EUROPEAN
COMMISSION

Brussels, 4.10.2017
COM(2017) 569 final
2017/0251 (CNS)

Proposal for a
COUNCIL DIRECTIVE
amending Directive 2006/112/EC as regards harmonising and simplifying certain rules
in the value added tax system and introducing the definitive system for the taxation of
trade between Member States
{SWD(2017) 325 final}
{SWD(2017) 326 final}

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EXPLANATORY MEMORANDUM
1.

CONTEXT OF THE PROPOSAL

•

Reasons for and objectives of the proposal

Indirect taxes on consumption are at international level governed by the fundamental principle
of taxation in the country of destination. In other words, taxes are charged in the country in
which the goods and services are consumed.
Value-added tax (VAT) is Europe’s longest-standing consumption tax. In 1967, the
commitment was made to establish a definitive VAT system operating within the European
Community in the same way as it would within a single country1. The need to abolish the
fiscal frontiers between Member States by the end of 1992 made it necessary to reconsider the
way in which trade in goods was taxed in the European Community. The goal was that goods
would be taxed in the country of origin, so that the same conditions that apply to domestic
trade would also apply to intra-Community trade, perfectly reflecting the idea of a genuine
internal market.
Since the political and technical conditions were not ripe for such a system, transitional VAT
arrangements were adopted2. Those arrangements, as far as Business-to-Business (B2B)
transactions on goods are concerned, split the cross-border movement of goods into two
different transactions: an exempt supply in the Member State of departure of the goods and an
intra-Community acquisition taxed in the Member State of destination. These rules were
regarded as temporary and are not without drawbacks since allowing goods to be bought free
of VAT increases the opportunity for fraud, while the inherent complexity of the system is not
favourable to cross-border trade. However, these transitional arrangements are still in
operation more than 20 years after their adoption.
After a broad public debate, launched with a consultation on the Green Paper on the future of
VAT3 (Green Paper) on 6 December 2011, the Commission adopted the Communication On
the future of VAT — Towards a simpler, more robust and efficient VAT system tailored to the
single market4. That consultation confirmed that many businesses consider that the
complexity, additional compliance costs and legal uncertainty of the VAT system often
prevent them from engaging in cross-border activities and reaping the benefits of the single
market. It also provided an opportunity to examine whether the commitment made in 1967
was still relevant.
Discussions with Member States showed that the objective of taxation in the Member State of
origin was still politically unachievable and this was confirmed by the Council in May 20125.
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First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member
States concerning turnover taxes; Second Council Directive 67/228/EEC of 11 April 1967 on the
harmonisation of legislation of Member States concerning turnover taxes — Structure and procedures
for application of the common system of value added tax.
Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value
added tax and amending Directive 77/388/EEC with a view to the abolition of fiscal frontiers (OJ L 376
of 31.12.1991, p. 1).
COM(2010) 695, Commission Staff Working Document, SEC(2010) 1455, 1.12.2010.
COM(2011) 851, 6.12.2011.
Council conclusions on the future of VAT - 3167th Economic and Financial affairs Council meeting,
Brussels, 15 May 2012 (see in particular point B 4)
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/130257.pdf

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Also the European Parliament6 and the European Economic and Social Committee7
recognised the deadlock and favoured a new VAT system based on the principle of taxation at
destination as a realistic solution.
After the adoption of the aforementioned Communication, the Commission entered into a
broad-based and transparent dialogue with Member States and with stakeholders to examine
in detail the different possible ways of implementing the destination principle. The main idea
in this regard was that doing business across the European Union (hereinafter, "Union" or
"EU") should be as simple and as secure as engaging in purely domestic activities. That
dialogue took place in particular via the Group on the Future of VAT (GFV)8 and the VAT
Expert Group (VEG)9.
Following this work, the Commission adopted on 7 April 2016 the Action Plan on VAT –
Towards a single EU VAT area – Time to decide10 (VAT Action Plan). The Commission
announced, inter alia, its intention to adopt a definitive VAT system for intra-Union crossborder trade based on the principle of taxation in the Member State of destination of the goods
in order to create a robust single European VAT area. A legislative proposal for such a
simpler and fraud-proof definitive VAT system for intra-Union trade was included in the
Commission Work Programme for 201711.
In its conclusions of 25 May 201612, the Council took note of the points made by the
Commission in its VAT Action Plan as regards the way forward towards a definitive VAT
system and of its intention to present, as a first step, a legislative proposal in 2017 for the
definitive VAT system for cross-border B2B trade. It also reiterated its view that the principle
of “taxation in the Member State of origin of the supply of goods or services” should be
replaced by the principle of “taxation in the Member State of destination”. The European
Parliament also welcomed the Commission’s intention to propose a definitive VAT system by
2017 that is simple, fair, robust, efficient and less susceptible to fraud13.

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European Parliament resolution of 13 October 2011 on the future of VAT (P7_TA(2011)0436)
http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P7-TA-20110436
European Economic and Social Committee Opinion of 14 July 2011 on the ‘Green Paper on the future
of VAT - Towards a simpler, more robust and efficient VAT system’ http://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=celex:52011AE1168
The Group on the Future of VAT provides a forum for discussion with VAT delegates from the
Member States' tax administrations on the Commission pre-legislative initiatives and for exchanges of
opinions on the preparation of future VAT legislation.
The VAT Expert Group is composed of 40 members: individuals with the requisite expertise in the area
of VAT and organisations representing in particular businesses, tax practitioners and academics.
COM(2016) 148 final.
Commission Work Programme 2017: Delivering a Europe that protects, empowers and defends,
COM(2016) 710 final
http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1487237841093&uri=CELEX:52016DC0710
See: http://www.consilium.europa.eu/en/press/press-releases/2016/05/25-conclusions-vat-action-plan/
European Parliament resolution of 24 November 2016 on Towards a definitive VAT system and
fighting VAT fraud (2016/2033(INI))
http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P8-TA-20160453

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In its conclusions of 8 November 201614 the Council stated that, while the Commission is
working on the definitive VAT system for intra-Union trade, improvements to the current
VAT system should be made in the meantime. In this context, the Council requested
amendments in four areas:
 VAT identification number: the Council invited the Commission to present a
legislative proposal aimed at making the valid VAT identification number of the
taxable person or non-taxable legal person acquiring the goods, allocated by a Member
State other than that in which dispatch or transport of the goods began, an additional
substantive condition for the application of the exemption in respect of an intraCommunity supply of goods.
 Chain transactions: the Commission was invited by the Council to propose uniform
criteria and appropriate legislative improvements which would lead to increased legal
certainty and harmonised application of VAT rules when determining the VAT
treatment of chain transactions, including triangular transactions.
 Call-off stock: the Council invited the Commission to propose modifications to the
current VAT rules in order to allow simplification and uniform treatment for call-off
stock arrangements in cross-border trade. To this effect, 'call-off stock' refers to the
situation where a vendor transfers goods to a warehouse at the disposal of a known
acquirer in another Member State and that acquirer becomes the owner of the goods
upon calling them off the warehouse.
 Proof of intra-Community supply: the Council invited the Commission to explore
possibilities for a common framework of recommended criteria for the documentary
evidence required to claim an exemption for intra-Community supplies.
In order to meet the request of the Council, amendments to the VAT Directive15 are proposed
for the three first areas. The fourth area requires a modification of the VAT Implementing
Regulation16 and is therefore subject to a separate proposal.
In addition the present proposal introduces the cornerstones of the definitive system for intraUnion B2B trade. A forthcoming proposal in 2018 will then further provide detailed technical
provisions for the actual implementation of these cornerstones. The first legislative step of the
definitive VAT system announced in the VAT Action Plan17 therefore includes two sub-steps:

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Council conclusions of 8 November 2016 on Improvements to the current EU VAT rules for crossborder transactions (No. 14257/16 FISC 190 ECOFIN 1023 of 9 November 2016)
http://data.consilium.europa.eu/doc/document/ST-14257-2016-INIT/en/pdf
Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
(OJ L 347, 11.12.2006, p. 1).
Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing
measures for Directive 2006/112/EC on the common system of value added tax (recast) (OJ L 77,
23.3.2011, p. 1).
The VAT Action Plan provided for two legislative steps in relation with the introduction of the
definitive VAT system. See the last two paragraphs of point 4 of the VAT Action Plan for further
details on the content of these legislative steps.

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one contained in the present proposal and made of the aforementioned cornerstones and
another one that will take place in 201818.
•

Consistency with existing policy provisions in the policy area

The introduction of a definitive system for intra-Union supplies of goods is one of the main
parts of the VAT Action Plan. This proposal is a step towards replacing the transitional
arrangements, applicable since 1 January 1993, by a definitive VAT system for intra-Union
B2B trade under which domestic and cross-border transactions of goods will be treated in the
same way19. Further, that definitive VAT system will create a robust single European VAT
area which can support a deeper and fairer single market that helps to boost jobs, growth,
investment and competitiveness.
•

Consistency with other Union policies

The creation of a simple, modern and fraud-proof VAT system is one of the fiscal priorities
set out by the Commission for 201720.
Combating missing trader VAT fraud is also one of the European Union’s priority crime
areas, under the 2014-2017 EU Policy Cycle of Europol21.
Reducing administrative burden, particularly for SMEs, is also an important objective
highlighted in the EU’s growth strategy22.
The proposed initiative and its objectives are consistent with the EU SME policy as set out by
the Small Business Act (SBA)23, in particular principle VII on helping SMEs to benefit more
from the opportunities offered by the Single Market.
It is consistent with the Single market strategy (SMS)24 and the objectives of the Regulatory
Fitness and Performance programme (REFIT).

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A detailed description of the successive steps and sub-steps of the introduction of the definitive VAT
system may be found in the Communication from the Commission to the European Parliament, the
Council and the European Economic and Social Committee – On the follow-up to the Action Plan on
VAT - Towards a single EU VAT area - Time to act (COM(2017) […].
Although currently not in the forefront of the work on the definitive VAT system, there might be a need
to assess in the future certain customs procedures (e.g. CP 42) so as to ensure this principle is
coherently applied in combination with import/export schemes.
Annual Growth Survey 2017; see: https://ec.europa.eu/info/publications/2017-european-semesterannual-growth-survey_en
EMPACT priorities
Europe 2020 – A strategy for smart, sustainable and inclusive growth; see:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:2020:FIN:EN:PDF
Communication from the Commission to the Council, the European Parliament, the European
Economic and Social Committee and the Committee of the Regions - “Think Small First” – A “Small
Business Act” for Europe (COM(2008) 394 final).
Communication from the Commission to the European Parliament, the Council, the European
Economic and Social Committee and the Committee of the regions – "Upgrading the Single Market:
more opportunities for people and business" (COM(2015) 550 final).

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2.

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•

Legal basis

The Directive amends the VAT Directive on the basis of Article 113 of the Treaty on the
Functioning of the European Union. This Article provides for the Council, acting
unanimously in accordance with a special legislative procedure and after consulting the
European Parliament and the Economic and Social Committee, to adopt provisions for the
harmonisation of Member States' rules in the area of indirect taxation.
•

Subsidiarity (for non-exclusive competence)

According to the principle of subsidiarity, as set out in Article 5(3) of the Treaty on European
Union, action at Union level may only be taken if the envisaged aims cannot be achieved
sufficiently by the Member States alone and can therefore, by reason of the scale or effects of
the proposed actions, be better achieved by the EU.
VAT rules for cross-border Union trade can, by their nature, not be decided by individual
Member States since, inevitably, more than one Member State is involved. Moreover, VAT is
a tax harmonised at Union level and therefore any initiative to introduce the definitive VAT
system for cross-border supplies of goods requires a proposal by the Commission to amend
the VAT Directive.
As regards the provisions to harmonise and simplify rules within the current VAT system
contained in this proposal, they have unanimously been requested by the Member States
which demonstrates that action at Union level is likely to be more effective as action at
national level has proven not to be sufficiently successful.
•

Proportionality

The proposal, as far as the introduction of the definitive system for intra-Union B2B trade is
concerned, is consistent with the principle of proportionality i.e. it does not go beyond what is
necessary to meet the objectives of the Treaties, in particular the smooth functioning of the
single market. As with the subsidiarity test, it is not possible for Member States to address
problems such as fraud or complexity without a proposal to amend the VAT Directive.
As regards the proposed improvements to the current system, they are targeted and limited to
a restricted number of VAT rules which have proven difficult to apply in a systematic and
uniform way and which have created problems for taxable persons.
•

Choice of the instrument

A Directive is proposed in view of amending the VAT Directive.

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3.

RESULTS
OF
EX-POST
EVALUATIONS,
CONSULTATIONS AND IMPACT ASSESSMENTS

•

Ex-post evaluations/fitness checks of existing legislation

STAKEHOLDER

A retrospective evaluation of elements of the Union VAT system was conducted by an
external consultant in 2011 and its findings have been used as a starting point to the
examination of the current VAT system25.
•

Stakeholder consultations

On 6 May 2011, the European Commission organised a conference in Milan as part of the
consultation process on the Green Paper. It brought together policy makers, experts,
businesses and other stakeholders and the general public from all over Europe, and beyond26.
The open public consultation on the Green Paper, resulting in around 1700 contributions,
provided the Commission with a clear understanding of the problems and possible solutions.
Following publication of the Green Paper, the Commission set up two working groups for
discussions at technical level: the GFV and the VEG. A total of 12 meetings of the GFV and
14 meetings of the VEG took place to discuss different issues related to the definitive VAT
system for intra-Union B2B trade as well as the improvements to the current system. Mixed
sub-groups consisting of both GFV and VEG members were constituted to discuss jointly
certain specific topics. Also a Fiscalis27 seminar was organised in Vienna in 2015 which
brought together members of both the GFV and the VEG. Another mixed sub-group was
established in the framework of the EU VAT forum28, a discussion platform where businesses
and VAT authorities meet to discuss how the implementation of the VAT legislation can be
improved in practical terms.
Finally, a public consultation on the definitive system for intra-Union trade was organised
from 20 December 2016 to 20 March 2017 resulting in 121 contributions29.The objective was
to get the views of all stakeholders on the operation of the current transitional VAT
arrangements, the possible short term improvements to these transitional arrangements, as
requested by the Council, and the introduction of the definitive VAT system based on the
principle of taxation at destination.
•

Collection and use of expertise

Regarding the options for a definitive VAT system, the following studies have provided
detailed analysis of the problems at stake and the possible ways forward:

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Institute for Fiscal Studies (project leader), 2011, A retrospective evaluation of elements of the EU
VAT system:
http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/common/publications/stu
dies/report_evaluation_vat.pdf
More information on: https://ec.europa.eu/taxation_customs/business/vat/action-planvat/communication-future-vat/green-paper_en
Regulation (EU) No 1286/2013 of the European Parliament and of the Council of 11 December 2013
establishing an action programme to improve the operation of taxation systems in the European Union
for the period 2014-2020 (Fiscalis 2020).
Commission Decision of 3 July 2012 setting up the EU VAT forum, 2012/C198/05, (OJ C 198/4 of
6.7.2012).
Summary of the results of the open public consultation:
https://ec.europa.eu/taxation_customs/consultations-get-involved/tax-consultations_en

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- Study on applying the current principle for the place of supply of B2B services to B2B
supplies of goods30;
- Economic study on charging VAT on intra-EU supplies of goods and services31;
- Implementing the ‘destination principle’ to intra-EU B2B supplies of goods32;
- Study and Reports on the VAT Gap in the EU-28 Member States33.
•

Impact assessment

Reference is made to the separate impact assessment which has been carried out in relation to
this proposal. The preferred option, chosen in that impact assessment, would reduce cross
border VAT fraud by EUR 41 billion and compliance costs for businesses by EUR 1 billion.
The impact assessment for the proposal was considered by the Regulatory Scrutiny Board on
14 July 2017. The Board gave a positive opinion to the proposal with some recommendations,
in particular on the link of the proposal to other elements of the VAT Action Plan, the need
for a staged approach and the concept of certified taxable person, that have been taken on
board. The opinion of the Board and the recommendations are mentioned in Annex 1 to the
Staff Working Document for the impact assessment accompanying this proposal.
4.

BUDGETARY IMPLICATIONS

The proposal will have no negative implications for the Union budget.
5.

OTHER ELEMENTS

•

Detailed explanation of the specific provisions of the proposal

Certified taxable person: Article 13a (new)
This provision introduces the concept of the certified taxable person.
As a rule, taxable persons are identified for VAT purposes via a VAT identification number.
No distinction is currently made at the level of the attribution of such a number between
reliable and less reliable taxable persons. The VAT rules, as far as identification is concerned,
apply in the same way to both categories.
The concept of certified taxable person allows for an attestation that a particular business can
globally be considered to be a reliable taxpayer. The concept is important because certain
simplification rules, which could be fraud-sensitive, will apply only where a certified taxable
person is involved in the relevant transaction.

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PwC, 2012; see:
http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/common/publications/stu
dies/place_supply_b2b.zip
CPB (project leader), 2013; see: https://circabc.europa.eu/sd/a/60e05641-2653-4ac3-aca23060896aa6e3/33-ANN%20-%20Final%20report%20%20Study%20on%20charging%20VAT%20on%20intraEU%20supplies%20of%20goods%20and%20services%5B1%5D.pdf
EY, 2015; see:
https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/ey_study_destination_principle.pdf
CASE, 2016; see: https://ec.europa.eu/taxation_customs/sites/taxation/files/2016-09_vat-gapreport_final.pdf

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Further, the certified taxable person concept will be one of the essential elements of the first
step of the definitive VAT system for intra-Union B2B trade. That definitive system will
replace, by one taxable supply of goods located for VAT purposes in the Member State of
destination (the so-called intra-Union supply of goods), the current transitional arrangements
which entail an exempt supply of goods in the Member State of departure and a taxed intraCommunity acquisition in the Member State of destination, for which the acquirer is the
person liable to VAT. The certified taxable person concept will allow for a gradual
implementation of the definitive VAT system because, in the first step of that system, reverse
charge (i.e. liability to VAT of the acquirer and not of the supplier, which gives rise in
practice to a similar situation to what exists today under the transitional arrangements) will
apply where the acquirer, in case of intra-Union supplies, is a certified taxable person34 The
justification is that no fraud should occur as a result of VAT not being charged on intra-Union
supplies made for a certified taxable person, as the certified taxable person by definition is a
reliable taxpayer.
The provision sets out the overall criteria on the basis of which the Member States will be
able to certify taxable persons. Following the adoption of this proposal, a Council
Implementing Regulation will have to be adopted, based on Article 397 of the VAT Directive,
so as to arrange the practicalities of the certified taxable person status and to ensure that the
procedure for granting and withdrawing the certified taxable person status is sufficiently
harmonised and standardised throughout the Union so that a uniform application can be
guaranteed. Also an amendment to the Administrative Cooperation Regulation35 is to be
proposed in order to enable the certified taxable person status of taxable persons being
integrated in the VIES (VAT information and exchange system) thus allowing both tax
administrations and businesses to verify online the certified taxable person status of a
particular business.
Since the certified taxable person status entails VAT reporting and payment obligations, nontaxable persons will not be eligible. For the same reason, the proposal excludes flat-rate
farmers, exempt SMEs, other taxable persons exempt without the right to deduct and
occasional taxable persons from the possibility of obtaining the certified taxable person status.
However, any SME not applying the exemption scheme will be able to apply for the certified
taxable person status under the same conditions as any other taxable person. It is therefore
consistent with the EU SME policy as set by the Small Business Act (SBA)36.
Similarity exists between the criteria to be used for granting the certified taxable person status
and those applied regarding the Authorised Economic Operator (AEO) as defined in the
Union Customs Code (Article 39). Similar criteria, based on the AEO status, can also be
found in the recent VAT proposal on e-commerce37.

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As announced in the VAT Action Plan, in a future second legislative step of the definitive VAT system,
taxation would cover all cross border supplies of goods and services (and therefore the supplier, and not
the customer, would be liable for the VAT on all goods and services purchased from other Member
States) so that all supplies of goods and services within the single market, either domestic or crossborder, will be treated the same way.
Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating
fraud in the field of value added tax (recast) (OJ L 268, 12.10.2010, p. 1).
See footnote 23.
Proposal for a Council Directive amending Directive 2006/112/EC and Directive 2009/132/EC as
regards certain value added tax obligations for supplies of services and distance sales of goods
(COM(2016) 757 final of 1.12.2016; see the proposed Article 369m(1)(c) of Directive 2006/112/EC).

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Call-off stock: Articles 17a (new), 243(3) and 262 (amended)
Call-off stock is a scheme whereby a supplier transfers goods to a known acquirer without
transferring the ownership of the goods yet. The acquirer has the right to take the goods from
a stock of the supplier at his own discretion at which point a supply of goods takes place. In
domestic relationships, the use of this model does not create specific problems but issues arise
when supplier and acquirer are situated in different Member States.
Under the current VAT rules, a business transferring own goods to another Member State in
order to constitute a stock for a customer is deemed to have made a VAT exempt supply of
goods in the Member State of departure. The arrival of the goods gives rise to an intraCommunity acquisition made by the business that transferred the goods which is subject to
VAT in that other Member State. The business that has transferred the goods is obliged, as a
rule, to be identified for VAT purposes in the Member State of arrival in order to be able to
declare the intra-Community acquisition in its VAT return. When the goods are taken out of
the stock and delivered to the acquirer a second supply occurs, the place of supply of which is
the Member State in which the stock is situated.
In order to address the difficulties that this can cause in practice, certain Member States apply
simplification measures regarding these transactions while others do not. These differences
run against the uniform application of the VAT rules within the single market.
The proposed solution consists in considering the call-off stock arrangements as giving rise to
a single supply in the Member State of departure and to an intra-Community acquisition in the
Member State where the stock is situated insofar as the transaction is taking place between
two certified taxable persons This will avoid that the supplier has to be identified in every
Member State where he has placed goods under the call-off stock arrangements. However, to
ensure an adequate follow-up of the goods by the tax administrations, the supplier as well as
the acquirer will be required to keep a register of call-off stock goods to which these rules
apply. Further, in the recapitulative statement of the supplier the identity of the acquirers to
whom goods dispatched under call off stock arrangements will be supplied at a later stage
must be mentioned.
VAT identification number and the exemption for certain intra-Community
transactions: Article 138(1) (amended)
The VAT exemption for intra-Community supplies of goods laid down in Article 138(1) of
the VAT Directive is at the centre of the current transitional arrangements. At the same time,
this exemption is also at the root of the so-called carousel fraud. The VAT definitive system
for intra-Union trade is intended to solve that problem but, in the meantime, interim solutions
have been requested by the Member States. In particular they have requested including in the
VAT Directive the requirement for a valid VAT identification number of the acquirer in a
Member State other than that in which transport of the goods begins as a substantive condition
in order for the supplier to be allowed to apply the exemption. This goes further than the
current situation under which, according to the interpretation of the Court of Justice of the
European Union38, the VAT identification number of the acquirer is simply a formal condition
of the right to exempt an intra-Community supply. That currently leads to situations where,
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Judgments of 6 September 2012, Mecsek-Gabona, C-273/11, ECLI:EU:C:2012:547; of 27 September
2012, VSTR, C-587/10, ECLI:EU:C:2012:592; of 20 October 2016, Plöckl, C-24/15,
ECLI:EU:C:2016:791 and of 9 February 2017, Euro-Tyre, C-21/16, ECLI:EU:C:2017:106.

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when the condition has not been complied with, Member States are only able to impose fines
or administrative sanctions, but not to refuse the exemption itself.
The current transitional arrangements are further based on the obligation for the supplier to
submit a recapitulative statement (the so-called VIES listing which includes the VAT
identification number of the acquirer). This is again a formal but not a substantive condition
in relation to the exemption. This information is, via the VIES system, accessible for the tax
authorities of the Member State of the acquirer which are thus informed of the arrival in its
territory of goods that are normally subject to a taxed intra-Community acquisition. The
acquirer has to declare this intra-Community acquisition in his VAT return and the tax
authorities have the possibility to cross-check this declaration with data in the VIES system.
The VIES listing has therefore been a crucial component of the VAT system since the
abolition of the fiscal borders and the corresponding disappearance of the customs
documentation.
Without correct information from the VIES system, the tax authorities of the Member States
are not duly informed of the arrival of untaxed goods in their territory and have solely to rely
on what their taxable persons declare. Nevertheless, if the listing is not filled in as regards a
supply, this can give rise to penalties but not to the rejection of the exemption as such.
The new proposed Article 138(1) therefore includes changes as regards these two aspects.
First, whereas currently reference is made to the acquirer as a taxable person or a non-taxable
legal person acting as such, it is now stipulated, as a substantive condition for the application
of the exemption, that the acquirer has to be identified for VAT purposes in a Member State
other than that in which dispatch or transport of the goods begins. As it already happens
today, the supplier will have to verify the status of his customer via the VIES system before
applying the exemption. From that perspective, there is no practical difference for the
supplier, but the consequences might be different as the non-identification of his customer
can, on that basis, lead to a rejection of the exemption. Secondly, also the correct filing of the
VIES listing becomes a substantive condition which can lead, where that condition is not met,
to the rejection by the tax administration of an applied exemption.
Chain transactions: Article 138a (new)
Chain transactions, which are considered within the remit of this proposal, have to be
understood as successive supplies of the same goods where the goods supplied are subject to a
single intra-Community transport between two Member States. In this situation, according to
the case-law of the Court of Justice39, the transport is to be attributed to one supply within the
chain so as to determine to which of the transactions the exemption for intra-Community
supplies should be applied in accordance with Article 138 of the VAT Directive. This
provision stipulates, as a condition for the exemption, that the goods are 'dispatched or
transported by or on behalf of the vendor or the person acquiring the goods' from one Member
State to another. In this context, Member States have asked for legislative improvements in
order to increase legal certainty for operators in determining the supply within the chain of
transactions to which the intra-Community transport must be ascribed (which will be the
supply within the chain to which the exemption laid down in Article 138 will be applicable,
provided all the other conditions for that exemption are met).

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Judgment of 6 April 2006, Emag Handel, C-245/04, ECLI:EU:C:2006:232.

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Where the transport has been made by or on behalf of one of the intermediate suppliers in the
chain, rules are proposed whereby that transport will be ascribed (i) to the supply made for
that intermediate supplier if he is, for VAT purposes, identified in a Member State other than
the Member State of supply and has communicated the name of the Member State of arrival
of the goods to his supplier; (ii) to the supply made by the intermediate supplier to the next
operator in the chain, where any of the two conditions mentioned in (i) is not met. The rules,
and the legal certainty they allow, apply only where the intermediate supplier and the taxable
person who supplied the goods to him are both certified taxable persons No rule of this kind is
needed where the transport is made on behalf of the first supplier in the chain (in which case
the transport can only be ascribed to the first supply) or on behalf of the last taxable person in
the chain (in which case the transport can only be ascribed to the supply made for that taxable
person).
It is not excluded that, in case of involvement of a non-certified taxable person, the transport
could be ascribed to the same supply. However, in that case the legal rules in Article 138a will
not apply and thus it remains, in the same way as under the current conditions, for the taxable
person concerned to demonstrate that the transport and the exemption are linked to that
particular supply.
Definitive system for intra-Union trade: Articles 402 (amended), 403 and 404 (deleted)
The cornerstones of the definitive system for intra-Union trade are introduced and the lines
along which the new system will operate are set out. As regards the choice of this particular
system, a reference is made to the impact assessment accompanying this proposal.
As already explained in point 1 above, a forthcoming proposal in 2018 will then further
provide detailed technical provisions for the actual implementation of these cornerstones.
That forthcoming proposal will overhaul the whole VAT Directive and will replace or delete
the current transitional articles. Further changes regarding the administrative cooperation rules
and substantial IT developments will be needed in order to ensure the proper operation of the
system.
In the proposed Article 402 of the Directive, it is now established that the VAT definitive
system for intra-EU trade will be based on the principle of taxation in the Member State of
destination of the supply of goods and services. In this context, a new concept in relation to
goods - the so-called 'intra-Union supply' – will be introduced in the above-mentioned
detailed technical provisions. This new single taxable event is intended to replace the current
system of an exempt supply in the Member State of departure and a taxed 'intra-Community
acquisition' in the Member State of destination as a second and separate taxable event. Under
this new concept, the 'place of supply' will be situated in the Member State of arrival of the
goods.
Further, the supplier will be liable for the payment of the VAT on this 'intra-Union supply'
unless the acquirer is a certified taxable person, in which case the certified taxable person will
account for the VAT in his VAT return. Where the person liable for VAT is not established in
the Member State where the tax is due, he will be able to settle his declaration and payment
obligations via a so-called One-Stop Shop system. Use of that system will also be possible for
the deduction of input VAT.
Although at this stage not yet explicitly stipulated, the system could or should further be
based on the abolition of the recapitulative statement (the so-called VIES listing), the

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application of the overall invoicing rules of the Member State of the supplier, and the
harmonisation of certain rules related to invoicing (such as the time of issuing of invoices),
chargeable event and chargeability of VAT in relation to 'intra-Union supplies' of goods.

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2017/0251 (CNS)
Proposal for a
COUNCIL DIRECTIVE
amending Directive 2006/112/EC as regards harmonising and simplifying certain rules
in the value added tax system and introducing the definitive system for the taxation of
trade between Member States

THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union, and in particular
Article 113 thereof,
Having regard to the proposal from the European Commission,
After transmission of the draft legislative act to the national parliaments,
Having regard to the opinion of the European Parliament1,
Having regard to the opinion of the European Economic and Social Committee2,
Acting in accordance with a special legislative procedure,
Whereas:
(1)

In 1967, when the Council adopted the common system of value added tax (VAT) by
means of Council Directives 67/227/EEC3 and 67/228/EEC4, the commitment was
made to establish a definitive VAT system operating within the European Community
in the same way as it would within a single Member State. Since the political and
technical conditions were not ripe for such a system, when the fiscal frontiers between
Member States were abolished by the end of 1992 transitional VAT arrangements
were adopted. Council Directive 2006/112/EC5, which is currently in force, provides
that these transitional rules have to be replaced by definitive arrangements.

(2)

In its VAT Action Plan6, the Commission announced its intention to put forward a
proposal setting out the principles for a definitive VAT system for cross-border
business-to-business (B2B) trade between Member States that would be based on the
taxation of cross-border supplies of goods in the Member State of destination.

1

OJ C , , p. .
OJ C , , p. .
First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member
States concerning turnover taxes (OJ 71, 14.4.1967, p. 1301).
Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member
States concerning turnover taxes — Structure and procedures for application of the common system of
value added tax (OJ 71, 14.4.1967, p. 1303).
Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L
347, 11.12.2006, p. 1).
Communication from the Commission to the European Parliament, the Council and the European
Economic and Social Committee on an action plan on VAT - Towards a single EU VAT area - Time to
decide (COM(2016)148 final of 7.4.2016).

2
3

4

5

6

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EN

(3)

This would require replacing the current system consisting of an exempt supply in the
Member State of departure of the goods and a taxed intra-Community acquisition of
goods in the Member State of destination by a system of a single supply taxed in and
in accordance with the VAT rates of the Member State of destination. As a rule, the
VAT will be charged by the supplier who will be able to verify the applicable VAT
rate of any Member State online by means of a web portal. However, where the person
acquiring the goods is a certified taxable person (a reliable taxpayer recognised as such
by Member States), the reverse charge mechanism would apply and the certified
taxable person should be liable to VAT on the intra-Union supply. The VAT definitive
system will also be based on the concept of a single registration scheme (One-Stop
Shop (OSS)) for businesses allowing for the payment and deduction of the VAT due.

(4)

These principles should be established in the Directive and should replace the current
concept according to which the definitive arrangements shall be based on the taxation
in the Member State of origin.

(5)

The Council, in its conclusions of 8 November 20167, invited the Commission to make
certain improvements to the Union VAT rules for cross-border transactions, regarding
the role of the VAT identification number in the context of the exemption for intraCommunity supplies, call-off stock arrangements, chain transactions and the proof of
transport for the purposes of the exemption for intra-Community transactions.

(6)

Given this demand and the fact that it will take several years for the definitive VAT
system for intra-Union trade to be implemented, these specific measures, intended to
harmonise and simplify certain arrangements for businesses, are appropriate.

(7)

The creation of the certified taxable person status is needed for the efficient
application of the improvements to the Union VAT rules for cross-border transactions
as well as for the gradual transition towards the definitive system for intra-Union
trade.

(8)

In the current system no distinction is made between reliable and less reliable taxable
persons as regards the VAT rules to be applied. The granting of the certified taxable
person status on the basis of certain objective criteria should enable the identification
of those reliable taxable persons. This status would allow them to benefit from the
application of certain fraud-sensitive rules not applicable to other taxable persons.

(9)

Access to the certified taxable person status should be based on criteria harmonised at
Union level and therefore certification provided by one Member State should be valid
in the whole Union.

(10)

Certain taxable persons covered by particular arrangements excluding them from the
general VAT rules, or who only occasionally carry out economic activities, should not
be granted the certified taxable person status as far as those particular arrangements or
occasional activities are concerned. Otherwise the smooth application of the proposed
changes could be disrupted.

(11)

Call-off stock refers to the situation where at the time of transport of goods to another
Member State, the supplier already knows the identity of the person acquiring the
goods to whom they will be supplied at a later stage and after arrival of the goods in
the Member State of destination. This currently gives rise to a deemed supply (in the

7

Council conclusions of 8 November 2016 on Improvements to the current EU VAT rules for crossborder transactions (No. 14257/16 FISC 190 ECOFIN 1023 of 9 November 2016).

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Member State of departure of the goods) and a deemed intra-Community acquisition
(in the Member State of arrival of the goods), followed by a 'domestic' supply in the
Member State of arrival and requires the supplier to be identified for VAT purposes in
that Member State. To avoid this, these transactions, where they take place between
two certified taxable persons should be, under certain conditions, considered as giving
rise to one exempt supply in the Member State of departure and one intra-Community
acquisition in the Member State of arrival.

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(12)

As regards the VAT identification number in relation to the exemption for the supply
of goods in the intra-Community trade, it is proposed that the inclusion of the VAT
identification number of the person acquiring the goods in the VAT Information
Exchange System (VIES), assigned by a Member State other than that in which the
transport of the goods begins, and the reference to that number in the recapitulative
statement submitted by the supplier should become, in addition to the condition of
transport of the goods outside the Member State of supply, substantive conditions for
the application of exemption rather than formal requirements. The VIES listing is
essential for informing the Member State of arrival of the presence of goods in its
territory and is therefore a key element in the fight against fraud in the Union.

(13)

Chain transactions refer to successive supplies of goods which are subject to a single
intra-Community transport. The intra-Community movement of the goods should only
be ascribed to one of the supplies, and only that supply should benefit from the VAT
exemption provided for the intra-Community supplies. The other supplies in the chain
should be taxed and may require the VAT identification of the supplier in the Member
State of supply. In order to avoid different approaches amongst Member States, which
may lead to double or non-taxation, and in order to enhance legal certainty for
operators, a common rule should be established that, provided certain conditions are
met, the transport of the goods should be attributed to one supply within the chain of
transactions.

(14)

Since the objectives of this Directive – improved operation of the VAT arrangements
in the context of cross border B2B trade and definition of the principles of the
definitive VAT system- cannot be sufficiently achieved by the Member States and can
therefore be better achieved at Union level, the Union may adopt measures, in
accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on the
European Union. In accordance with the principle of proportionality, as set out in that
Article, this Directive does not go beyond what is necessary in order to achieve those
objectives.

(15)

In accordance with the Joint Political Declaration of Member States and the
Commission of 28 September 2011 on explanatory documents8, Member States have
undertaken to accompany, in justified cases, the notification of their transposition
measures with one or more documents explaining the relationship between the
components of a directive and the corresponding parts of national transposition
instruments. With regard to this Directive, the legislator considers the transmission of
such documents to be justified.

(16)

Directive 2006/112/EC should therefore be amended accordingly,

8

OJ C 369, 17.12.2011, p. 14.

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HAS ADOPTED THIS DIRECTIVE:
Article 1
Directive 2006/112/EC shall be amended as follows:
(1) The following Article 13a is inserted:
'Article 13a
1.
Any taxable person who has a place of business or a fixed establishment in the
Community or in absence of place of business and fixed establishment has his
permanent address or usual residence in the Community and who, in the course of his
economic activity, carries out, or intends to carry out, any of the transactions referred
to in Articles 17a, 20 and 21, or transactions in accordance with the conditions
specified in Article 138 may apply to the tax authorities for the status of certified
taxable person.
The tax authorities shall grant that status to an applicant where the criteria set out in
paragraph 2 are met, unless the applicant is excluded from such certification by virtue
of the terms of paragraph 3.
Where the applicant is a taxable person who has been granted the status of an
authorised economic operator for customs purposes, the criteria in paragraph 2 shall be
deemed to have been met.
2.
All the following criteria shall be required to be met in order to grant the status
of a certified taxable person:
(a)

the absence of any serious infringement or repeated infringements of taxation
rules and customs legislation, as well as of any record of serious criminal
offences relating to the economic activity of the applicant;

(b)

the demonstration by the applicant of a high level of control of his operations
and of the flow of goods, either by means of a system managing commercial
and, where appropriate, transport records, which allows appropriate tax
controls, or by means of a reliable or certified internal audit trail;

(c)

evidence of financial solvency of the applicant, which shall be deemed to be
proven either where the applicant has good financial standing, which enables
him to fulfil his commitments, with due regard to the characteristics of the type
of business activity concerned, or through the production of guarantees
provided by insurance or other financial institutions or by other economically
reliable third parties.

3.
The following taxable persons may not be granted the status of a certified
taxable person:

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(a)

taxable persons covered by the common flat-rate scheme for farmers;

(b)

taxable persons covered by the exemption for small enterprises provided for in
Articles 282 to 292;

(c)

taxable persons carrying out supplies of goods or services in respect of which
VAT is not deductible;

17

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(d)

taxable persons carrying out an occasional supply of a new means of transport
within the meaning of Article 9(2) or carrying out an occasional activity within
the meaning of Article 12.

However, the taxable persons mentioned under points (a) to (d) may be granted the
status of a certified taxable person for the other economic activities that they carry
out.
4.
A taxable person who applies for the status of a certified taxable person shall
supply all the information required by the tax authorities in order to enable them to
take a decision.
For the purposes of granting this tax status, tax authorities shall mean:
(a)

those of the Member State where the applicant has established his business;

(b)

those of the Member State with the fixed establishment of the applicant in
which his main accounts within the Community for tax purposes are held or
accessible, where the applicant has established his business outside the
Community but has one or more fixed establishments within the Community;

(c)

those of the Member State where the applicant has his permanent address or
where he usually resides, where he has neither a place of business nor a fixed
establishment.

5.

Where the application is refused, the grounds for refusal shall be notified by
the tax authorities to the applicant together with the decision. Member States
shall ensure that the applicant is granted a right of appeal against any decision
to refuse an application.

6.

The taxable person who has been granted the status of certified taxable person
shall inform the tax authorities without delay of any factor arising after the
decision was taken, which may affect or influence the continuation of that
status. The tax status shall be withdrawn by the tax authorities where the
criteria set out in paragraph 2 are no longer met.

7.

The status of a certified taxable person in one Member State shall be
recognised by the tax authorities of all the Member States.'

(2) The following Article 17a is inserted:
'Article 17a
1.
The transfer by a certified taxable person of goods forming part of his business
assets to another Member State under call-off stock arrangements shall not be treated
as a supply of goods for consideration.
2.
For the purposes of this Article, call-off stock arrangements shall be deemed to
exist where the following conditions are met:

EN

(a)

goods are dispatched or transported by a certified taxable person, or by a third
party on behalf of that certified taxable person, to another Member State with a
view that those goods shall be supplied there, at a later stage and after arrival,
to another certified taxable person;

(b)

the certified taxable person dispatching or transporting the goods is not
established in the Member State to which the goods are dispatched or
transported;

18

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(c)

the certified taxable person to whom the goods are supplied is identified for
VAT purposes in the Member State to which the goods are transported or
dispatched and both his identity and the VAT identification number assigned to
him by that Member State are known to the certified taxable person referred to
in point (b) at the time when the dispatch or the transport begins;

(d)

the certified taxable person dispatching or transporting the goods has recorded
the dispatch or transport in the register provided for in Article 243(3) and has
included the identity of the certified taxable person acquiring the goods and the
VAT identification number assigned to him by the Member State to which the
goods are dispatched or transported in the recapitulative statement as provided
for in Article 262.

3.
Where the conditions laid down in paragraph 2 are met, at the time of the
transfer of the right to dispose of the goods to the certified taxable person referred to
in point (c) of that paragraph, the following rules shall apply:
(a)

a supply of goods, exempt from VAT in accordance with Article 138(1) shall
be deemed to be made by the certified taxable person that dispatched or
transported the goods either by himself or by a third party on his behalf in the
Member State from which the goods were dispatched or transported;

(b)

an intra-Community acquisition of goods shall be deemed to be made by the
certified taxable person to whom those goods are supplied in the Member State
to which the goods were dispatched or transported.'

(3) In Article 138, paragraph 1 is replaced by the following:
'1.
Member States shall exempt the supply of goods dispatched or transported to a
destination outside their respective territory but within the Community, by or on
behalf of the vendor or the person acquiring the goods, where the following
conditions are met:
(a)

the goods are supplied to another taxable person, or to a non-taxable legal
person acting as such in a Member State other than that in which dispatch or
transport of the goods begins;

(b)

the taxable person or non-taxable legal person for whom the supply is made is
identified for VAT purposes in a Member State other than that in which
dispatch or transport of the goods begins;

(c)

reference is made to the person acquiring the goods in the recapitulative
statement submitted by the supplier under Article 262.'

(4) The following Article 138a is inserted:
'Article 138a
1.
For the purposes of applying the exemptions in Article 138 in the context of a
chain transaction situation, the intra-Community transport shall be ascribed to the
supply made by the provider to the intermediary operator, where the following
conditions are met:

EN

(a)

the intermediary operator communicates the name of the Member State of
arrival of the goods to the provider;

(b)

the intermediary operator is identified for VAT purposes in a Member State
other than that in which the dispatch or transport of the goods begins.

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2.
Where any of the conditions laid down in paragraph 1 is not met, in a chain
transaction situation the intra-Community transport shall be ascribed to the supply
made by the intermediary operator to the customer.
3.

For the purposes of this Article, the following definitions shall apply:

(a)

'chain transaction situation' shall mean a situation where successive supplies of
the same goods by taxable persons give rise to a single intra-Community
transport of those goods and where both the intermediary operator and the
provider are certified taxable persons;

(b)

'intermediary operator' shall mean a supplier in the chain other than the first
supplier, who dispatches or transports the goods, himself or by a third party on
his behalf;

(c)

'provider' shall mean the taxable person in the chain who supplies the goods to
the intermediary operator;

(d)

'customer' shall mean the taxable person to whom the intermediary operator
supplies the goods in the chain.'

(5) In Article 243, the following paragraph 3 is added:
'3. Every certified taxable person who transfers goods under the call-off stock
arrangements referred to in Article 17a shall keep a register of the following:
(a)

the goods dispatched or transported to another Member State and the address
where they are stored in this Member State;

(b)

the goods supplied at a later stage and after arrival in the Member State
referred to in point (a).

Every certified taxable person to whom goods are supplied under the call-off stock
arrangements referred to in Article 17a shall keep a register of those goods.'
(6) Article 262 is replaced by the following:
'Article 262
1. Every taxable person identified for VAT purposes shall submit a recapitulative
statement of the following:
(a)

the acquirers identified for VAT purposes to whom he has supplied goods in
accordance with the conditions specified in Article 138(1) and (2)(c);

(b)

the persons identified for VAT purposes to whom he has supplied goods which
were supplied to him by way of intra-Community acquisitions referred to in
Article 42;

(c)

the taxable persons, and the non-taxable legal persons identified for VAT
purposes, to whom he has supplied services, other than services that are
exempted from VAT in the Member State where the transaction is taxable, and
for which the recipient is liable to pay the tax pursuant to Article 196.

2. In addition to the information referred to in paragraph 1, every certified taxable
person shall identify the certified taxable persons for whom goods are intended and
which are dispatched or transported under call-off stock arrangements in accordance
with the conditions set out in Article 17a.'.
(7) The heading of Chapter 1 of Title XV is replaced by the following:

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'Definitive arrangements for the taxation of trade between Member States'
(8) Article 402 is replaced by the following:
'Article 402
The arrangements provided for in this Directive for the taxation of trade between
Member States are transitional and shall be replaced by definitive arrangements
based on the principle of taxation in the Member State of destination of the supply of
goods or services; of liability for VAT of the supplier, or the acquirer if he is a
certified taxable person, and of a single registration scheme for the declaration,
payment and deduction of the tax.'.
(9) Articles 403 and 404 are deleted.
Article 2
1.
Member States shall adopt and publish, by 31 December 2018 at the latest, the laws,
regulations and administrative provisions necessary to comply with this Directive. They shall
forthwith communicate to the Commission the text of those provisions.
They shall apply those provisions from 1 January 2019.
When Member States adopt those provisions, they shall contain a reference to this Directive
or be accompanied by such a reference on the occasion of their official publication. Member
States shall determine how such reference is to be made.
2.
Member States shall communicate to the Commission the text of the main provisions
of national law which they adopt in the field covered by this Directive.
Article 3
This Directive shall enter into force on the twentieth day following that of its publication in
the Official Journal of the European Union.
Article 4
This Directive is addressed to the Member States.
Done at Brussels,

For the Council
The President

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