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
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
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