VAT Place of supply of gas and electricity - Main contents

Document date	26-06-2003
Publication date	22-01-2013
Reference	10927/03
From	Italian Presidency
To	Working Party on Tax Questions - Indirect Taxation (VAT)
External link	original PDF
Original document in PDF

COUNCIL OF Brussels, 26 June 2003

THE EUROPEAN UNION PUBLIC

10927/03

Interinstitutional File:

2002/0286 (CNS) LIMITE

FISC 108 ENER 207

NOTE

From Italian Presidency

To : Working Party on Tax Questions – Indirect Taxation (VAT)

On : 8 July 2003

Subject : VAT

• - 

  Place of supply of gas and electricity

Delegations will find attached a revised compromise proposal from the Italian Presidency prepared in the light of the results of the Fiscal Counsellors and Attachés from the Permanent

Representations (VAT) meeting of 23 June.

10927/03 GM/ovl 1 Proposal for a

COUNCIL DIRECTIVE

amending Directive 77/388/EEC i as regards the rules on the place of supply of gas and

electricity

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 93 thereof,

Having regard to the proposal from the Commission 1 ,

Having regard to the opinion of the European Parliament 2 ,

Having regard to the opinion of the European Economic and Social Committee 3 ,

Whereas:

(1) Increasing liberalisation of the gas and electricity sector, aimed at completing the internal market for electricity and natural gas, has revealed a need to review the current VAT rules on the place of supply of those goods, set out in Council Directive 77/388/EEC i of 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 4 , in order to modernise

and simplify the operation of the VAT system within the context of the internal market, a

strategy to which the Commission is committed 5 .

(2) Electricity and gas are treated as goods for VAT purposes, and, accordingly, the place of their supply with respect to cross-border transactions has to be determined in accordance with Article 8 of Directive 77/388/EEC i. However, since electricity and gas are difficult to track physically it is particularly difficult to determine the place of supply under the current rules.

1 OJ C , , p. .

2 OJ C , , p. .

3 OJ C , , p. .

4 OJ L145,13.6.1977,p.1.Directive as last amended by Directive 2002/38/EC i ( OJ L 128,

15.5.2002,p.41)

5 Com(2000)348 final

(3) In order to attain a real internal market for electricity and gas without VAT obstacles, the place of supply of gas through the natural gas distribution system and of electricity, before the goods reach the final stage of consumption, should be determined to be the place where the customer has established his business.

(4) The supply of electricity and gas in the final stage, from traders and distributors to final consumer, should be taxed at the place where the customer has effective use and enjoyment of the goods, in order to ensure that taxation takes place in the country where actual consumption takes place. This is normally the place where the meter of the customer is located.

(5) Electricity and gas are supplied through distribution networks, to which network operators provide access. In order to avoid double or non-taxation, it is necessary to harmonise the rules governing the place of supply of the transmission and transportation services. Access to and use of the distribution systems and the provision of other services directly linked to these services should therefore be added to the list of specific instances set out in Article 9, paragraph 2 (e) of Directive 77/388/EEC i.

(6) The importation of gas through the natural gas distribution system and of electricity should be exempted in order to avoid double taxation.

(7) Those changes in the rules governing the place of supply for gas through the natural gas distribution system and for electricity, need to be combined with a compulsory reverse charge when the customer is an identified for VAT purposes person.

(8) Directive 77/388/EEC i should therefore be amended accordingly,

HAS ADOPTED THIS DIRECTIVE:

Article 1

Directive 77/388/EEC i is hereby amended as follows:

• 1. 

  In Article 8(1), the following points (d) and (e) are added:

“d. in the case of the supply of gas through the natural gas distribution system or of electricity, to a taxable dealer: the place where that taxable dealer has established his business or has a fixed establishment for which the goods 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.

A taxable dealer for the purposes of this provision means a taxable person whose principal activity in respect of purchases of gas and electricity is reselling such products and whose own consumption of these products is negligible.

• e. 

  in the case of the supply of gas through the natural gas distribution system or of electricity, where such a supply is not covered by point (d): the place where the customer has effective use and consumption of the goods. Where part of these goods are not in fact consumed by this customer, he is deemed to have used and consumed that part at the same place. Where none of this goods are consumed by this customer, he is deemed to have used and consumed the goods at the place where he has established his business or has a fixed establishment to which the goods were to be supplied and consumed. In the absence of such a place of business or fixed establishment, he is deemed to have used and consumed the goods at the place where he has his permanent address or usually resides.”

Note (see Annex)

• 2. 

  In Article 9(2)(e), the following indent is inserted after the eighth indent:

“- the provision of access to, and of transport or transmission through, natural gas and electricity distribution systems and the provision of other directly linked services.”

• 3. 

  In Article 14(1), the following point (k) is added:

“k. importation of gas through the natural gas distribution system and of electricity.”

• 4. 

  Article 21(1)(a), in the version set out in Article 28g, is replaced by the following:

“a. the taxable person carrying out the taxable supply of goods or of services, except for the cases referred to in (b), (c) and (f). Where the taxable supply of goods or of services is effected by a taxable person who is not established within the territory of the country, Member States may, under the conditions determined by them, lay down that the person liable to pay tax is the person for whom the taxable supply of goods or of services is carried out;”

• 5. 

  In Article 21(1), in the version set out in Article 28g, the following point (f) is added:

“f. persons who are identified for value added tax purposes within the territory of the country and to whom goods are supplied under the conditions set out in Article 8(1)(d) or (e), if the supplies are carried out by a taxable person not established within the territory of the country.”

• 6. 

  In Article 22(1)(c), in the version set out in Article 28h, the first intent is replaced by the following:

“Every taxable person, with the exception of those referred to in Article 28a(4), who within the territory of the country effects supplies of goods or of services giving him the right of deduction, other than supplies of goods or of services for which tax is payable solely by the customer or the recipient in accordance with Article 21(1) (a), (b), (c) or (f). However, Member States need not identify certain taxable persons referred to in article 4(3)”.

• 7. 

  In Article 28a(5)(b) the following indent is added:

“- the supply of gas through the natural gas distribution system or of electricity under the conditions set out in Article 8(1)(d) or (e).”

Article 2

Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive on 1.1.2005. They shall forthwith inform the Commission thereof.

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

Article 3

This Directive shall enter into force on the twentieth day following that of its publication in the

Official Journal of the European Communities .

Article 4

This Directive is addressed to the Member States.

Done at Brussels, 2003

For the Council

The President ANNEX 1

Draft Statements for the Council Minutes.

• 1. 

  The Council and the Commission agree that the treatment of financial derivatives such as forwards, futures and options on gas supplied through the natural gas distribution system and on electricity should be examined when the treatment of all financial derivatives is reviewed.

2. The Council notes that, in case the liberalisation of the electricity and gas markets is not completed by 1 July 2007, the Commission undertakes to examine the functioning of the VAT regime for the supplies of electricity and gas and will present a report to the Council and the European Parliament within the next three months. If necessary the Commission will present a proposal for appropriate measures with a view to abolishing any possible distortion of competition caused by the VAT rules in this sector, by the end of 2007.

• 3. 

  [The Council and the Commission agree that Member States require statistical data on arrivals and dispatches of gas and electricity. The Council requests the Commission to ensure that the collection of this data is undertaken in the least burdensome manner for business involved.]

ANNEX 2

Note

1. Article 8(1)(d) covers all supplies of gas and electricity to traders (taxable dealers). A taxable dealer for the purposes of this Directive means a taxable person whose principal activity in respect of purchases of gas and electricity is reselling such products and whose own consumption of these products is negligible.

2. The supply of gas and electricity that is not supplied to a taxable dealer is taxable where the consumption takes place. This is normally the place where the meter of the customer is located, as was added to the recitals. This is reflected in the first sentence of Article 8(1)(e).

3. If, however, an electricity distributor is selling electricity to a consumer who is (partly) not consuming the goods, (part of) this supply is without a place of taxation. To cover these situations, a second sentence was added to Article 8(1)(e). As a result every supply has a place of taxation.

4. As the meaning of the second sentence was not fully clear this text should be clarified. With the changes the following results will be achieved.

5. For a customer who is only consuming gas and electricity, the supply is taxable at the place of consumption. Where one customer is established in more than one Member State (for example a head office in MS 1 and a branch in MS 2) the supplies are taxable where the consumption takes place, which normally will be in two Member States.

6. For a customer, who is not a taxable dealer, but who is not at all consuming the gas and electricity supplied, these supplies are taxable at the place where the customer has established his business or has a fixed establishment at which the goods were to be supplied and consumed.

7. Finally, for a customer who is consuming part of the gas and electricity supplied and reselling another part, these supplies should be taxable in one single place. As the place of taxation of the part that is consumed is known (the place where the meter is located), the other part should logically follow this same place of taxation.

8. These principles would lead to the amended text of Article 8(1)(e).

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