18.8.2006   

EN

Official Journal of the European Union

C 195/54

2.1

Since the first and second EC directives of 11 April 1967, the Community has set itself the goal of dismantling fiscal barriers between Member States. A unified place of taxation is needed to make this vision come true. The country of origin principle which the Directive aims to apply would result in taxation in the country of establishment of all taxable activities conducted by economic operators in that country and within the framework of the European Community. According to this principle, goods delivered from, say, France to another Member State would be subject to taxation at French VAT rates. The same would apply to services provided from France.

2.2

However, to avoid distortions of competition, the country of origin principle would require VAT rates in individual Member States to be aligned. Above all, an internal clearing system would be needed, given that value added tax represents a significant proportion of tax revenue in Member States and of EU funding.

2.3

With this in mind, the EU has decided not to apply the country of origin principle, or at least not during a lengthy transition period.

2.4

However, the European Commission has taken various measures to boost trade between individual Member States, to remove bureaucratic obstacles and to reduce or if possible entirely avoid distortions of competition, in particular those arising from differing taxation rates. In the past, the Council in particular has contributed to the retention of divergent systems. The EESC continues to support the Commission in all its efforts to align these systems and to promote the Internal Market.

4.3.1

A strict distinction needs to be drawn between business-to-business services (services provided to taxable persons (1)) and business-to-consumer services (services provided to non-taxable persons (2)). The proposal in question clearly differentiates between treatment of these two eventualities.

4.3.2

In the case of services to taxable persons, the general rule should be that the place of supply of services depends on the place where the client is established, rather than the service provider.

4.3.3

The document under review proposes to maintain the place of establishment of the service provider as the general rule, in the case of services provided to non-taxable persons. The reason for this decision is that taxation of services provided to non-taxable persons in other EU Member States would result in an excessive administrative burden on enterprises providing the services, such as a requirement to register as a VAT payer in the countries concerned.

4.3.4

In the absence of a mechanism enabling tax to be collected in the Member States of consumption without creating undue administrative complications, it is unrealistic to tax all supplies to non-taxable persons at the place of consumption.

4.3.5

However, some exceptions to this general rule are necessary.

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It is proposed to insert a sixth paragraph, which stipulates that services rendered between establishments shall not be treated under the directive as supplies.

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Paragraph 2 has been reinserted and defines the place of supply for restaurant and catering services provided to taxable persons on board ships, aircraft or trains during a passenger transport service as the place of departure of the transport service.

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Paragraph 3 has been amended to define long-term hiring or leasing as an arrangement governed by an agreement providing for continuous possession or use of the movable tangible property throughout a continuous period of more than thirty days. This provision should rule out disputes (for example car hire by taxable persons for immediate use).

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Paragraph 1(c) has been amended to exempt the distance-learning services referred to in point (d) of Article 9g(1), which are the subject of a separate provision.

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In paragraph 1(d), restaurant and catering services have been included to ensure that they are taxed at the place where they are actually carried out.

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In paragraph 2, the place of supply of restaurant and catering services on board ships, aircraft or trains during a passenger transport service has been notionally defined as the place of departure of the transport service. This amendment was made in response to a proposal which came up during the consultation process.

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In the case of long-term hire, i.e. for longer than 30 days, the place of supply of a means of transport to non-taxable persons is defined as the place where the customer is established, has his permanent address or usually resides.

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In the case of short-term hire (e.g. hire of a car for a few days), the place of supply is the place where the means of transport is put at the disposal of the non-taxable person. This provision was also welcomed by the majority of respondents to the consultation process.

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This article has been completely overhauled. The services listed in Article 9g(1) are supplied in the place where the client is established, has his permanent address or usually resides.

During consultation there was an overwhelmingly negative response to this provision due to the introduction of excessive red tape arising from compliance with VAT obligations. For this reason, introduction of one-stop shop arrangements were seen as a precondition for this provision.

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The EESC calls for a clearer definition of the services to be subsumed under this article.

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The amendment makes it clear that the place of supply of services is determined by the place in which the principal transaction is carried out according to the provisions of Articles 9a to 9g and 9i.

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The changes here follow on from the deletions in Article 9g, as mentioned earlier.

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The rules for determining the place of supply of e-commerce, telecommunication and broadcasting services provided by a supplier established outside the EU will remain unchanged in future. The place of supply will therefore remain the Member State in which a non-taxable client is established or the Member State in which the service is actually used.

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The proposed amendment to the text of this article envisages extending the recapitulative statement submitted by each taxable person identified for value added tax purposes to certain transactions arising from the provision of services. This applies to other services provided to consignees identified for value added tax purposes in the transactions referred to in the fifth subparagraph and to the taxable customers supplied with services under the conditions provided for in Article 9(1).

6.1.1

The Committee welcomes the planned extension of the reverse-charge procedure to company level and thus to the exchange of services between taxable persons.

6.1.2

However, this is dependent on the persons concerned being able to carry out all aspects of the reverse-charge procedure without any problems. Difficulties could arise if the service provider delegates the evaluation of turnover or of VAT details, the place of supply, taxation obligations and tax rates, or the possibility of tax exemption to the recipient of services, without giving the latter the option of assessing this information reliably.

6.1.3

Companies should not be burdened with extra recording and reporting requirements. There is no doubt that businesses within the EU should be enabled to reliably determine whether a taxable person or company established in another EU country is obliged to apply the reverse-charge mechanism to the relevant transaction. Excessive liability of the company providing services in the event of a subsequent failure to reverse VAT charges would undermine the system as a whole and lead to resistance from those affected by it.

6.2.1

If services are provided by a company/taxable person to non-taxable persons, the reverse-charge procedure is excluded a priori. This mean that in the event of taxation being applied at the place where services are used, a company from another EU country would have to register as a VAT payer in the country where services are provided and to comply with VAT obligations there. To avoid red tape in this situation and thus minimise obstacles to intra-Community trade, unbureaucratic rules are needed.

6.2.2

Any obligation to register as a VAT payer would result in significant extra red tape, additional costs and, in doubtful cases, to reluctance on the part of the taxable company to provide the service. Far from opening up the single market and creating a level playing field for companies in all Member States of the EU, this would significantly disadvantage EU companies established in other countries in comparison to domestic service providers. This can hardly be in the interests of dismantling barriers to trade. Therefore, extending taxation at the place where services are used to non-taxable persons is only a viable option if the proposed one-stop shop system operates smoothly and rapidly. Only then could companies be expected to provide taxable services, possibly in all 25 Member States, in the absence of the reverse-charge option. Otherwise there is a danger of the opposite effect, with small and medium enterprises being excluded from the single market.

7.1

The same applies to simplification of VAT obligations arising from the input VAT refund procedure. As is well known, problems connected with input VAT refunds mean that, particularly when the sums in question are relatively small, companies need to decide whether it is ‘worth’ submitting a claim to a foreign tax office or whether giving up any entitlement to a refund is a much more advantageous option. However, this is in de facto contradiction with the principle of the deductibility of input VAT which underlies the sixth VAT directive.

In this connection, the Committee feels that efforts in some Member States to apply VAT at uniform rates across the board are severely in need of improvement.

7.2

For this reason, it must be ensured that the Commission's proposals concerning the introduction of a one-stop shop system are implemented and monitored for effectiveness.