On the basis of Article 395 of the VAT Directive, EU countries may be authorised to derogate from common VAT rules to simplify the procedure for charging VAT or to prevent certain types of tax evasion or avoidance.
Such derogations have been authorised under the following different procedures:
- Decisions authorised by the Council under the procedure provided for in Article 395;
- Council Decisions tacitly approved under the former Article 27(4) of Directive 77/388/EEC;
- Special measures that were applied by EU countries before 1 January 1977 and that were notified to the Commission before 1 January 1978, under Article 394.
View the latest list of VAT derogations currently applied throughout the EU in accordance with the procedure provided for in Article 395 of the VAT Directive.
Background
On 24 July 2006, the Council adopted Directive 2006/69/EC giving all EU countries the option of applying special rules to simplify the application of VAT or to counter tax avoidance and evasion.
Until the adoption of this Directive, EU countries were able to apply such special rules but only by individually requesting authorisations from the Council, which have to be periodically renewed.
As some of those special rules have proved successful, particularly in the fight against tax avoidance and evasion, the Commission wished to allow all EU countries to apply them without having to seek individual authorisations. Instead, it became sufficient to inform the other Member States through consultation of the VAT Committee.
View the list of EU countries that have consulted the VAT Committee to apply such rules.
The ability for Member States to request special authorisation under Article 395 of the VAT Directive to derogate from the common VAT rules remains unchanged.
Impact
A wider use of effective measures against tax avoidance and evasion should protect compliant businesses from the competitive advantages gained by tax avoiders and evaders. A single agreed alternative rule should also mean greater transparency and consistency of Member States' rules.
Legal texts
- Council Directive 2006/112/EC on the common system of value added tax
- Council Directive 2006/69/EC amending Directive 77/388/EEC as regards certain measures to simplify the procedure for charging value added tax and to assist in countering tax evasion or avoidance, and repealing certain Decisions granting derogations
- Council Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes