Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (77/388/EEC) (repealed)

Article 28 U.K.

1. Any provisions brought into force by the Member States under the provisions of the first four indents of Article 17 of the second Council Directive of 11 April 1967 shall cease to apply, in each Member State, as from the respective dates on which the provisions referred to in the second paragraph of Article 1 of this Directive come into force.

[F1 1a. Until a date which may not be later than 30 June 1999 , the United Kingdom of Great Britain and Northern Ireland may, for imports of works of art, collectors' items or antiques which qualified for an exemption on 1 January 1993 , apply Article 11 (B) (6) in such a way that the value added tax due on importation is, in any event, equal to 2,5% of the amount determined in accordance with Article 11 (B) (1) to (4).]

[F2 2. Notwithstanding Article 12 (3), the following provisions shall apply during the transitional period referred to in Article 281.

(a) Exemptions with refund of the tax paid at the preceding stage and reduced rates lower than the minimum rate laid down in Article 12 (3) in respect of the reduced rates, which were in force on 1 January 1991 and which are in accordance with Community law, and satisfy the conditions stated in the last indent of Article 17 of the second Council Directive of 11 April 1967 , may be maintained.

Member States shall adopt the measures necessary to ensure the determination of own resources relating to these operations.

In the event that the provisions of this paragraph create for Ireland distortions of competition in the supply of energy products for heating and lighting, Ireland may, on specific request, be authorized by the Commission to apply a reduced rate to such supplies, in accordance with Article 12 (3). In that case, Ireland shall submit its request to the Commission together with all necessary information. If the Commission has not taken a decision within three months of receiving the request, Ireland shall be deemed to be authorized to apply the proposed reduced rates.

(b) Member States which, at 1 January 1991 in accordance with Community law, applied exemptions with refund of tax paid at the preceding stage, or reduced rates lower than the minimum laid down in Article 12 (3) in respect of the reduced rates, to goods and services other than those specified in Annex H, may apply the reduced rate or one of the two reduced rates provided for in Article 12 (3) to any such supplies.

(c) Member States which under the terms of Article 12 (3) will be obliged to increase their standard rate as applied at 1 January 1991 by more than 2 %, may apply a reduced rate lower than the minimum laid down in Article 12 (3) in respect of the reduced rate to supplies of categories of goods and services specified in Annex H. Furthermore, those Member States may apply such a rate to restaurant services, children's clothing, children's footwear and housing. Member States may not introduce exemptions with refund of the tax at the preceding stage on the bais of this paragraph.

(d) Member States which at 1 January 1991 applied a reduced rate to restaurant services, children's clothing, children's footwear and housing, may continue to apply such a rate to such supplies.

(e) Member States which at 1 January 1991 applied a reduced rate to supplies of goods and services other than those specified in Annex H may apply the reduced rate or one of the two reduced rates provided for in Article 12 (3) to such supplies, provided that the rate is not lower than 12 %.]

[F1 This provision may not apply to supplies of second-hand goods, works of art, collectors' items or antiques subject to value added tax in accordance with one of the special arrangements provided for an Article 26a (B) and (C).]

[F2 (f) The Hellenic Republic may apply VAT rates up to 30 % lower than the corresponding rates applied in mainland Greece in the departments of Lesbos, Chios, Samos, the Dodecanese and the Cyclades, and on the following islands in the Aegean: Thasos, Northern Sporades, Samothrace and Skiros.

(g) On the basis of a report from the Commission, the Council shall, before 31 December 1994 , reexamine the provisions of subparagraphs (a) to (f) above in relation to the proper functioning of the internal market in particular. In the event of significant distortions of competition arising, the Council, acting unanimously on a proposal from the Commission, shall adopt appropriate measures.]

[F3 (h) Member States which, on 1 January 1993 , were availing themselves of the option provided for in Article 5 (5) (a) as in force on that date, may apply to supplies under a contract to make up work the rate applicable to the goods after making up.

For the purposes of applying this provision, supplies under a contract to make up work shall be deemed to be delivery by a contractor to his customer of movable property made or assembled by the contractor from materials or objects entrusted to him by the customer for this purpose, whether or not the contractor has provided any part of the materials used.]

[F4 (i) Member States may apply a reduced rate to supplies of live plants (including bulbs, roots and the like, cut flowers and ornamental foliage) and wood for use as firewood.]

[F5 (j) the Republic of Austria may apply one of the two reduced rates provided for in the third subparagraph of Article 12(3)(a) to the letting of immovable property for residential use, provided that the rate is not lower than 10 %.

(k) the Portuguese Republic may apply one of the two reduced rates provided for in the third subparagraph of Article 12(3)(a) to restaurant services, provided that the rate is not lower than 12 %.]

3. During the transitional period referred to in paragraph 4, Member States may:

(a) continue to subject to tax the transactions exempt under Article 13 or 15 set out in Annex E to this Directive;

(b) continue to exempt the activities set out in Annex F under conditions existing in the Member State concerned;

(c) grant to taxable persons the option for taxation of exempt transactions under the conditions set out in Annex G;

(d) continue to apply provisions derogating from the principle of immediate deduction laid down in the first paragraph of Article 18 (2);

(e) continue to apply measures derogating from the provisions of Articles [F6 ] 6 (4) and 11 A (3) (c);

(f) provide that for supplies of buildings and building land purchased for the purpose of resale by a taxable person for whom tax on the purchase was not deductible, the taxable amount shall be the difference between the selling price and the purchase price;

(g) by way of derogation from Articles 17 (3) and 26 (3), continue to exempt without repayment of input tax the services of travel agents referred to in Article 26 (3). This derogation shall also apply to travel agents acting in the name and on account of the traveller.

[F7 3a. Pending a decision by the Council, which, under Article 3 of Directive 89/465/EEC (1) , is to act on the abolition of the transitional derogations provided for in paragraph 3, Spain shall be authorized to exempt the transactions referred to in point 2 of Annex F in respect of services rendered by authors and the transactions referred to in points 23 and 25 of Annex F.]

4. The transitional period shall last initially for five years as from 1 January 1978. At the latest six months before the end of this period, and subsequently as necessary, the Council shall review the situation with regard to the derogations set out in paragraph 3 on the basis of a report from the Commission and shall unanimously determine on a proposal from the Commission, whether any or all of these derogations shall be abolished.

5. At the end of the transitional period passenger transport shall be taxed in the country of departure for that part of the journey taking place within the Community according to the detailed rules of procedure to be laid down by the Council acting unanimously on a proposal from the Commission.

[F8 6. The Council, acting unanimously on a proposal from the Commission, may authorise any Member State to apply for a maximum period of [F9 six years between 1 January 2000 and 31 December 2005] the reduced rates provided for in the third subparagraph of Article 12(3)(a) to services listed in as maximum of two of the categories set out in Annex K. In exceptional cases a Member State may be authorised to apply the reduced rate to services in three of the abovementioned categories.

The services concerned must satisfy the following requirements:

(a) they must be labour-intensive;

(b) they must be largely provided direct to final consumers;

(c) they must be mainly local and not likely to create distortions of competition;

(d) there must be a close link between the lower prices resulting from the rate reduction and the foreseeable increase in demand and employment.

The application of a reduced rate must not prejudice the smooth functioning of the internal market.

Any Member State wishing to introduce the measure provided for in the first subparagraph shall inform the Commission before 1 November 1999 and shall provide it before that date with all relevant particulars, and in particular the following:

(a) scope of the measure and detailed description of the services concerned;

(b) particulars showing that the conditions laid down in the second and third subparagraphs have been met;

(c) particulars showing the budgetary cost of the measure envisaged.

Those Member States authorised to apply the reduced rate referred to in the first subparagraph shall, before 1 October 2002 , draw up a detailed report containing an overall assessment of the measure's effectiveness in terms notably of job creation and efficiency.

Before 31 December 2002 the Commission shall forward a global evaluation report to the Council and Parliament accompanied, if necessary, by a proposal for appropriate measures for a final decision on the VAT rate applicable to labour-intensive services.]

Textual Amendments

F1 Inserted by Council Directive 94/5/EC of 14 February 1994.

F2 Inserted by Council Directive 92/77/EEC of 19 October 1992.

F3 Inserted by Council Directive 95/7/EC of 10 April 1995.

F4 Inserted by Council Directive 96/42/EC of 25 June 1996.

F5 Inserted by Council Directive 2000/17/EC of 30 March 2000 amending Directive 77/388/EEC on the common system of value added tax — transitional provisions granted to the Republic of Austria and the Portuguese Republic.

F6 Deleted by Council Directive 94/5/EC of 14 February 1994.

F7 Inserted by Council Directive of 16 December 1991 (91/680/EEC).

F8 Inserted by Council Directive 1999/85/EC of 22 October 1999 amending Directive 77/388/EEC as regards the possibility of applying on an experiment basis a reduced VAT rate on labour-intensive services.

F9 Substituted by Council Directive 2004/15/EC of 10 February 2004 amending Directive 77/388/EEC to extend the facility allowing Member States to apply reduced rates of VAT to certain labour-intensive services.

(1)

[F7 JO No L 226, 3. 8. 1989, p. 21 .]

Textual Amendments

F7 Inserted by Council Directive of 16 December 1991 (91/680/EEC).