COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(89)358 final 
Brussels, 12 July 1989 
Proposal for a 
COUNCIL DECISION 
authorizing the French Republic 
to apply a measure derogating from 
Article 17(2) 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 6 
1. By letter v." eivd on 17 April 1989, the French Government submitted 
to the Cocwiiltsioii a request for a derogation under Article 27 of the 
Sixth VAT Directive'1' aimed at Introducing a special simplification 
measure. The measure, which derogates from Article 17(2) of the Sixth 
Directive, is designed to exclude from the right to deduct VAT 
previously charged expenditure in respect of the acquisition of goods 
and services in cases where private use of those goods and services 
accounts for more than .90% of their total use. 
2. In support of its request, the French Government emphasizes that 
taxation of the private use of goods and services supplied by a 
taxable person to himself, which will be introduced in France along 
with the right to deduct the entire amount of input VAT charged on 
goods and services used for mixed purposes, would be complicated in 
cases where the goods and services were used primarily for non­
business purposes since virtually all the amounts taxable would be 
represented not by actual turnover but by the value of the self-supply 
of services. 
3. The French Government also points out that, being applicable in 
exceptional and marginal situations, the derogation will not affect 
the amount of tax due at the final consumption stage. 
l1*> O.J. N° L 145 of 13 June 1977 
°L 
4. 7he Commission informed the other Member States of the French request 
by letter dated 17 May 1989. 
Proposal for a 
COUNCIL. DECISION 
authorizing th<» French Republic 
to apply a measure derogating from 
Article 17(2) of the Sixth Council Directive (77/J88/Enc> of 17 May 1977 
on the harmonization of the laws of the Member States 
relating to turnover taxes 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic 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 
assessment1'*, and in particular Article 27 thereof, 
Having regard to the proposal from the Commission, 
Whereas, under Article 2/(1) of the aforementioned Directive, the 
Council, acting unanimously on a proposal from the Commission, may 
authorize any Member State to introduce 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; 
Whereas by letter received by the Commission on 17 April 1989, the French 
Republic requested authorization to introduce a special measure 
derogating from Article 17(2) of the Sixth Directive; 
Whereas the French Republic intends to introduce an arrangement 
permitting deduction of the entire amount of tax charged on goods and 
services used for both business and private purposes while, at the same 
time, providing for taxation of the private use of such goods and 
"' O.J. N° L 145 of 13 June 1977 
4 
services, in accordance with Articles 5'6) and 6(2) of the Sixth 
Directive: 
Whereas, France would like to retain the right to exclude altogether the 
deduction of input VAT while refraining from taxing self-supplies in 
cases where private use accounts for more than 90% of the use to which a 
particular good or service is put; whereas such a measure is necessary 
and appropriate to avoid certain tax evasion and fraud and whereas it 
contributes to the simplification of tax collection; 
Whereas the latter measure constitutes a derogation from Article 17(2) of 
the Sixth Directive, whereby a taxable person is entitled to deduct the 
tax charged on goods and services used by him in so far as those goods 
and services are used for the purposes of his taxable transactions; 
Whereas this.request can be accepted subject to certain conditions; 
Whereas the measure in question should be temporary in order to allow an 
evaluation after a certain period of application; 
Whereas the authorisation will run until 31 December 1992, with the 
Commission presenting before that date, a report to the Council on the 
application of this authorization; 
Whereas the Council will determine, on the basis of a proposal for a 
Decision submitted if appropriate by the Commission and accompanying the 
above mentioned report, whether to extend the authorization beyond that 
date: 
Whereas the derogation will not affect, except to a negligible degree, 
the amount of tax due at the final consumption stage; whereas it will not 
have a negative effect on the European Communities' own resources 
accruing from value added tax; 
Whereas the other Member States were Informed on the French Republic's 
request on 17 May lvnvt 
HAS ADOPTED THIS DEC If. TON : 
Ç 
10 
Article J 
By way of derogation from Article 17(2) of the Sixth Directive, the 
French Republic is h^rby authorized until 31 December 1V92 to exclude 
from the right to deiJm.. t value added tax previously charged expenditure 
in respect of goods and services in cases where private use of those 
goods and services accounts for more than 90% of their total use. 
Article 2 
On the basis of a report by the Commission on the application of the 
authorization cited in Article 1, accompanied if appropriate by a 
proposal for a decision, the Council shall determine on the basis of that 
proposal before 31 December 1992 whether the said authorization shall be 
extended. 
Article J 
This Decision is addressed to the French Republic. 
Done at Brussels, For the Council 
The President 
c 

Commission of the European Communities . 
COM(89) 358 final 
Proposal for a 
COUNCIL DECISION 
authorizing the French Republic to apply a measure derogating from 
Article 17(2) 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 
(submitted by the Commission) 
12.7.1989 
Office for Official Publications of the European Communities 
L - 2985 Luxembourg 
Series: DOCUMENTS 
1989 - 6 pp. — Format: 21.0 * 29.7 cm 
EN 
ISSN 0254-1475 
ISBN 92-77-51982-7 
Catalogue number: CB-CO-89-308-EN-C 
ISSN 025*1475 
COM(89) 358 final 
DOCUMENTS 
Proposal for a 
COUNCIL DECISION 
authorizing the French Republic to apply a measure 
derogating from Article 17(2) 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 
(submitted by the Commission) 
09 
Catalogue number: CB-CO-89-308-EN-C 
ISBN 92-77-51982-7 12.7.1989 
€ 
COMMISSION OF THE EUROPEAN COMMUNITIES