VAT: Postal services - Main contents

Document date	22-10-2010
Publication date	22-01-2013
Reference	15236/10
From	Presidency
To	Working Party on Tax Questions - Indirect taxation (VAT)
External link	original PDF
Original document in PDF

COUNCIL OF PUBLIC Brussels, 22 October 2010 (27.10)

THE EUROPEAN UNION (OR. fr)

15236/10

Interinstitutional file:

2003/0091 (CNS) LIMITE

FISC 123

NOTE from: Presidency to: Working Party on Tax Questions – Indirect taxation (VAT) Subject: VAT: Postal services

• 1. 

  The ECOFIN Council of 2 December 2009 invited "the Spanish and Belgian Presidencies to

explore and examine all options in order to make steps forward in this respect and to report

the progress made at the Ecofin council in December 2010 at the latest" 1 .

• 2. 

  With a view to drawing up the report for submission to the Council, the Presidency is sending

the list of options regarding the VAT treatment of postal services to the working party.

The Presidency invites the delegations to comment on the options suggested.

15236/10 ris/JD/kr 1

• 1. 

  Proposal for a Council directive and discussions in the Working Party on Tax Questions

To recap, the proposal for a Council Directive amending Directive 77/388/EEC i as regards value

added tax on services provided in the postal sector 1 was intended to make all postal services subject

to VAT in order to restore a level playing field for all operators on the postal market and to ensure the neutrality of the tax. The removal of the exemption for public postal services and postage stamps was accompanied by an option for Member States to apply a reduced VAT rate to "standard postal services" involving addressed mail weighing no more than 10 kg.

Following on from the work done by the Working Party on Taxation under the Italian Presidency in 2003 and the Irish Presidency in 2004, the Swedish Presidency held a meeting on 16 July 2009 on the basis of a working document (11024/09 FISC 87). The context in which the Swedish Presidency

resumed discussions on the matter had changed in the interim. The third Postal Directive 2 , which set 31 December 2010 as the final date for the full opening of the postal market, had been adopted 3 , and

on 23 April 2009 the Court of Justice of the European Communities had ruled on Case C-357/07

(TNT Post UK Ltd) as regards the correct interpretation of the VAT exemption for public postal services. It emerged from the discussions that the TNT judgment did not provide all the necessary clarifications on the VAT treatment of postal services or contribute to the uniform application of the VAT exemption, and that the rules on VAT were incompatible with postal rules. However, the Member States were unable to agree on resuming discussions on the proposal for a Council directive. The Member States were also unable to agree on a political guideline regarding the future VAT treatment of postal services. In its conclusions to the meeting on 2 December 2009, the ECOFIN Council called on the Spanish and Belgian Presidencies to review the situation.

1 COM(2003) 234 final i, as amended by COM(2004) 468 final.

2 Directive 2008/6/EC i of the European Parliament and of the Council of 20 February 2008,

OJ L 52, 27.2.2008, p. 3.

3 However, certain Member States (CZ, EL, CY, LV, LT, LU, HU, MT, PL, RO and SK) may

postpone full market opening by a maximum of two years.

• 2. 

  Work of the VAT Committee on the interpretation of the TNT judgment

At the same time as discussions at the Council, the VAT Committee 1 discussed the consequences of

the TNT judgment. Two guidelines (on the scope of application of the VAT exemption and on the VAT treatment of terminal dues respectively) are currently being drawn up and will be reviewed at the next meeting of the VAT Committee, which is scheduled for December 2010.

• 3. 

  Options

Option 1: The status quo

This option would see the VAT Committee continuing its work to draw up a common guideline on the scope of the VAT exemption and on the VAT treatment of terminal dues. That guideline, in the form that it appears likely to take, would inevitably lead to uneven application of the VAT exemption in the Community as the exemption is based on the national definition of universal service. Moreover, it would not put an end to distortion of competition between operators that are exempt from VAT and those that are not. Nevertheless, this option seems to suit most Member States.

1 At the 90th (11 December 2009) and 91st (10-12 May 2010) meetings of the VAT

Committee.

Option 2: Resuming negotiations on the proposal for a Council directive with a view to providing for the taxation of public postal services and postage stamps

From an economic point of view, this option seems to be the best because it re-establishes the fundamental principles on which the VAT system is based (tax levied as generally as possible) and puts an end to distortion of competition in the postal sector. However, in the past the option has proven difficult for certain Member States to accept, as they fear it would result in price rises for individuals and for bodies unable to deduct VAT. The possible application of a lower rate of VAT should minimise the total tax burden on postal services and should not be much different from the situation arising from application of the VAT exemption.

Option 3: Resuming negotiations on the proposal for a Council directive with a view to providing for the taxation of public postal services and postage stamps, while giving Member States the option of continuing to exempt public postal

services and postage stamps from VAT

This option is intended as an intermediate step towards taxing public postal services and postage stamps. It should allow the most advanced Member States in terms of postal market opening not to be hindered by the need to maintain the VAT exemption, while the Member States that so wish would be able to keep the current VAT exemption.

Option 4: Extending the VAT exemption to all postal operators

This option involves extending the current VAT exemption to all postal operators, regardless of how they offer their postal service (whether or not they provide a commitment), as long as their service corresponds to the definition of "universal service". Although it would put an end to distortion of competition between operators that are exempt from VAT and those that are not, this option does not appear to comply with the TNT judgment and goes against the fundamental principles on which the VAT system is based.

Option 5: Specific amendment to the current VAT Directive to limit and harmonise the scope of the VAT exemption

The current VAT Directive could be amended in such a way that the scope of the VAT exemption would correspond to the definition of "universal service" but only to the minimum range of services which applies to all Member States, rather than according to each Member State's national definition. The VAT exemption would therefore be maintained, but its scope, which would finally be clarified, would be more limited and would be identical in all Member States. Given that the VAT exemption would be maintained, it could not be ruled out that distortion of competition would persist between operators that are exempt from VAT and those that are not.

_________________