COMMISSION OF THE EUROPEAN COMMUNITIES 
:>£'$" Brussels, 12.04.1995 
COM(95) 136 final 
-SÏÏN 
Proposal for a 
COUNCIL DECISION 
AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY AND 
THE REPUBLIC OF POLAND TO CONCLUDE AN AGREEMENT CONTAINING MEASURES 
DEROGATING FROM ARTICLES 2 AND 3 OF 
THE SIXTH COUNCIL DIRECTIVE (77/388/EEC) OF 17 MAY 1977 
ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES 
RELATING TO TURNOVER TAXES 
(presented by the Commission) 
^ 
EXPLANATORY MEMORANDUM 
By letter officially received by the Secretariat-General of the Commission on 20 January 
1995, the German Government requested authorization, on the basis of Article 30 of the 
Sixth Council Directive, to conclude an agreement with the Republic of Poland containing 
derogations from Articles 2 and 3 of that Directive (Sixth Council Directive 77/388/EEC 
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 assessment1). 
This agreement concerns the link-up of the German B97 and Polish 274 roads, and the 
construction of a frontier bridge across the Neisse in the Guben and Gubinek area. 
However, the tax provisions derogating from the Sixth Directive refer only to the 
construction of the frontier bridge. 
In accordance with Article 30, the other Member States were informed of Germany's 
request by letter dated 20 February 1995. 
The agreement provides that Polish law relating to goods and services tax is to apply to 
supplies of goods or services effected in connection with the construction of the frontier 
bridge. It also stipulates that, with the exception of customs duties, no import tax is to be 
charged on goods imported from the. sovereign territory of one Contracting State into the 
sovereign territory of the other Contracting State, provided that those goods are used in 
the construction of the frontier bridge. This does not apply to imports of goods for the 
public building authorities. 
Under the principle of territorial application laid down by the Sixth Directive, construction 
work carried out on German sovereign territory would be subject to VAT in Germany, 
but construction work carried out on Polish sovereign territory would lie outside the 
scope of the Sixth Directive. If these provisions were applied, it would be necessary to 
break down transactions on the basis of the territory on which they were carried out. In 
addition, each importation into Germany from Poland of goods used for the construction 
of the bridge would be subject to VAT in Germany. 
The Contracting States are of the opinion that the application of these rules would involve 
substantial tax complications for the contractors responsible for the construction work. 
They therefore take the view that the tax provisions of the draft agreement are justified in 
order to simplify the contractors' tax obligations. 
OJ No L 145, 13.6.1977, p. 1, as last amended by Directive 94/76/EC (OJ No L 365, 31.12.1994, 
p.53). 
J? 
It is clear that the tax provisions in the agreement adversely affect the total amount of 
VAT to be collected on transactions relating to construction work on the frontier bridge. 
However, the German Government would point out that earlier agreements between 
Germany and Poland concerning, first, the motorway link-up and the construction of 
frontier clearance facilities for the new frontier crossing in the Gôrlitz and Zgorzelec area 
and, second, the motorway link-up between Frankfurt/Oder and Schwetig stipulated that 
all supplies of goods or services effected in connection with the construction of bridges 
were subject to VAT in Germany, including those effected on Polish territory. The 
Council authorized Germany to conclude agreements by two decisions deemed to have 
been adopted in accordance with the second paragraph of Article 30 of the Sixth 
Directive. 
However, in the course of the negotiations on these agreements, a guarantee of 
reciprocity was given. Thus, the Federal Republic of Germany had agreed that, in future 
cross-border construction projects of a similar nature, Polish tax law could be applied to 
transactions carried out on German territory if this facilitated construction. It is therefore 
in accordance with what was agreed during earlier negotiations that the draft agreement 
provides that Polish law relating to tax on goods and services is to apply to all the 
construction work on the bridge. 
Under Article 30 of the Sixth Directive, any Member State may be authorized to conclude 
with a non-member country or an international organization an agreement which may 
contain derogations from the said Directive. 
The Commission agrees that the uniform taxation of construction work and the waiving of 
collection of VAT on the importation of goods intended for use in such work is a 
simplification for the contractors compared with the application of the normal rules of 
taxation. 
It also considers that the provisions of the proposed agreement resulting in the 
non-taxation of transactions relating to construction work that is subject to VAT in 
Germany are fair, given the tax provisions of the two above-mentioned agreements 
providing for VAT to be charged in Germany on certain transactions which were, in 
theory, outside the scope of the Sixth Directive. 
In addition, given the compensating effect of the tax provisions of the three agreements, 
the application of the tax provisions of the present draft agreement will have only a 
negligible effect on the own resources of the European Communities accruing from value 
added tax. 
Accordingly, the Commission takes the view that the Federal Republic of Germany should 
be authorized to conclude the proposed agreement. 
M 
Proposal for a 
COUNCIL DECISION 
AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY AND 
THE REPUBLIC OF POLAND TO CONCLUDE AN AGREEMENT CONTAINING MEASURES 
DEROGATING FROM ARTICLES 2 AND 3 OF 
THE SIXTH COUNCIL DIRECTIVE (77/388/EEC) OF 17 MAY 1977 
ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES 
RELATING TO TURNOVER TAXES 
•• * 3 I 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing the European Community, 
Having regard to the Sixth Council Directive (77/388/EEC) 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,1 and in particular Article 30 
thereof, 
Having regard to the proposal from the Commission, 
Whereas, under Article 30 of the Sixth VAT Directive, the Council, acting unanimously 
on a proposal from the Commission, may authorize any Member State to conclude with a 
non-member country or an international organization an agreement which may contain 
derogations from the said Directive; 
Whereas, by letter officially received by the Secretariat-General of the Commission on 20 
January 1995, the German Government requested authorization to conclude an agreement 
with Poland concerning the link-up of the German road B97 and the Polish road 274, and 
the construction of a frontier bridge across the Neisse in the Guben and Gubinek area, 
which contains derogations from Articles 2 and 3 of the Sixth Directive as regards the 
construction of the frontier bridge; 
Whereas the other Member States were informed on 20 February 1995 of the German 
request; 
1 OJ No L 145, 13.6.1977, p.l, as last amended by Directive 94/76/EC (OJ No L 365, 31.12.1994, 
p.53). 
X 
Whereas, in the absence of derogations, the construction work carried out on German 
territory would be subject to VAT in Germany while that carried out on Polish territory 
would be outside the scope of the Sixth Directive and whereas, in addition, each 
importation from Poland into Germany of goods used for the construction of the frontier 
bridge would be subject to VAT in Germany; 
Whereas the purpose of these derogations is to simplify the rules of taxation for the 
contractors carrying out the construction work on the frontier bridge in question; 
Whereas the derogations will have only a negligible effect on the own resources of the 
European Communities accruing from value added tax, 
HAS ADOPTED THIS DECISION: 
s 
Article 1 
The Federal Republic of Germany is authorized to conclude an agreement with the 
Republic of Poland relating to the link-up of the German road B97 and the Polish road 
274 and to the construction of a frontier bridge across the Neisse in the Guben and 
Gubinek area and containing measures derogating from the Sixth Council Directive 
(77/388/EEC) of 17 May 1977. These derogations are defined in Articles 2 and 3. 
Article 2 
By way of derogation from Article 3 of the Sixth Directive, that part of the territory of the 
Federal Republic of Germany in the region of Guben in which work to construct a frontier 
bridge across the Neisse linking German road B97 and Polish national road 274 is carried 
out is deemed to be part of the territory of the Republic of Poland for the purposes of 
supplies of goods and services intended for use in the construction of that bridge. 
Article 3 
By way of derogation from point 2 of Article 2 of the Sixth Directive, the importation of 
goods into Germany from Poland shall not be subject to value added tax in so far as those 
goods are used for the construction of a frontier bridge across the Neisse in the Guben 
and Gubinek area linking German road B97 and Polish road 274. However, this 
derogation shall not apply to importations of goods effected by a public authority. 
Article 4 
This Decision is addressed to the Federal Republic of Germany. 
Done at Brussels ...1995 
For the Council 
The President 
ISSN 0254-1475 
COM(95) 136 final 
DOCUMENTS 
09 II 
Catalogue number : CB-CO-95-149-EN-C 
ISBN 92-77-87747-2 
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