Commission objects to the request made by Romania to apply zero rate on certain supplies

By letter registered with the Commission on 26 April 2017, Romania requested based on Article 395 of the VAT Directive an authorisation to apply 0% VAT rate of VAT to a number of supplies of goods and services.

Pursuant to Article 395 of 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.

Articles 96 to 99 of the VAT Directive provide for VAT rates applicable to supplies of goods and services. Romania would like to derogate from these provisions and apply a 0% VAT rate to a number of supplies of goods and services to which normally apply a standard or a reduced VAT rate. Romania requests the measure for the purpose of combating tax evasion.

According to the Commission, the introduction of 0% VAT rate cannot be regarded as a measure to prevent tax evasion or avoidance as required by Article 395 of the VAT Directive. As the conditions of Article 395 are not fulfilled, the derogating measure requested by Romania cannot be justified based on this Article.

Consequently, the Commission objects to the request made by Romania.

For the full text of the communication, see document: COM(2017) 785 Communication to Romania regarding request for zero rate.

Your Tax Representative

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Raluca Tutu

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Raluca is a certified tax consultant and focuses on VAT, indirect and international tax advice, acting as lead tax counsel on various tax mandates for the company’s clients.

She holds a BA in Finance and Capital Markets from the Academy of Economic Studies in Bucharest and an LLM in International Tax from the Institute for Austrian and International Tax Law of Vienna University of Economics and Business. Raluca regularly publishes and contributes with tax related articles and expert views to various media channels. Raluca is author of the book “Value Added Tax, from Theory to Practice”, Published in December 2012 and she is the exclusive member for Romania of the European VAT Club.