Considerations on COM(1999)703 - Amendment of Directive 77/388/EEC on the common system of VAT - transitional provisions granted to Austria and Portugal

Please note

This page contains a limited version of this dossier in the EU Monitor.

 
dossier COM(1999)703 - Amendment of Directive 77/388/EEC on the common system of VAT - transitional provisions granted to Austria and Portugal.
document COM(1999)703 EN
date March 30, 2000
 
(1) Article 2(e) of Annex XV (part IX 'Taxation') to the Act of Accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden to the European Community  i authorised Austria to derogate from Article 28(2) of Council Directive 77/388/EEC  iof 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, last amended by Directive 1999/85/EC  i and to apply a reduced rate to the letting of immovable property for residential use until 31 December 1998, provided that the rate was not lower than 10%.

(2) Under Article 13(B)(b) of the Sixth VAT Directive, the letting of immovable property for residential use in Austria has been exempt from VAT since 1 January 1999 without the right to deduct input tax. However, under Article 13(C)(a) of the Directive Austria may allow taxpayers the right to opt for taxation. In that case the normal VAT rate and the normal rules for the right to deduction apply.

(3) Although the derogation has expired, Austria considers that the measure is still essential, mainly because the transitional VAT regime is still in force and the situation has not really changed since the negotiation of its act of accession.

(4) Austria also considers that dispensing with the reduced rate of 10% would inevitably lead to an increase in the price of immovable property rental for the final consumer.

(5) Portugal applied a reduced rate of 8% to restaurant services at 1 January 1991. Under Article 28(2)(d) of Directive 77/388/EEC, introduced by Directive 92/77/EEC  i of 19 October 1992, Portugal was permitted to continue applying that rate. However, after a comprehensive amendment of the rates and for political and budgetary reasons, restaurant services were made subject to the normal rate from 1992.

(6) Portugal wishes to re-introduce a reduced rate on these services on the basis that maintaining the normal rate had adverse consequences, in particular job losses and an increase in undeclared employment, and that application of the normal rate increased the price of restaurant services for the final consumer.

(7) As the derogations in question concern supplies of services within a single Member State, the risk of distortion of competition can be considered non-existent.

(8) In these circumstances, return to the previous situation may be considered for both Austria and Portugal, provided that application of the derogations is limited to the transitional period referred to in Article 28l of Directive 77/388/EEC. However, Austria must take the necessary steps to ensure that the introduction of a reduced rate under the derogation has no adverse effects on the European Communities' own resources accruing from VAT, the basis of assessment for which must be reconstituted in accordance with Regulation (EEC, EURATOM) No 1553/89.