Select Committee on European Union Fortieth Report


VAT ARRANGEMENTS APPLICABLE TO RADIO AND TELEVISION BROADCASTING SERVICES (9405/06)

Letter from Rt Hon Dawn Primarolo MP, Paymaster General, HM Treasury to the Chairman

  Please find attached an Explanatory Memorandum (not printed) concerning a recent Commission Proposal to extend Directive 2002/38/EC, which concerns the VAT treatment of e-services and certain broadcasting services.

  This Proposal was only received on 19 May 2006 and I am told that the Austrian Presidency is seeking agreement at ECOFIN on 7 June. This is necessary because the provisions in Directive 2002/38/EC, which prevent non-EU businesses from being able to provide certain services VAT free to EU consumers, expire on 30 June 2006. It will not be necessary for any changes to be made to UK legislation in respect of this Proposal.

  I am aware that your Committee does not meet before ECOFIN and, you should be aware therefore that the Government may be asked to agree this proposal before it has cleared scrutiny. Although regrettable I hope you will understand this is unavoidable in the circumstances.

5 June 2006

Letter from Rt Hon Dawn Primarolo MP to the Chairman

  I recently submitted an Explanatory Memorandum (EM 9405/06) concerning a Commission Proposal to extend Directive 2002/38/EC, which concerns the VAT treatment of radio and television broadcasting services and certain electronically supplied services.

  The provisions of Directive 2002/38/EC mainly relate to the place of supply for such services, so that they are subject to VAT when supplied by businesses established outside the EU to private consumers within the EU, and they are not subject to VAT when exported by EU businesses. They also provide for a special VAT registration and declaration scheme for non-EU businesses.

  As advised in my letter of 5 June, although the Commission Proposal was only received on 19 May 2006, the Austrian Presidency was likely to seek agreement to it at ECOFIN on 7 June. This was because the provisions of Directive 2002/38/EC would otherwise expire on 30 June 2006.

  The Austrian Presidency did indeed seek agreement to this Proposal at the June ECOFIN, but with an amendment to the period of extension. The suggested period was limited to 6 months only, to 31 December 2006, rather than to 31 December 2008 as in the original Commission Proposal.

  This was because the technical work on the Proposal on the place of supply of services (EM 5051/04 and 11439/05) is more or less concluded and the technical work on the Proposal on simplification of VAT obligations (EM 14248/04) is to continue under the forthcoming Finnish Presidency. All these issues are then likely to return to Council towards the end of this year.

  The Government did therefore exceptionally agree in principle at June ECOFIN, to a limited extension of Directive 2002/38/EC for a period of six months only, while work on these other dossiers continues as a matter of urgency. Although this is regrettable, I hope you understand it was unavoidable in the circumstances.

  In terms of process, I am told that the revised Proposal will probably now go to another Council for adoption before 30 June 2006 (possibly the Environmental Council on 27 June). As I indicated in my last letter, it will not be necessary for any changes to be made to UK legislation. This is because our domestic legislation, which originally implemented Directive 2002/38/EC, is not time limited and so no further legislation is necessary to give effect to the extension.

15 June 2006



 
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