Date: 2019-09-27Category: Not ApplicableState: Union GovernmentCountry: Europe
Council Implementing Decision (EU) 2019/1592 of 24 September 2019 authorising Portugal to introduce a special measure derogating from Article 193 of Directive 2006/112/EC on the common system of value added tax
Executive Summary:
This Council Implementing Decision authorises Portugal to introduce a special measure derogating from Article 193 of Directive 2006/112/EC, allowing the reverse charge mechanism for supplies of cork, wood, pine cones, and pine nut kernels in their shell. This applies if the recipient is a taxable person in Portugal entitled to deduct input VAT. The decision is effective upon notification, applies from January 1, 2020, and expires on December 31, 2022.
Key Points / Main Content:
* **Authorisation of Special Measure:**
* Portugal is authorised to designate the taxable person receiving supplies of cork, wood, pine cones, or pine nut kernels in their shell as the person liable to pay VAT.
* This applies if the recipient is a taxable person with a registered office, fixed establishment, or habitual residence in Portugal and is entitled to fully or partly deduct input VAT.
* **Scope and Duration:**
* The derogation from Article 193 of Directive 2006/112/EC is specifically for supplies of cork, wood, pine cones, and pine nut kernels in their shell.
* The special measure is authorised for a limited period, from January 1, 2020, to December 31, 2022.
* **Justification:**
* Portugal requested the authorisation due to high levels of fraud and tax evasion in its forestry sector.
* The reverse charge mechanism aims to combat VAT fraud by shifting the liability to pay VAT to processing companies.
* **Review and Conventional Measures:**
* Portugal is expected to implement other conventional measures to fight and prevent VAT fraud in the specified sector until the special measure expires.
* The goal is to eliminate the need for further derogations from Article 193 of Directive 2006/112/EC.
Impact Analysis:
Portuguese Taxable Persons:
* Impact: Taxable persons in Portugal who receive supplies of cork, wood, pine cones, or pine nut kernels in their shell and are entitled to deduct input VAT may become liable for paying the VAT under the reverse charge mechanism.
* Action Required: These taxable persons need to comply with the reverse charge mechanism for the specified supplies from January 1, 2020, to December 31, 2022.
Portuguese Republic:
* Impact: Portugal is authorised to implement the special measure and is expected to introduce conventional measures to combat VAT fraud in the forestry sector.
* Action Required: Portugal needs to implement the reverse charge mechanism, monitor its effectiveness, and develop and implement conventional measures to fight VAT fraud in the sector by December 31, 2022.
Council of the European Union:
* Impact: The Council has adopted a decision authorising a derogation to the common system of VAT in Portugal.
* Action Required: No further action is required.
Key Entities Referenced
Portugal: A Member State of the European Union, authorised to introduce a special measure derogating from Article 193 of Directive 2006/112/EC.
European Union: The supranational political and economic union to which the decision and directive apply.
Council Directive 2006/112/EC: A directive on the common system of value added tax (VAT).
European Commission: The executive branch of the European Union, responsible for proposing legislation.
Value Added Tax (VAT): A consumption tax assessed on the value added to goods and services.
Article 193 of Directive 2006/112/EC: Article of the directive from which Portugal is authorised to derogate.
Brussels: The location where the Council Implementing Decision was done.
Portuguese Republic: The formal name of the country to which the decision is addressed.
27.9.2019 EN Official Journal of the European Union L 248/67
COUNCIL IMPLEMENTING DECISION (EU) 2019/1592
of 24 September 2019
authorising Portugal to introduce a special measure derogating from Article 193 of Directive
2006/112/EC on the common system of value added tax
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (1),
and in particular Article 395(1) thereof,
Having regard to the proposal from the European Commission,
Whereas:
(1) By letter registered with the Commission on 2 July 2018, Portugal requested an authorisation to introduce
a special measure derogating from Article 193 of Directive 2006/112/EC for supplies of cork, wood, pine cones
and pine nut kernels in their shell if the person to whom those goods are supplied is a taxable person who has
his registered office, fixed establishment or habitual residence in Portugal and carries out transactions for which
he is entitled to fully or partly deduct input value added tax (VAT). By letters registered with the Commission on
27 November 2018 and 19 March 2019, more information was submitted by Portugal to the Commission.
(2) In accordance with the second subparagraph of Article 395(2) of Directive 2006/112/EC, the Commission
informed the other Member States, by letters dated 27 March 2019, of the request made by Portugal. By letter
dated 28 March 2019, the Commission notified Portugal that it had all the information necessary to consider the
request.
(3) According to Portugal, levels of fraud and tax evasion in the forestry sector in Portugal are very high. This is
because that sector is dominated by a large number of small producers and numerous harvesters who sell raw
materials onwards to processing companies without declaring and paying VAT for those sales. The nature of the
market and of the businesses involved has led to VAT fraud, which the Portuguese tax authorities find difficult to
tackle despite enhanced controls and the measures already taken. In order to combat such tax evasion, Portugal
intends to introduce the reverse charge mechanism for supplies of cork, wood, pine cones and pine nut kernels
in their shell. This would shift the liability to pay VAT to a small number of easily identifiable processing
companies. Portugal considers that this would eliminate this kind of VAT fraud and prevent the resulting losses of
VAT revenue.
(4) Portugal should therefore be authorised to introduce a special measure for a limited period of time until
31 December 2022.
(5) Derogations are in general authorised for a limited period of time to allow an assessment of whether the special
measure is appropriate and effective. Derogations give Member States time until the expiry of the special measure
to introduce other conventional measures to tackle the specific problem, thereby making an extension of the
derogation unnecessary. Derogations that permit use of the reverse charge mechanism are only granted
exceptionally for specific areas where fraud occurs, and constitute a means of last resort. Portugal should
therefore implement other conventional measures to fight and prevent VAT fraud in the sector of cork, wood,
pine cones and pine nut kernels in their shell until the expiry of the special measure and consequently should no
longer need to derogate from Article 193 of Directive 2006/112/EC with regard to such supplies.
(6) The special measure will have no adverse impact on the Union's own resources accruing from VAT,
(1) OJ L 347, 11.12.2006, p. 1.L 248/68 EN Official Journal of the European Union 27.9.2019
HAS ADOPTED THIS DECISION:
Article 1
By way of derogation from Article 193 of Directive 2006/112/EC, Portugal is authorised to designate the taxable person
to whom supplies of cork, wood, pine cones or pine nut kernels in their shell are made as the person liable to pay VAT
if this is a taxable person who has his registered office, fixed establishment or habitual residence in Portugal and who
carries out transactions for which he is entitled to fully or partly deduct input VAT.
Article 2
This Decision shall take effect on the date of its notification.
It shall apply from 1 January 2020 and shall expire on 31 December 2022.
Article 3
This Decision is addressed to the Portuguese Republic.
Done at Brussels, 24 September 2019.
For the Council
The President
K. KULMUNI