Proposal for a Decision authorising Portugal to introduce a special measure derogating from Article 193 of Directive 2006/112/EC on the common system of value added tax

Summary:

Proposal presented on 14 June 2019 by the European Commission authorising Portugal to introduce a measure derogating from Article 193 of the VAT Directive for supplies of cork, wood, pine cones and pine nut kernels in their shell.

Further information:

In July 2018, Portugal requested authorisation to introduce a special measure derogating from Article 193 of the VAT Directive, which determines the person liable for the payment of VAT.

The forestry sector in Portugal is one of the sectors of economic activity where fraud and tax evasion is extremely high. This is due to the fact that this sector is dominated by a large number of small producers and numerous harvesters who are selling raw materials onwards to processing companies without declaring and paying VAT for these sales. The nature of the market and of businesses involved has generated VAT fraud, which the Portuguese tax authorities have found difficult to tackle despite enhanced controls and the measures already taken.

In order to combat abuse, Portugal would like to introduce the reverse charge mechanism for supplies of cork, wood, pine cones and pine nut kernels in their shell, which would shift the liability to pay VAT to the small number of easily identifiable processing companies. This would, according to Portugal, eliminate this kind of VAT fraud and prevent the resulting losses of VAT revenue.

Taking into account the fraudulent situation in the above-mentioned sector, the European Commission considers that Portugal should be authorised to introduce a derogating measure for a limited period of time until 31 December 2022.