation regarding the standard rate. That still ranges from 15% to 25% in 27 Member States. Two Member States (Cyprus and Luxembourg) apply a 15% rate and three a 25% rate (Denmark, Hungary and Sweden). 12. In these circumstances, it therefore appears appropriate to maintain the principle of a minimum standard VAT rate of 15%, and to propose that the current arrangements be extended. 13. To give businesses necessary legal certainty, and allow further evaluation of the appropriate level of the standard VAT rate at EU level, it seems appropriate to extend the provision for another five years, while the Commission reflects on a new VAT strategy and re-examines the standard VAT rate appropriate for a common approach. 14. Since the application of the minimum standard rate under Article 97(1) of Directive 2006/112/EC expires on 31 December 2010, the object of this proposal is to enable the Council to extend the period during which this rate applies. The minimum standard VAT rate is therefore set at 15% for five years from 1 January 2011 to 31 December 2015. The Commission would also expect the Council to renew the statement for the minutes agreed earlier on the span between the lowest and highest rates applied for that same period.