Proposal for a COUNCIL DECISION authorizing the Republic of Finland to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes
COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 05. 02. 1997 COM(97) 42 final Proposals for COUNCIL DECISIONS authorizing the 15 Member States to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) Proposal for a COUNCIL DECISION authorizing the Kingdom of Belgium to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) -2- EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 10 September 1996, the government of the Kingdom of Belgium requested authorization, under Article 27 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Kingdom of Belgium. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Kingdom of Belgium wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). i- Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty rules safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, and pending approval of a proposal for a directive amending the Sixth Directive, that would be presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which Would limit the validity of the derogation to 31 December 1998. As this is a safeguard measure, it is necessary to limit it to what is strictly needed for combating the tax avoidance and, notwithstanding Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. for a ;directive amending the proposal It is therefore necessary, first of all, to restrict the effects of the1 authorization to services provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance. ! As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. However, it is not sufficient to provide a tax solution purely for services supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover services purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications services supplied to non-taxable persons. j For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essehtial to define the services covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. i Even though a growing number of services, such as advertising, information, recreational and leisure services, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These H- other services can be supplied other than through telecommunications networks, and the development of tax rules which differ according to the medium of transmission used might well distort competition. It is therefore preferable to distinguish between the transmission of messages and their content. This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. - b - Proposal for a COUNCIL DECISION Authorizing the Kingdom of Belgium to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes j THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member State to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; "Whereas, by registered letter to the Commission dated 10 September 1996, the Kingdom of Belgium requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; f Whereas the other Member States were informed on 20 December 1996 of the request made by the Kingdom of Belgium; Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 31 December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, : i HAS ADOPTED THIS DECISION: ! -c - Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC, tie Kingdom of Belgium is" hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community tp customers established in the Community. In the case of a Member State making use of thi^ facility, the provisions of Article 9(3)(b) of the Directive will also apply to these services. Telecommunications services shall be deemed to be services relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception'. The authorisation specified in this decision shall expire on 31 Decern ber 1998. Article 2 This Decision is addressed to the Kingdom of Belgium. Article 3 Done at Brussels, For the Council The President 1- - FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in ihe place of taxation of telecommunications services should provide better coverage of consumption of this type of service within the European Union. I However, it is impossible to quantity this increase in own resources. s- Proposal for a COUNCIL DECISION authorizing the Kingdom of Denmark to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) - ^- EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the Kingdom of Denmark requested authorization, under Article 27 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Kingdom of Denmark. That request involves a change to the rules governing the place of taxation of the supply of telecommunications seryices. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order^o avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Kingdom of Denmark wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145. 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996. p. 89). - \o Since the aim of the derogation requested is to alter the place 6f taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in' accordance with the Treaty rules safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, aid pending approval of a proposal'for a directive amending the Sixth Directive, that would hi presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. As this is a safeguard measure, it is necessary to limit it to what is strictly needed for combating tax avoidance and, notwithstanding the Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. 'directive amending the proposal for a , i It is therefore necessary, first of all, to restrict the effects of the! authorization to services provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance. As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules e for payment of the tax is in Article 9(2)(e) of the Sixth Directive, under which the person liab the taxable recipient of the service. However, it is not sufficient to provide a tax solution purely for services supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a Mill deduction entitlement, notably banks and insurance companies, and would not cover services purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications services supplied to non-taxable persons. For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the services covered. The. best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of services, such as advertising, information, recreational and leisure services, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These l\ other services can be supplied other than through telecommunications networks, and the development of tax rules which differ according to the medium of transmission used might well distort competition. It is therefore preferable to distinguish between the transinission of messages and their content. This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. - \1 Proposal for a COUNCIL DECISION Authorizing the Kingdom of Denmark to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the lajws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, j Having regard to the Treaty establishing the European Community, ! Having regard to the Sixth Council Directive (77/388/EEC) j of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, ! Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Cpuncil, acting unanimously on a proposal from the Commission, may authorize any Member jState to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; j Whereas, by registered letter to the Commission dated 6 December 1996, the Kingdom of Denmark requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; Whereas the other Member States were informed on 20 December 11996 of the request made by the Kingdom of Denmark; j Whereas the measure is necessary to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be "ranted until 31 December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, HAS ADOPTED THIS DECISION: - \ 2 >' Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC, the Kingdom of Denmark is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of this facility, the provisions of Article 9(3)(b) of the Directive will also apply to these services. Telecommunications services shall be deemed to be services relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception. The authorisation specified in this decision shall expire on 31 December 1998. Article 2 This Decision is addressed to the Kingdom of Denmark. Article 3 Done at Brussels, For the Council The President - VH- FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have th|e effect of increasing the Community's VAT own resources base since the change in {he place of taxation of telecommunications services should provide better coverage of consumption of this type of service within the European Union. However, it is impossible to quantify this increase in own resources. - l^ - Proposal for a COUNCIL DECISION authorizing the Federal Republic of Germany to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) - [it> EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the Federal Republic of Germany requested authorization, under Article 27 of the Sbcth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Federal Republic bf Germany. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place wherje telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services Its application means that telecommunications services consumed within the Community. provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Ur. ion. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States" public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Federal Republic of Germany wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that vvhere the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145. 13. 6. 1977. p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). - 0- >f taxation and that same Since the aim of the derogation requested is to alter the place o required by all the Member States, the Council's authorization would have an derogation is required by all the Member States, the Council's autl effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty ailes safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, aid pending approval of a proposal for a directive amending the Sixth Directive, that would b ï presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 3 1 December 1998. As this is a safeguard measure, it is necessary to limit it to what is strictly needed for combating the tax avoidance and, notwithstanding Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. for a jdirective amending the proposal It is therefore necessaiy, first of all, to restrict the effects of the; authorization to sei'vices provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules e for payment of the tax is in Article 9(2)(e) of the Sixth Directive, under which the person liab the taxable recipient of the service. However, it is not sufficient to provide a tax solution purely for sei'vices supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a lull deduction entitlement, notably banks and insurance companies, and would not cover sei'vices purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications services supplied to non-taxable persons. For the introduction of a specific rule governing the location of telecommunications sei'vices provided by suppliers established outside the Community, it is essential to define the services covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of services, such as advertising, information, recreational and leisure services, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These is other services can be supplied other than through telecommunications networks, and the development of tax rules which differ according to the medium of transmission used might well distort competition. It is therefore preferable to distinguish between the transmission of messages and their content. This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. - H- Proposal for a COUNCIL DECISION Authorizing the Federal Republic of Germany to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) |of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member jState to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; | i Whereas, by registered letter to the Commission dated 6 December 1996, the Federal Republic of Germany requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; Whereas the other Member States were informed on 20 December! 1996 of the request made by the Federal Republic of Germany; | Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of y AT; Whereas it is desirable that the derogation should be granted until 31 December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, HAS ADOPTED THIS DECISION: - Jo Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC Germany is hereby authorized include, within Article 9 telecommunications services provided by suppliers not established customers established in the Community. In the case of a Member facility, the provisions of Article 9(3 )(b) of the Directive will also apply to the Federal Republic of 2)(e) of the Directive, in the Community to State making use of this to these sei'vices. Telecommunications sei'vices shall be deemed to be seivices relating to the transmission, emission or reception of signs, signals, writing, images and sounds of information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception. Article 2 The authorisation specified in this decision shall expire on 3 1 December 1998. This Decision is addressed to the Federal Republic of Germany. Article 3 : Done at Brussels, For the Council The President ~2\ FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in the place of taxation of telecommunications services should provide better coverage of consumption of this type of service within the European Union. However, it is impossible to quantify this increase in own resources. 21 Proposal for a COUNCIL DECISION authorizing the Hellenic Republic to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member Stales relating to turnover taxes (presented by the Commission) -lb- EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 2 September 1996, the government of the Hellenic Republic requested authorization, under Article 27 of the Sbcth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Hellenic Republic. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Hellenic Republic wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). 2l\- Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty 1*11 les safeguarding the rights of the European Parliament and the Economic and Social Committee, Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, aid pending approval of a proposal for a directive amending the Sixth Directive, that would be presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 3 1 December 1998. As this is a safeguard measure, it is necessary to limit it to what is strictly needed for combating tax avoidance and, notwithstanding Sixth VAT Directive, to use a tax mechanism that is already well kjiown and that is therefore easy to apply. directive amending the proposal for a the It is therefore necessaiy, first of all, to restrict the effects of the; authorization to services provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance. ! As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. However, it is not sufficient to provide a tax solution purely for services supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover sei'vices purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications sei'vices supplied to non-taxable persons. For the introduction of a specific rule governing the location of telecommunications semces provided by suppliers established outside the Community, it is essential to define the sei'vices covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of services, such as advertising, information, recreational and leisure semces, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These is other services can be supplied other than through telecommunications development of tax rules which differ according to the medium of distort compétition. messages and their content. It is therefore preferable to distinguish betlween networks, and the transmission used might well the transmission of This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. i - 2t Proposal for a COUNCIL DECISION Authorizing the Hellenic Republic to apply a measure derog: Sixth Directive (77/388/EEC) on the harmonization of the law iting from Article 9 of the s of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) jof 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular A(ticle 27 thereof, Having regard to the proposal from the Commission, i Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member State to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; Whereas, by registered letter to the Commission dated 2 September 1996, the Hellenic Republic requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; r Whereas the other Member States were informed on 20 December by the Hellenic Republic; 996 of the request made Whereas the measure is necessary to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 3 1 December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, HAS ADOPTED THIS DECISION: - &- Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC, the Hellenic Republic is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of thi^ facility, the provisions of Article 9(3)(b) of the Directive will also apply to these sei'vices. Telecommunications services shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity, for such transmission, emission or reception. The authorisation specified in this decision shall expire on 31 December 1998 Article 2 This Decision is addressed to the Hellenic Republic. Article 3 Done at Brussels, For the Council The President - 2& FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in the place of taxation of telecommunications sei'vices should provide better coverage of consumption of this type of service within the European Union. I However, it is impossible to quantify this increase in own resources. ! i - 2°\ Proposal for a COUNCIL DECISION authorizing the Kingdom of Spain to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) - 3 o- EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the Kingdom of Spain requested authorization, under Article 27 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sbcth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Kingdom of Spain. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Kingdom of Spain wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would bfc fully achieved as regards telecommunications services. OJ No L 145. 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996. p. 89). ' ^> ° l- *, Since the aim of the derogation requested is to alter the place if taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty rules safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets! the legitimate interests of the Member States, namely the need to combat tax avoidance, and pending approval of a proposal for a directive amending the Sixth Directive, that would be presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. j i j As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating the tax avoidance and, notwithstanding Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. for a directive amending the proposal It is therefore necessary, first of all, to restrict the effects of the authorization to services provided by a supplier established outside the Community, since only those sei'vices currently escape taxation and lead to tax avoidance. i i I As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the seivice. ! I However, it is not sufficient to provide a tax solution purely for services supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover sei'vices purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications services supplied to non-taxable persons. ( For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the services covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. I i Even though a growing number of services, such as advertising, information, recreational and leisure services, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications sei'vices. These »• • • I L -2,2 other services can be supplied other than through telecommunications networks, and the development of tax rules which differ according to the medium of transmission used might well distort competition. It is therefore preferable to distinguish between the transmission of messages and their content. This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. - 33 ~ Proposal for a COUNCIL DECISION Authorizing the Kingdom of Spain to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, i Having regard to the Sixth Council Directive (77/388/EEC) |of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member State to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; Whereas, by registered letter to the Commission dated 6 December 1996, the Kingdom of Spain requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; ] Whereas the other Member States were informed on 20 December by the Kingdom of Spain; 996 of the request made Whereas the measure is necessary to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 3 1 December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, | i HAS ADOPTED THIS DECISION: -&r Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC, the Kingdom of Spain is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of this facility, the provisions of Article 9(3)(b) of the Directive will also apply to these sei'vices. Telecommunications services shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception!. The authorisation specified in this decision shall expire on 31 December 1998 Article 2 This Decision is addressed to the Kingdom of Spain. Article Done at Brussels, For the Council The President 2 » ^" FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in the place of taxation of telecommunications sei'vices should provide better coverage of consumption of this type of service within the European Union. However, it is impossible to quantify this increase in own resources. - 3 6' Proposal for a COUNCIL DECISION authorizing the French Republic to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) - 2 > 1- EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the French Republic requested authorization, under Article 27 of the Sbcth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sbcth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the French Republic. That request involves a change to the rules governing the place of taxation of the supply of * telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications service^ arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the French Republic wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). 3 s- Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. Hov/ever, such an amendment can be made only in accordance with the Treaty rules safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, aid pending approval of a proposal for a directive amending the Sixth Directive, that would bp presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. As this is a safeguard measure, it is necessary to limit it to what is strictly needed for combating tax avoidance and, notwithstanding the Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. for a directive amending the proposal It is therefore necessary, first of all, to restrict the effects of thej authorization to services provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance. ! As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. However, it is not sufficient to provide a tax solution purely for sei'vices supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and jnsurance companies, and would not cover services purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications services supplied to non-taxable persons. For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the services covered. The best solution is to use a definition which is already well established at ,. i. international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of services, such as advertising, information, recreational and leisure sei'vices, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These 3iï- other services can be supplied other than through telecommunications development of tax rules which differ according to the medium of transmi distort competition. It is therefore preferable to distinguish between messages and their content. networks, and the ission used might well the transmission of This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. 14. 0 Proposal for a COUNCIL DECISION Authorizing the French Republic to apply a measure derogating Sixth Directive (77/388/EEC) on the harmonization of the lawjs from Article 9 of the of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) j of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, i ! Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member iState to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; Whereas, by registered letter to the Commission dated 6 December requested Directive 77/388/EEC; introduce a measure derogatin authorization to 996, the French Republic from Article 9 of Whereas the other Member States were informed on 20 December by the French Republic; 1996 of the request made Whereas the measure is necessary to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 3 j December 1998, in order to allow the Council to adopt a general Community solution bjased on the Commission proposal, ! FIAS ADOPTED THIS DECISION: j - 4-1 Article By way of derogation from Article 9(1) of Directive 77/388/EEC hereby authorized to include, within Article 9(2)(e) of the Directive services provided by suppliers not established in the Community to the Community. In the case of a Member State making use of thi$ Article 9(3 )(b) of the Directive will also apply to these sei'vices. the French Republic is telecommunications customers established in facility, the provisions of Telecommunications sei'vices shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception^ The authorisation specified in this decision shall expire on 3 1 December 1998. Article 2 j This Decision is addressed to the French Republic. Article 3 Done at Baissels, For the Council The President cv2- FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in he place of taxation of telecommunications sei'vices should provide better coverage of consumption of this type of service within the European Union. However, it is impossible to quantify this increase in own resources. M-3 Proposal for a COUNCIL DECISION authorizing Ireland to apply a measure derogating of the Sixth VAT Directive (77/388/EEC) on the han from Article 9 «ionization of the laws of the Member States relating to tin nover taxes (presented by the Commission) LV^ EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of Ireland requested authorization, under Article 27 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by Ireland. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, Ireland wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). 4-^ Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty rules safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, aid pending approval of a proposal for a directive amending the Sixth Directive, that would b i presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating the tax avoidance and, notwithstanding Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. for a idirective amending the proposal j It is therefore necessaiy, first of all, to restrict the effects of thé authorization to services provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance. As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. However, it is not sufficient to provide a tax solution purely for services supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover sei'vices purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications sei'vices supplied to non-taxable persons. : For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the services covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of services, such as advertising, information, recreational and leisure sei'vices, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These - Mr<o other services can be supplied other than through telecommunications networks, and the development of tax rules which differ according to the medium of transmission used might well distort competition. It is therefore preferable to distinguish between the transmission of messages and their content. This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. -^ Proposal for a COUNCIL DECISION Authorizing Ireland to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member jState to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; Whereas, by registered letter to the Commission dated 6 December 1996, Ireland requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; Whereas the other Member States were informed on 20 December 11996 of the request made by Ireland; 1 Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 3 December 1998, in order to allow the Council to adopt a geneial Community solution based on the Commission proposal, HAS ADOPTED THIS DECISION: H:% ' Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC, Ireland is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of this facility, the provisions of Article 9(3)(b) of the Directive will also apply to these sei'vices. Telecommunications services shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, raclio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception^ The authorisation specified in this decision shall expire on 31 December 1998. Article 2 Article 3 This Decision is addressed to Ireland. Done at Brussels, For the Council The President - 4 - 1- FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in ihe place of taxation of telecommunications sei'vices should provide better coverage of consumption of this type of service within the European Union. However, it is impossible to quantify this increase in own resources. SO - Proposal for a COUNCIL DECISION ! I authorizing the Italian Republic to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) - Si EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the Italian Republic requested authorization, under Article 27 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Italian Republic. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Italian Republic wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). - SZ' Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty ailes safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, aid pending approval of a proposal for a directive amending the Sixth Directive, that would hi presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 3 1 December 1998. As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating tax avoidance and, notwithstanding the Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. directive amending the proposal for a j It is therefore necessaiy, first of all, to restrict the effects of the! authorization to services provided by a supplier established outside the Community, since only those sei'vices currently escape taxation and lead to tax avoidance. ! As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. However, it is not sufficient to provide a lax solution purely for services supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover services purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications sei'vices supplied to non-taxable persons. ! i For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the services covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of services, such as advertising, information, recreational and leisure sei'vices, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications sei'vices. These 53 other services can be supplied other than tlnough telecommunications networks, and the development of tax rules which differ according to the medium of transmission used might well distort competition. It is therefore preferable to distinguish betjween the transmission of messages and their content. This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. s*- Proposal for a COUNCIL DECISION Authorizing the Italian Republic to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, i i Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Cbuncil, acting unanimously on a proposal from the Commission, may authorize any Member (State to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; i | Whereas, by registered letter to the Commission dated 6 December requested Directive 77/388/EEC; introduce a measure authorization to derogating 996, the Italian Republic from Article 9 of Whereas the other Member States were informed on 20 December; 1996 of the request made by the Italian Republic; Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purbhase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 3 1 December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, HAS ADOPTED THIS DECISION: - 5S- Article By way of derogation from Article 9(1) of Directive 77/388/EEC hereby authorized to include, within Article 9(2)(e) of the Directive services provided by suppliers not established in the Community to the Community. In the case of a Member State making use of this Article 9(3)(b) of the Directive will also apply to these sei'vices. the Italian Republic is telecommunications customers established in facility, the provisions of Telecommunications services shall be deemed to be services relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception[ The authorisation specified in this decision shall expire on 3 1 Decern ber 1998. Article 2 This Decision is addressed to the Italian Republic. Article Done at Brussels, For the Council The President SL' FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in he place of taxation of telecommunications sei'vices should provide better coverage of consumption of this type of service within the European Union. However, it is impossible to quantify this increase in own resources. SV Proposa! for a COUNCIL DECISION authorizing the Grand Duchy of Luxemburg to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member Stales relating to turnover taxes (presented by the Commission) ss EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the Grand Duchy of Luxemburg requested authorization, under Article 27 of the Sbcth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Grand Duchy of Luxemburg. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services Its application means that telecommunications services consumed within the Community. provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Grand Duchy of Luxemburg wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). ^ 5^ Since the aim of the derogation requested is to alter the place if taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself However, such an amendment can be made only in accordance with the Treaty rules safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, and pending approval of a proposal for a directive amending the Sixth Directive, that would be presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating tax avoidance and, notwithstanding the Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. for a -directive amending the proposal. It is therefore necessaiy, first of all, to restrict ihe effects of the! authorization to sei'vices provided by a supplier established outside the Community, since onjy those services currently escape taxation and lead to tax avoidance. As regards the definition of the place of taxation, a mechanism mu$t be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. ! However, it is not sufficient to provide a tax solution purely for services supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover sei'vices purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications services supplied to non-taxable persons. For the introduction of a specific rule governing the location of te ecommunications sei'vices provided by suppliers established outside the Community, it is essential to define the sei'vices covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of services, such as advertising, information, recreational and leisure sei'vices, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These - Go - other services can be supplied other than through telecommunications networks, and the development of tax rules which differ according to the medium of transmission used might well distort competition. \t is therefore preterable to distinguish between the transmission of messages and their content. This proposal for a Council decision is identical to the proposals presented to the Council on the same date in respect of the fourteen other Member States. by the Commission - <L\- Proposal for a COUNCIL DECISION Authorizing the Grand Duchy of Luxemburg to apply a me; sure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, ; Whereas, pursuant to Article 27(1) of Directive 77/38S/EEC, the Cbuncil, acting unanimously on a proposal from the Commission, may authorize any Member (State to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; ' Wliereas, by registered letter to the Commission dated 6 December 11996, the Grand Duchy of Luxemburg requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; Whereas the other Member States were informed on 20 December 1996 of the request made by the Grand Duchy of Luxemburg; Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to pur:hase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 31 December 1998, in order to allow the Council to adopt a général Community solution based on the Commission proposal, | HAS ADOPTED THIS DECISION: I - CZ' Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC, the Grand Duchy of Luxemburg is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of this facility, the provisions of Article 9(3 )(b) of the Directive will also apply to these services. Telecommunications services shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception. Article 2 The authorisation specified in this decision shall expire on 3 1 December 1998. This Decision is addressed to the Grand Duchy of Luxemburg. Article 3 Done at Brussels, For the Council The President - 43 FINANCIAL STATEMENT Once adopted, tliis proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in ihe place of taxation of telecommunications services should provide better coverage of consumption of tliis type of service within the European Union. However, it is impossible to quantify this increase in own resources, j (&<+ Proposal for a COUNCIL DECISION authorizing the Kingdom of the Netherlands to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) fcS- EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 30 September 1996, the government of the Kingdom of the Netherlands requested authorization, under Article 27 of the Sbcth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Kingdom of the Netherlands. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services Its application means that telecommunications services consumed within the Community. provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment ifi his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Kingdom of the Netherlands wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). - GG - Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty rules safeguarding the rights of the Accordingly, the measure European Parliament and the Economic and Social Committee the legitimate interests of envisaged can be authorized only as an interim measure that meets the Member States, namely the need to combat tax avoidance, aid pending approval of a proposal for a directive amending the Sixth Directive, that would be presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating tax avoidance and, notwithstanding the Sixth VAT Directive, to use a tax mechanism that is already well kiown and that is therefore easy to apply. for a directive amending the proposal It is therefore necessary, first of all; to restrict the effects of thej authorization to services provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance. As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. \ However, it is not sufficient to provide a tax solution purely for sei'vices supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a flill deduction entitlement, notably banks and insurance companies, and would not cover sei'vices purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications services supplied to non-taxable persons. I For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the services covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of services, such as advertising, information, recreational and leisure services, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications sei'vices. These i - CT- other services can be supplied other than through telecommunications development of tax rules which differ according to the medium of transmission distort competition. messages and their content. It is therefore preferable to distinguish between networks, and the used might well the transmission of This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. - £& Proposal for a COUNCIL DECISION Authorizing the Kingdom of the Netherlands to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) jof 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member (State to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; j I Whereas, by registered letter to the Commission dated 30 September 1996, the Kingdom of the Netherlands requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; ; Whereas the other Member States were informed on 20 December by the Kingdom of the Netherlands; 996 of the request made Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of y AT; i Whereas it is desirable that the derogation should be granted until 3 I December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, HAS ADOPTED THIS DECISION: I - G^ Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC, the Kingdom of the Netherlands is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications sei'vices provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of this facility, the provisions of Article 9(3 )(b) of the Directive will also apply to these services. Telecommunications sei'vices shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception. Article 2 The authorisation specified in this decision shall expire on 31 December 1998. This Decision is addressed to the Kingdom of the Netherlands. Article 3 Done at Brussels, For the Council The President - 3o- FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in the place of taxation of telecommunications sei'vices should provide better coverage of consumption of this type of service within the European Union. However, it is impossible to quantify this increase in own resources. - =H~ Proposal for a COUNCIL DECISION authorizing the Republic of Austria to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) =12- EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 September 1996, the government of the Republic of Austria requested authorization, under Article 27 of the Sbcth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sbcth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Republic of Austria. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. t This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without tfye supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Republic of Austria wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be, fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as hist amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996. p. 89). - 7 3- Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. Hoyever, such an amendment can be made only in accordance with the Treaty rules safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, and pending approval of a proposal for a directive amending the Sixth Directive, that would be presented to the Council af the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating tax avoidance and, notwithstanding Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. directive amending the proposal for a the It is therefore necessaiy, first of all, to restrict the effects of the! authorization to services provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance. | As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liah e for payment of the tax is the taxable recipient of the service. However, it is not sufficient to provide a tax solution purely for services supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover services purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunications sei'vices supplied to non-taxable persons. j For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the services covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of services, such as advertising, information, recreational and leisure services, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These ! * v- other services can be supplied other than through telecommunications development of tax rules which differ according to the medium of distort competition. messages and their content. It is therefore preferable to distinguish between networks, and the transmission used might well the transmission of This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. - ^fs- Proposal for a COUNCIL DECISION Authorizing the Republic of Austria to apply a measure deroga Sixth Directive (77/388/EEC) on the harmonization of the h ilWS ing from Article 9 of the of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) |of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, i I i Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Cbuncil, acting unanimously on a proposal from the Commission, may authorize any Member iState to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; Whereas, by registered letter to the Commission dated 6 September 1996, the Republic of Austria requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; ] Whereas the other Member States were informed on 20 December 11996 of the request made by the Republic of Austria; Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 3 to allow the Council to adopt a général Community solution proposal, December 1998, in order biased on the Commission HAS ADOPTED THIS DECISION: TG>- Article 1 By way of derogatiomfrom Article 9(1) of Directive 77/388/EEC, the Republic of Austria is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of thi^ facility, the provisions of Article 9(3)(b) of the Directive will also apply to these services. Telecommunications sei'vices shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception The authorisation specified in this decision shall expire on 31 December 1998 Article 2 This Decision is addressed to the Republic of Austria. Article 3 Done at Brussels, For the Council The President TÏ FINANCIAL STATEMENT Once adopted, tliis proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in the place of taxation of telecommunications semces should provide better coverage of consumption of tliis type of service within the European Union. However, it is impossible to quantity this increase in own resources. 3 8- Proposal for a COUNCIL DECISION authorizing the Portuguese Republic to apply a measure der of the Sixth VAT Directive (77/388/EEC) on the harmpniz ogating from Article 9 ation of the laws of the Member Stales relating to turnover taxes (presented by the Commission) ^ EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the Portuguese Republic requested authorization, under Article 27 of the Sbcth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sbcth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Portuguese Republic. • * That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications service^ arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Portuguese Republic wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996. p. 89). - So ' Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty rules safegiarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, aid pending approval of a proposal for a directive amending the Sixth Directive, that would b^ presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating the tax avoidance and, notwithstanding Sixth VAT Directive, to use a tax mechanism that is already well kpown and that is therefore easy to apply. 'directive amending the proposal for a ! It is therefore necessaiy, first of all, to restrict the effects of the authorization to services provided by a supplier established outside the Community, since only those sei'vices currently escape taxation and lead to tax avoidance. i As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number, of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be aclueved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. I i However, it is not sufficient to provide a tax solution purely for services supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover services purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for télécommunications services supplied to non-taxable persons. For the introduction of a specific rule governing the location of telecommunications sei'vices provided by suppliers established outside the Community, it is essential to define the sei'vices covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of sei'vices, such as advertising, information, recreational and leisure sei'vices, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These €1- other services can be supplied other than through telecommunications networks, and the development of tax rules which differ according to the medium of transmission used might well distort competition. It is therefore preferable to distinguish between the transmission of messages and their content. This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. - 82 Proposal foi- a COUNCIL DECISION Authorizing the Portuguese Republic to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes- Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, ! Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member iState to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; Whereas, by registered letter to the Commission dated 6 December 1996, the Portuguese Republic requested authorization to introduce a measure derogating from Aiticle 9 of Directive 77/388/EEC; j Whereas the other Member States were informed on 20 December: 1996 of the request made by the Portuguese Republic; j Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to pur:hase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 3 December 1998, in order to allow the Council to adopt a geneial Community solution based on the Commission proposal, | i j I HAS ADOPTED THIS DECISION: - S3 Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC, the Portuguese Republic is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of this facility, the provisions of Article 9(3)(b) of the Directive will also apply to these sei'vices. Telecommunications services shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception. The authorisation specified in this decision shall expire on 31 December 1998. Article 2 j Tliis Decision is addressed to the Portuguese Republic. Article 3 Done at Brussels, ; ! i i i i For the Council The President - *Si\. FINANCIAL STATEMENT Once adopted, tliis proposal for a Council decision will have the Community's VAT own resources base since the change in telecommunications services should provide better coverage of consum service within the European Union. effect of increasing the :he place of taxation of ption of this type of However, it is impossible to quantity this increase in own resources. - gs- Proposal for a COUNCIL DECISION authorizing the Republic of Finland to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) - s& - EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the Republic of Finland requested authorization, under Article 27 of the Sbcth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sbcth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Republic of Finland. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has hi^ permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications seivices provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Republic of Finland wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. la this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145. 13. 6. 1977. p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996. p. 89). - 8Ï Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty rules safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, and pending approval of a proposal for a directive amending the Sixth Directive, that would be presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. j As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating the tax avoidance and, notwithstanding Sixth VAT Directive, to use a tax mechanism that is already well kpown and that is therefore easy to apply. for a directive amending the proposal It is therefore necessaiy, first of all, to restrict the effects of the authorization to services provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance. j As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. j i However, it is not sufficient to provide a tax solution purely for sei'vices supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover sei'vices purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsory for telecommunicatipns services supplied to non-taxable persons. j For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the sei'vices covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of sei'vices, such as advertising, information, recreational and leisure services, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications sei'vices. These other services can be supplied other than through telecommunications networks, and the development of tax rules wliich differ according to the mediLim of transmission used might well distort competition. It is therefore preferable to distinguish betjween the transmission of messages and their content. This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. - <§°[- Proposal for a COUNCIL DECISION Authorizing the Republic of Finland to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, I Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member iState to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; j Whereas, by registered letter to the Commission dated 6 December 1996, the Republic of Finland requested authorization to introduce a measure derogating from Article 9 of Directive 77/388/EEC; Whereas the other Member States were informed on 20 December by the Republic of Finland; 996 of the request made Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 31 December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, | i HAS ADOPTED THIS DECISION: - ^O - Article 1 By way of derogation from Article 9(1) of Directive 77/388/EEC, the Republic of Finland is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of tliis facility, the provisions of Article 9(3)(b) of the Directive will also apply to these sei'vices. Telecommunications services shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception!. The authorisation specified in this decision shall expire on 31 December 1998 Article 2 This Decision is addressed to the Republic of Finland. Article 3 Done at Brussels, For the Council The President - ^ \- FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in ihe place of taxation of telecommunications sei'vices should provide better coverage of consumption of tliis type of service within the European Union. j However, it is impossible to quantify this increase in own resources. - 9 2- Proposal for a COUNCIL DECISION authorizing the Kingdom of Sweden to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) ^3 EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the Kingdom of Sweden requested authorization, under Article 27 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. • In accordance with Article 27(3) of the Sbcth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the Kingdom of Sweden. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established his business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without thje supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in this activity sector is simply one of tax avoidance. In order to remedy this situation, the Kingdom of Sweden wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). *H Since the aim of the derogation requested is to alter the place of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty ailes safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets! the legitimate interests of the Member States, namely the need to combat tax avoidance, and pending approval of a proposal for a directive amending the Sixth Directive, that would be presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. ' ol As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating tax avoidance and, notwithstanding the Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. for a directive amending the proposal It is therefore necessaiy, first of ail, to restrict the effects of the authorization to services provided by a supplier established outside the Community, since only those services currently escape taxation and lead to tax avoidance. As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules in Article 9(2)(e) of the Sixth Directive, under which the person liable for payment of the tax is the taxable recipient of the service. j I However, it is not sufficient to provide a tax solution purely for sei'vices supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and jnsurance companies, and would not cover sei'vices purchased by individuals. In order to fill tliis gap, application of Article 9(3)(b) must be made compulsory for telecommunications services supplied to non-taxable persons. For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the services covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a srowinsi number of services, such as advertising, information, recreational and leisure services, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications sei'vices. These ^s other services can be supplied other than through telecommunidations development of tax rules which differ according to the medium of transmission distort competition. messages and their content. It is therefore preferable to distinguish between networks, and the used might well the transmission of This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. e\f0- Proposal for a COUNCIL DECISION Authorizing the Kingdom of Sweden to apply a measure derogating from Article 9 of the Sixth Directive (77/388/EEC) on the harmonization of the lajws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, j Having regard to the Treaty establishing the European Community, j | Having regard to the Sixth Council Directive (77/388/EEC) jof 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, i ! Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member State to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; j I Whereas, by registered letter to the Commission dated 6 December 1996, the Kingdom of Sweden requested authorization to introduce a measure derogating from Ailicle 9 of Directive 77/388/EEC; ! Whereas the other Member States were informed on 20 December1! 1996 of the request made by the Kingdom of Sweden; ; Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 3 December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, j HAS ADOPTED THIS DECISION. 9r\~ Article By way of derogation from Ailicle 9(1) of Directive 77/388/EEC, the Kingdom of Sweden is hereby authorized to include, within Article 9(2)(e) of the Directive, telecommunications services provided by suppliers not established in the Community to customers established in the Community. In the case of a Member State making use of tlii^ facility, the provisions of Article 9(3)(b) of the Directive will also apply to these services. Telecommunications sei'vices shall be deemed to be services relhtin emission or reception of signs, signals, writing, images and sounds or by wire, radio, optical or other electromagnetic systems, including the the right to use capacity for such transmission, emission or reception. g to the transmission, information of any nature transfer or assignment of The authorisation specified in this decision shall expire on 31 December 1998. Article 2 This Decision is addressed to the Kingdom of Sweden. Article 3 Done at Brussels, For the Council The President - ^8- FINANCIAL STATEMENT Once adopted, this proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in the place of taxation of telecommujriications sei'vices should provide better coverage of consumption of this type of service within the European Union. I However, it is impossible to quantify this increase in own resources. - ^n Proposal for a COUNCIL DECISION authorizing the United Kingdom to apply a measure derogating from Article 9 of the Sixth VAT Directive (77/388/EEC) on the harmonization of the laws of the Member States relating to turnover taxes (presented by the Commission) - l OO - EXPLANATORY MEMORANDUM By registered letter to the Commission's Secretariat-General dated 6 December 1996, the government of the United Kingdom requested authorization, under Article 27 of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment,1 to apply a measure derogating from Article 9 of that Directive. In accordance with Article 27(3) of the Sixth Directive, the other Member States were informed by letter dated 20 December 1996 of the request made by the United Kingdom. That request involves a change to the rules governing the place of taxation of the supply of telecommunications services. According to the legislation in force (Article 9(1) of the Sixth Directive), the place where telecommunications services are supplied is deemed to be the place where the supplier has established hi?; business or has a fixed establishment from which the services are supplied or, in the absence of such a place of business or fixed establisiunent, the place where he has his permanent address or usually resides. This rule poses problems regarding the effective taxation of telecommunications services consumed within the Community. Its application means that telecommunications services provided by a supplier established outside the European Union are outside the scope of the tax even if those services are actually consumed within the Union. Community consumers are increasingly turning to suppliers of services established outside the European Union in order to avoid payment of VAT. The problem of the effective taxation of telecommunications services arose following the development of technical means of providing such services without the supplier needing to use a network belonging to him or another form of fixed establishment in his customer's country. This development is leading to tax revenue losses for Member States' public finances and is also undermining the competitiveness of European telecommunications companies. The situation in tliis activity sector is simply one of tax avoidance. In order to remedy this situation, the United Kingdom wishes to be able to apply different rules regarding the place of taxation and for that place to be regarded as that where the customer has established his business or has a fixed establishment for which the service is provided or, failing that, the place where he has his permanent address or usually resides. In this way, the aim of VAT, which is to tax all consumption within the Community, would be fully achieved as regards telecommunications services. OJ No L 145, 13. 6. 1977, p. 1. Directive as last amended by Directive 96/95/EC (OJ No L 338, 28. 12. 1996, p. 89). \o[- Since the aim of the derogation requested is to alter the place Of taxation and that same derogation is required by all the Member States, the Council's authorization would have an effect equivalent to an amendment of the Sixth Directive itself. However, such an amendment can be made only in accordance with the Treaty ailes safeguarding the rights of the European Parliament and the Economic and Social Committee. Accordingly, the measure envisaged can be authorized only as an interim measure that meets the legitimate interests of the Member States, namely the need to combat tax avoidance, a id pending approval of a proposal for a directive amending the Sixth Directive, that would hi presented to the Council at the same time. Similarly, the duration of the derogation must be limited to what is necessary for the adoption of Community legislation and its transposai into national law. A period of approximately two years would be sufficient in this regard, which would limit the validity of the derogation to 31 December 1998. As this is a safeguard measure, it is necessaiy to limit it to what is strictly needed for combating tax avoidance and, notwithstanding the Sixth VAT Directive, to use a tax mechanism that is already well known and that is therefore easy to apply. for a [directive amending the proposal ! I It is therefore necessaiy, first of all, to restrict the effects of the authorization to services provided by a supplier established outside the Community, since only those sei'vices currently escape taxation and lead to tax avoidance. As regards the definition of the place of taxation, a mechanism must be chosen which creates the least number of specific tax obligations for suppliers established outside the Community and thus does not prejudge the tax arrangements to be adopted in connection with the amendment of the Sixth Directive. These objectives can best be achieved by applying the rules e for payment of the tax is in Article 9(2)(e) of the Sixth Directive, under which the person liabi the taxable recipient of the service. However, it is not sufficient to provide a tax solution purely for sei'vices supplied to taxable persons. Such a solution would cover only the final consumption of taxable persons not benefiting from a full deduction entitlement, notably banks and insurance companies, and would not cover services purchased by individuals. In order to fill this gap, application of Article 9(3)(b) must be made compulsoiy for telecommunications services supplied to non-taxable persons. j For the introduction of a specific rule governing the location of telecommunications services provided by suppliers established outside the Community, it is essential to define the services covered. The best solution is to use a definition which is already well established at international level. Such a definition is provided by the Melbourne Convention. Even though a growing number of servicer, such as advertising, information, recreational and leisure services, are currently supplied through telecommunications networks, it is not appropriate to include them in the definition of telecommunications services. These i i - V ol other services can be supplied other than through telecommunications networks, and the development of tax rules wliich differ according to the medium of transmission used might well distort competition. ,It is therefore preferable to distinguish between the transmission of messages and their content. This proposal for a Council decision is identical to the proposals presented by the Commission to the Council on the same date in respect of the fourteen other Member States. - I03- Proposal for a COUNCIL DECISION Authorizing the United Kingdom to apply a measure derog; Sixth Directive (77/388/EEC) on the harmonization of the h iitihg from Article 9 of the iws of the Member States relating to turnover taxes (presented by the Commission) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, j i Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, and in particular Article 27 thereof, Having regard to the proposal from the Commission, Whereas, pursuant to Article 27(1) of Directive 77/388/EEC, the Council, acting unanimously on a proposal from the Commission, may authorize any Member State to introduce special measures for derogation from that Directive in order to simplify the procedure for charging the tax or to prevent certain types of tax evasion or avoidance; Whereas, by registered letter to the Commission dated 6 December 1996, the United Kingdom requested from Article 9 of Directive 77/388/EEC; introduce a measure derogating authorization to Whereas the other Member States were informed on 20 December by the United Kingdom; 996 of the request made Whereas the measure is necessaiy to counter the tax avoidance effects that have led a growing number of Community taxable and non-taxable persons to purchase telecommunications services outside the Community solely in order to avoid payment of VAT; Whereas it is desirable that the derogation should be granted until 31 December 1998, in order to allow the Council to adopt a general Community solution based on the Commission proposal, HAS ADOPTED THIS DECISION: - VOi^ Article By way of derogation from Article 9(1) of Directive 77/388/EEC! hereby authorized to include, within Article 9(2)(e) of the Directive services provided by suppliers not established in the Community to the Community. In the case of a Member State making use of thi$ Article 9(3)(b) of the Directive will also apply to these sei'vices. the United Kingdom is telecommunications customers established in facility, the provisions of Telecommunications sei'vices shall be deemed to be sei'vices relating to the transmission, emission or reception of signs, signals, writing, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems, including the transfer or assignment of the right to use capacity for such transmission, emission or reception Article 2 ; The authorisation specified in this decision shall expire on 31 December 1998. This Decision is addressed to the United Kiimdom. Article 3 ! Done at Brussels, For the Council The President io^> - FINANCIAL STATEMENT Once adopted, tliis proposal for a Council decision will have the effect of increasing the Community's VAT own resources base since the change in the place of taxation of telecommunications services should provide better coverage of consumption of this type of service within the European Union. However, it is impossible to quantify this increase in own resources. - VOCo ISSN 0254-1475 COM(97) 42 final DOCUMENTS EN 09 06 10 Catalogue number : CB-CO-97-038-EN-C ISBN 92-78-15521-7 Office for Official Publications of the European Communities L-2985 Luxembourg