Communication in accordance with Article 395 of Council Directive 2006/112/EC

Pursuant to Article 395 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (the VAT Directive), the Council, acting unanimously on a proposal from the Commission, may authorise any Member State to introduce special measures for derogation from the provisions of this Directive, in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance. As this procedure provides for derogations from the general principles of VAT, in accordance with the consistent rulings of the Court of Justice of the European Union, such derogations should be proportionate and limited in scope.

By letter registered with the Commission on 22 February 2016, Slovakia requested an authorisation to apply a measure derogating from Article 193 of the VAT Directive. In accordance with Article 395(2) of the VAT Directive, the Commission informed the other Member States by letter dated 4 November 2016 of the request made by Slovakia. By letter dated 7 November 2016, the Commission notified Slovakia that it had all the information it considered necessary for appraisal of the request.

As a general rule, the person liable for the payment of VAT to the tax authorities under Article 193 of the VAT Directive is the taxable person supplying the goods. The purpose of the derogation requested by Slovakia is to place that liability on the taxable person to whom the supplies are made (the so-called reverse charge mechanism), in the case of particular products, notably as regards certain meat products, live bovine animals, swine and poultry.

According to Slovakia, a number of businesses within these trade sectors engage in tax evasion by not paying VAT to the tax authorities after selling the products. However, their customers, insofar as they are taxable persons with a right of deduction, being in receipt of a valid invoice, remain entitled to a tax deduction.

Therefore, Slovakia would want to apply the reverse charge mechanism, thus eliminating the possible fraud insofar as, in the absence of VAT being charged, the potential missing trader would not be able to keep the VAT received from his customer. The taxable recipient, insofar as being a taxable person with a full right of deduction, would declare and deduct the VAT in the same return. This would have the effect of preventing this type of fraud and, therefore, further losses.