amending Implementing Decision 2013/680/EU authorising the Kingdom of Denmark and the Kingdom of Sweden to extend the application of a special measure derogating from Articles 168, 169, 170 and 171 of Directive 2006/112/EC on the common system of value added tax

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

Grounds for and objectives of the proposal

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

Denmark and Sweden requested an extension to their existing derogation firstly granted by Decision 2000/91/EC and extended by Decisions 2003/65/EC, 2007/132/EC and 2013/680/EU . In accordance with Article 395(2) of the VAT Directive, the Commission, in a letter dated 2 April 2020, informed the other Member States of the request by Denmark and Sweden. By letter dated 3 April 2020, the Commission notified Denmark and Sweden that it had all the information it considered necessary for the appraisal of the request.

General context

Denmark and Sweden have jointly introduced simplified rules on the recovery of VAT in connection with tolls on the Öresund fixed link between Denmark and Sweden. This was deemed necessary as the normal VAT rules would create excessive paperwork for taxpayers and administrations alike.

Under the normal VAT rules as contained in Articles 168, 169, 170 and 171 of the VAT Directive, VAT must be deducted in or refunded by the Member State in which it was due or paid. As the Öresund fixed link is located partly in the territory of Denmark and partly in the territory of Sweden the VAT paid on the toll charge for using the link would be recoverable from either of these countries to the extent that the charge relates to their territory. Specifically 50% would be recoverable from Denmark and 50% from Sweden.

In practice this would mean that taxable persons established in either Denmark or Sweden would only be able to recover 50% of the VAT on their periodic VAT returns in the Member State of registration. The remaining 50% would have to be claimed back as a refund from the other Member State via Directive 2008/9/EC. Also, taxable persons established in Member States other than Denmark and Sweden would be required to recover VAT via two separate refund claims under Directive 2008/9/EC, one submitted to Denmark and the other to Sweden. Likewise, taxable persons established outside the territory of the Union would under Directive 86/560/EEC need to send refund claims both to Denmark and to Sweden.

The existing derogation for Denmark and Sweden simplifies the VAT rules concerning the recovery of VAT. In effect, under that derogation, they allow a single claim for the recovery of VAT in relation to the toll. The simplified rules applied are as follows:

– Taxable persons established in Denmark and Sweden are entitled to deduct, on their domestic VAT return, the full amount of deductible VAT on the tolls including that part relating to the use of the link in the territory of the Member State in which they are not established.

– To recover VAT deductible under the procedure laid down in Directive 2008/9/EC regarding taxable persons established in a Member State other than Denmark or Sweden or under the procedure laid down in Directive 86/560/EEC for taxable persons established outside of the Member States, the application should be made to the Swedish authorities only.

Denmark and Sweden request that these existing simplification rules be extended for a further period.

According to the statistical information provided by Sweden, the derogation created for the taxable persons provides a significant simplification of the VAT recovery of the Öresund link tolls, and has proven successful. It is also the Commission's view that this type of cross-border deduction is a model of simplification of business obligations that could be extended through a generalised One Stop Shop in the long term.

The Commission therefore considers that a further extension is appropriate.

Existing provisions in the area of the proposal

An existing derogation granted to Denmark and Sweden on 24 January 2000 and extended on 21 January 2003, on 30 January 2007 and on 13 November 2013.

Consistency with other policies and objectives of the Union

Not applicable.