# EUR-Lex - 52012PC0611 - EN

*|*

# 52012PC0611

**Proposal for a COUNCIL DECISION authorising Bulgaria and Romania to apply measures derogating from Article 5 of Directive 2006/112/EC on the common system of value added tax /* COM/2012/0611 final - 2012/0293 (NLE) */**

			*

			*

EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

Pursuant to Article 395 of Directive
2006/112/EC of 28 November 2006 on the common system of value added tax[1] (hereafter: 'VAT Directive'), the Council, acting unanimously on a
proposal from the Commission, may authorise any Member State to apply special
measures for derogation from the provisions of that Directive, in order to
simplify the procedure for collecting value added tax (VAT) or to prevent
certain forms of tax evasion or avoidance.

By letter registered with the Commission on 25
May 2011, Bulgaria and Romania requested authorisation to derogate from the
provisions of Article 5 of the VAT Directive governing the territorial scope of
the VAT in relation to a border bridge (road and rail) over the Danube. By
letter registered with the Commission on 7 March 2012, this request was partly
replaced by Bulgaria and Romania.

In accordance with Article 395(2) of the VAT
Directive, the Commission informed the other Member States by letter dated 17
July 2012 of the requests made by Bulgaria and Romania (however, Spain was
informed by letter dated 18 July 2012). By letter dated 19 July 2012, the
Commission notified Bulgaria and Romania that it had all the information it
considered necessary for appraisal of the request.

Bulgaria and Romania decided, in order to facilitate
road and rail traffic between their territories, to sign an agreement on 5 June
2000 for the construction of a border bridge over the river Danube between
Vidin (Bulgaria) and Calafat (Romania).

In this context, Bulgaria and Romanian
requested to be authorised to apply derogating measures as regards the VAT
rules on territoriality for the maintenance and repair of that bridge and the
charging of the toll for the crossing (the construction of the border bridge
was explicitly excluded from the derogation request).

Under the normal rules, the principle of
territoriality laid down in Article 5 of the VAT Directive would, in
combination with the place of supply rules, require that Bulgarian VAT would be
charged on the maintenance and repair carried out in Bulgaria. Likewise, maintenance
and repair carried out on the Romanian territory would be subject to Romanian
VAT. Applying the normal rules would imply establishing the exact place of
taxable transactions according to the territory in which each part of the works
was carried out. To that end, it would be necessary for businesses, involved in
the works, to establish with certainty the territorial border in the river Danube
for work carried out above water. Bulgaria and Romania consider that applying
these normal rules would create tax complications for these businesses and the
aim of this simplification derogation is therefore, as requested, to set the
territorial border as the middle of the bridge.

As regards tolls, the taxable amount should,
under the current rules, be related to the part of the bridge which belongs to
each of the Member States. Apart from the above-mentioned problem of
establishing the territorial border, each journey over the bridge should be
invoiced according to two tolls and two different VAT rates: one for the
Bulgarian territory and one for the Romanian territory; which would be
burdensome for the taxable persons concerned. In this respect, the purpose of
the derogation as regards tolls is to consider the bridge as being on the
territory of the Member State in which any transit journey starts. In practice,
Bulgarian VAT will be charged on the entire toll of all journeys starting from
the Bulgarian side and crossing the border bridge into Romania. In the same
way, Romanian VAT will be charged on the entire toll of all journeys starting
in Romania. This will simplify the way the VAT is calculated and accounted for.

2.           RESULTS OF CONSULTATIONS
WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS

There was no need for consultation or external
expertise.

The Decision proposal aims at simplifying the
VAT collection as regards certain services related to a border bridge.

Because of the narrow scope of the derogation,
the impact will in any case be limited.

3.           LEGAL ELEMENTS OF THE
PROPOSAL

The Decision authorises Bulgaria and Romania to
apply derogating measures from the territorial application of the VAT Directive
as regards a border bridge.

This Decision is based on Article 395 of the
VAT Directive.

The proposal falls under the exclusive
competence of the EU. The subsidiarity principle therefore does not apply.

This Decision concerns an authorisation granted
to individual Member States upon their own request and does not constitute any
obligation.

Given the strict limitation in scope, the
special measure appears to be proportionate to the aim pursued.

Under Article 395 of the VAT Directive,
derogation from the common VAT rules is only possible on the authority of the
Council acting unanimously on a proposal from the Commission. A Council
Decision is the only suitable instrument since it can be addressed to an
individual Member State.

4.           BUDGETARY IMPLICATION

The proposal has no implications for the Union
budget.

2012/0293 (NLE)

Proposal for a

COUNCIL DECISION

authorising Bulgaria and Romania to apply
measures derogating from Article 5 of Directive 2006/112/EC on the common
system of value added tax

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union,

Having regard to Council Directive
2006/112/EC of 28 November 2006 on the common system of value added tax[2], and in particular Article
395(1) thereof,

Having regard to the proposal from the
European Commission,

Whereas:

(1)       By letters registered at
the Commission on 25 May 2011, Bulgaria and Romania requested authorisation to
derogate from the provisions of Article 5 of Directive 2006/112/EC governing the
territorial scope of the VAT in relation to a border bridge over the Danube.
Bulgaria and Romania partly replaced this request by letter registered at the
Commission on 7 March 2012.

(2)       In accordance with Article
395(2) of Directive 2006/12/EC, the Commission informed the other Member States
by letter dated 17 July 2012 of the requests made by Bulgaria and Romania; with
the exception of Spain which was informed by letter dated 18 July 2012. By
letter dated 19 July 2012, the Commission notified Bulgaria and Romania that it
had all the information it considered necessary for appraisal of the request.

(3)       With regard to the
maintenance and repair of the bridge, the derogation sought by Bulgaria and
Romania consists in considering the territorial border between the two Member
States as being in the middle of the bridge.

(4)       With regard to the
charging of tolls to cross the border bridge, the two Member States wish to
consider the entire length of the bridge as part of the territory of the State
in which any transit journey starts. Thus only Bulgarian VAT will be charged on
the entire toll for all journeys starting from the Bulgarian side. In the same
way, only Romanian VAT will be charged on journeys starting from the Romanian
side.

(5)       In the absence of derogating
measures, the determination of the place of supply for the maintenance, repair
and charging of the toll would in the first place be dependent on the precise establishment
of the territorial border above water which, in practice, would be very
difficult for the taxable persons involved. Secondly, both Bulgarian and
Romanian VAT would have to be applied on the toll charged for a one-way journey
over the border bridge from the one Member State to the other. The derogation
measures are therefore intended to simplify the collection of VAT on these
services.

(6)       As the matter involved is
the definition of the territory for VAT purposes to which there should be no
changes, the requested derogation should be granted for an indefinite period.

(7)       The measures will not
adversely affect the Union's own resources provided from VAT, nor will they have
any effect on the amount of the tax due at the final stage of consumption,

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Article 5 of
Directive 2006/112/EC, Bulgaria and Romania are authorised, under the
conditions of Articles 2 and 3 of this Decision, to apply measures derogating
from Directive 2006/112/EC in relation to the maintenance, repair and the
charging of tolls in relation to the border bridge across the Danube between Vidin
(Bulgaria) and Calafat (Romania).

Article 2

As to determine the place of taxable
transactions regarding the maintenance or the repair of the border bridge, the
territorial boundary will be considered as being the middle of that bridge for
the supply of goods and services, intra-Community acquisitions and imports of
goods intended for that maintenance or repair.

Article 3

As to determine the place of the taxable
transactions regarding the charging of the toll, the border bridge will, for
its entire length, be considered as being part of the territory of the Member
State from which any journey using the bridge begins.

Article 4

This Decision is addressed to the Republic
of Bulgaria and to Romania.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 347, 11.12.2006, p. 1

[2]               OJ L 347, 11.12.2006, p. 1.