COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 30.04.1997 
COM(97) 181 final 
Proposal for a 
COUNCIL DECISION 
AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY 
TO CONCLUDE WITH THE CZECH REPUBLIC 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 registered by the Secretariat-General of the Commission on 5 February 1997, the 
Federal Republic of Germany requested authorization, on the basis of Article 30 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 - Common system of value added tax: 
uniform basis of assessment1, to conclude an agreement with the Czech Republic 
containing tax provisions derogating from Articles 2 and 3 of the Sixth Directive. 
In accordance with Article 30, the other Member States were informed of the request of 
the Federal Republic of Germany by letter dated 3 March 1997. 
This agreement concerns constructing in the Spitzberg area a frontier bridge, which partly 
is on the territory of the Federal Republic of Germany and partly on the territory of the 
Czech Republic, linking the German A17 motorway heading east with the Czech D8 
motorway heading west. 
The agreement provides that for the application of the German turnover tax law and the 
Czech value added tax law, the area of the construction site for the frontier bridge and, 
after its completion, the frontier bridge itself are to be treated as forming part of the 
sovereign territory of the Czech Republic as regards supplies of goods or services 
intended for the construction of the frontier bridge or for its repair and renewal. 
The agreement 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 for the construction of the frontier bridge in question or for its maintenance. This 
provision does not apply to goods imported for the same purpose by public authorities. 
In accordance with the principle of territorial application laid down by the Sixth Directive, 
the bridge construction, repair and renewal work carried out on German sovereign 
territory would be subject to value added tax in Germany, while such work carried out on 
Czech 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 the Czech Republic of goods used for the construction of the bridge or for its 
maintenance would be subject to value added tax in Germany. 
The Contracting States are of the opinion that application of these rules would involve 
onerous tax complications for the contractors responsible for the work in question. 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 96/95/EC (OJ No L 338, 28.12.1996, 
The German government is aware that the tax provisions of the agreement affect in a 
negative way the total amount of VAT chargeable on construction, repair and renewal of 
the frontier bridge. 
However, the German government indicates that by the Council Decision of 17 March 
19972 the Federal Republic of Germany has been authorized to conclude two agreements 
with the Czech Republic concerning construction of frontier bridges, whereby application 
of the tax provisions will have only a negligible - but, in any event, positive - effects for 
the collection of European Communities' own resources accruing from VAT. 
It should also be noted that, pursuant to Article 30 of the Sixth Directive, the Council has 
already authorized the Federal Republic of Germany to conclude a number of agreements 
with the Republic of Poland concerning construction work in the frontier area which 
contain tax provisions similar to those set out in the present agreement. 
Furthermore, the German authorities make known that until now, as regards application 
of the tax provisions of all the agreements which Germany has concluded with its Eastern 
European neighbour countries, and whereby the construction work extends on the 
sovereign territory of both Contracting parties, the overall balance is positive from the 
point of view of the European Communities' own resources accruing from VAT. 
The Commission agrees that the uniform taxation of construction, repair and renewal 
work, and the waiving of collection of value added tax on imports of goods intended for 
use in such work, simplify matters for the contractors compared with application of the 
normal rules of taxation. 
The Commission considers that the effect of the agreement in question on the European 
Communities' own resources accruing from value added tax, should not be an obstacle for 
granting the Federal Republic of Germany the requested authorization, given its minor 
importance, and moreover, the compensating effect of the several similar agreements 
which the Federal Republic of Germany has already conluded in the past. 
Accordingly, the Commission takes the view that the Federal Republic of Germany should 
be authorized to conclude the proposed agreement. 
OJ No L 80, 21.3.1997, p. 18 
Proposal for a 
COUNCIL DECISION 
AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY 
TO CONCLUDE WITH THE CZECH REPUBLIC 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 
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 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 registered by the Secretariat-General of the Commission on 5 
February 1997, the German government requested authorization to conclude an 
agreement with the Czech Republic relating to the construction of a frontier bridge 
between the Contracting States in question; 
Whereas, the agreement contains provisions in the field of value added taxation which 
derogate from the Articles 2 and 3 of the Sixth Directive as regards, on the one hand, the 
supplies of goods and services in connection with the construction, repair and renewal of 
the frontier bridge, and on the other hand, importation of goods used for the construction 
work or the maintenance of this bridge; 
OJ No L 145, 13.6.1977, p. 1, as last amended by Directive 96/95/EC (OJ No L 338, 28.12.1996, 
p. 89). 
Whereas the other Member States were informed on 3 March 1997 of the German 
request; 
Whereas, in the absence of derogations, the construction, repair and renewal work carried 
out on German territory would be subject to value added tax in Germany while that 
carried out on Czech territory would lie outside the scope of the Sixth Directive and 
whereas, in addition, each importation from the Czech Republic into Germany of goods 
used for the construction and the maintenance of the frontier bridge would be subject to 
value added tax in Germany; 
Whereas the purpose of these derogations is to simplify the rules of taxation for the 
contractors carrying out the work 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: 
5^ 
Article 1 
The Federal Republic of Germany is hereby authorized to conclude an agreement with the 
Czech Republic concerning the construction of a frontier bridge in the Spitzberg area, 
which partly is on the territory of the Federal Republic of Germany and partly on the 
territory of the Czech Republic, linking the German A17 motorway heading east with the 
Czech D8 motorway heading west, containing measures derogating from the Sixth 
Council Directive (77/388/EEC) of 17 May 1977. 
The derogations provided for by this agreement are spelt out in Articles 2 and 3. 
Article 2 
By way of derogation from Article 3 of the Sixth Directive, in so far as they extend onto 
the sovereign territory of the Federal Republic of Germany, the area of the construction 
site for the frontier bridge referred to in Article 1 of this decision and, after its completion, 
the frontier bridge itself shall be treated as forming part of the sovereign territory of the 
Czech Republic as regards supplies of goods or services intended for the construction of 
the frontier bridge or for its repair and renewal. 
Article 3 
By way of derogation from point 2 of Article 2 of the Sixth Directive, the importation of 
goods into Germany from the Czech Republic shall not be subject to value added tax in so 
far as those goods are used for the construction and the maintenance of the bridge 
referred to in Article 1 of this decision. However, this derogation shall not apply to goods 
imported for the same purpose by a public authority. 
Article 4 
This Decision is addressed to the Federal Republic of Germany. 
Done at Brussels, 1997 
For the Council 
The President 
£" 
Financial statement 
The proposed Decision, when adopted, will have only a negligible effect on the own 
resources of the European Communities accruing from the value added tax. 
Q-

ISSN 0254-1475 
COM(97) 181 final 
DOCUMENTS 
EN 09 07 
Catalogue number : CB-C0-97-175-EN-C 
ISBN 92-78- 19025-X 
Office for Official Publications of the European Communities 
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