EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 20.3.2006 
COM(2006) 99 final/2 
2006/0039 (CNS)   
CORRIGENDUM: page 10 
Proposal for a 
COUNCIL DECISION 
on the system of the European Communities' own resources 
(//EC, Euratom) 
 
(presented by the Commission) 
 
  
COMMISSION WORKING DOCUMENT 
on calculation, financing, payment and en try in the budget of the correction of 
budgetary imbalances in favour of the Un ited Kingdom (‘the UK correction’) in 
accordance with Articles 4 and 5 of Co uncil Decision 2006/xxx/EC, Euratom on the 
system of the European Communities’ own resources 
 
EN 2   EN EXPLANATORY MEMORANDUM  
1. I NTRODUCTION  
On 15–16 December 2005 the European Council reached a political agreement on the 
financial framework 2007-20131. It also called on the Comm ission to prepare a new Own 
Resources Decision and to modify the accomp anying working paper on the UK correction in 
order to implement its conclusions concerning the financing of the European Union. Paragraph 78 of the agreement on the financial framework attached to the European Council 
conclusions states: 
‘The Own Resources Decision and the accomp anying Working Methods paper shall be 
modified so that the ratification process fo r the Own Resources Decision can be completed 
by all Member States to allow entry into for ce from no later than the beginning of 2009 and 
in order to introduce the changes below. Th ese changes shall take effect from 1 January 
2007, and will be applied retroactively if necessary…’ 
Moreover, the European Council concluded that: 
• the ceilings of own resources and of commitment appropria tions should remain at their 
current levels (§76), and 
• the own resources arrangements should be guid ed by the overall objective of equity. These 
arrangements should therefore ensure, in line with the relevant conclusions of the 1984 
Fontainebleau European Council, that no Memb er State sustains a budgetary burden which 
is excessive in relation to its relative prosper ity. It is therefore appropriate to introduce 
provisions covering specifi c Member States (§77). 
The present proposal for a Council Decision on the system of the European Communities’ 
own resources and its accompanying working pa per on the UK correction amend the existing 
own resources provisions. These amendments concern: 
• Provisions implementing the conclusions of the European Council of 15-16 December 
2005 in the own resources area (s ee sections 2 and 3 below). 
• Some adjustments of existing provisions to  take into account de velopments since the 
existing Own Resources Decision was a dopted by Council in September 2000 and to 
improve the legal and linguistic consistency of the provisions (see sec tions 3 and 4 below). 
All references to Articles below refer to th e present proposal for a Council Decision on the 
system of the European Communities’ own resources. 
                                                 
1 Document 15915/05 CADREFIN 268 of 19.12.2005. 
 
EN 3   EN 2. I MPLEMENTATION OF THE EUROPEAN COUNCIL CONCLUSIONS – PROPOSAL FOR A 
NEW OWN RESOURCES DECISION  
2.1. Fixed rate of call of VAT – fi rst subparagraph of Article 2(4) 
The European Council concluded that the rate of call of VAT shall be fixed at 0.30 % of 
Member States’ capped VAT bases. 
Under the current Own Resources  Decision 2000/597/EC, Euratom2, the uniform rate of call 
of VAT actually levied on Member States’ capped VAT bases is established by deducting 
from the ‘maximum rate of call’  (currently 0.50 %) a ‘fro zen rate’, which in turn is calculated 
according to a complex formula related to the size of the UK correction. 
Under the new system the rate of call will be  fixed permanently at 0.30 %, which corresponds 
to the difference between the current maximum rate of call of 0.50 % and an average past 
value of the frozen rate of 0.20 %. 
The replacement of the current complicated and opaque system of calculating the VAT rate of 
call with a fixed rate of call is a welcome simplification that was long overdue. The link 
between the VAT rate and the UK correction via the ‘frozen rate’ is a historical relic from the 
pre-1988 own resources system when the UK correction was financed in proportion to 
Member States’ uncapped VAT bases, wherea s since 1988 it is financed in proportion to 
Member States’ GNP/GNI3 bases. The establishment of a fi xed rate of call of VAT (the 
uniform rate) at its current level ‘is therefore a logical step, as the fr ozen rate’ does no longer 
fulfil any meaningful purpose. 
2.2. Temporarily reduced rates of call of VAT for specific Member States – second 
subparagraph of Article 2(4) 
The European Council concluded that for th e period 2007–2013, four countries shall benefit 
from reduced rates of call of VAT to redu ce their respectiv e budgetary burden. During this 
period the rate of call of VAT for Austria sh all be fixed at 0.225 %, for Germany at 0.15 % 
and for the Netherlands and Sweden at 0.10 %. 
2.3. Temporary reductions in the GNI contri butions for specific Member States – 
Article 2(5) 
The European Council concluded that for th e period 2007–2013, the Netherlands shall benefit 
from a gross annual reduction in its GNI c ontribution of € 605 million and Sweden from a 
gross annual reduction in its GNI contributi on of € 150 million, expressed in 2004 prices. 
These gross reductions will be financed by all Member States, i.e. including the Netherlands 
and Sweden. These reductions are not intend ed to increase the size of the UK correction, 
neither to reduce the shares of the Netherla nds and Sweden in the financing of the UK 
correction. The gross reductions will therefore be granted after the calculation of the UK correction and its financing. 
                                                
 
2 OJ L 253, 7.10.2000, p. 42. 
3 As from 2002 gross national product (GNP) was replaced by gross national income (GNI) in the own 
resources area. 
 
EN 4   EN This measure is intended to reduce th e budgetary burden of these countries. 
2.4. Adjustment of the UK correction to enla rgement – Article 4(1)(f), (g) and 4(2) 
The European Council concluded that the correc tion of budgetary imbalances in favour of the 
United Kingdom shall remain in full except for e xpenditure in the Member States which have 
acceded to the EU after 30 April 2004. 
Expenditure in these new Member States, wi th the exception of CAP market expenditure 
(agricultural direct payments and market-related expenditure as well as that part of rural 
development expenditure originat ing from the EAGGF guarantee section), shall therefore be 
excluded from total allocated expenditure fo r the purpose of calcula ting the UK correction. 
The reduction of total allocated expenditure sha ll be progressively phase d in, starting with the 
2008 correction to be budgeted for the first time in 2009 and reaching cruising speed  with the 
2010 correction to be budgeted for the first time in 2011, according to the schedule below: 
 
UK correction to be budgeted 
for the first time in the year : Percentage of enlargement-related 
expenditure (as defined above) to be 
excluded from the calculation of the 
UK correction: 
2009 20 
2010 70 2011 100 
The European Council also concluded that during the period 2007–2013, the total adjustment 
of the amount of the UK correction resulting fr om this reduction of allocated expenditure 
shall not exceed € 10.5 billion, in 2004 prices. The proposed Council decision therefore lays 
down that the Commission services  shall verify each year whet her the cumulated adjustment 
of the UK correction exceeds this amount. If it does, the UK c ontribution to the budget shall 
be reduced accordingly. For the purpose of the calculation, the latest available GDP deflator 
for the EU expressed in euro as prov ided by the Commission shall be used. 
The amount of € 10.5 billion shall, furthermore,  be adjusted upwards in case of further 
enlargement before 2013, except for the accession of Romania and Bulgaria. 
As soon as it has been phased in and provided that the ceiling of € 10.5 billion for the period 
2007–2013 is not breached, this adjustment of th e UK correction mechanism will ensure that 
the UK fully participates in the financing of enlargement, with the exception of the 
agricultural expenditure  referred to above. 
As stated in Annex III of the agreement on the financial framework attached to the European 
Council conclusions, the enlargement-related adjustment in the current Own Resources 
Decision, i.e. the reduction of total allocated expenditure by an amount corresponding to pre-
accession expenditure in the acceding countries in the year preceding their accession, shall 
cease to apply as from the 2013 correction to be budgeted for the first time in 2014. 
2.5. Review of the own resources system – Article 9 
The European Council concluded (§80) that the Commission should undertake a full, wide-
ranging review covering all as pects of EU funding and spen ding and to report in 2008/2009. 
 
EN 5   EN The proposal for a Council Decision therefore la ys down that in the framework of this full 
review, the Commission shall und ertake a general review of the own resources system, 
accompanied, if necessary, by appropriate proposals. 
2.6. Entry into force and effect – Article 10 
The European Council concluded that the new Own Resources De cision shall be adopted so 
that the ratification process fo r the new decision can be completed by all Member States to 
allow entry into force from the beginning of 2009 at  the latest, with retroactive effect as from 
1 January 2007. 
The provisions of previous Own Resources Decisi ons will continue to apply to the calculation 
of own resources and the UK corre ction for years prior to 2007. 
3. I MPLEMENTATION OF THE EUROPEAN COUNCIL CONCLUSIONS – PROPOSAL FOR A 
NEW ACCOMPANYING WORKING DOCUMENT ON THE UK  CORRECTION  
The accompanying working document on the UK corr ection has been modified in order to 
take into account the proposed changes in the Own Resources Decision. They concern: 
– The date that the workin g document takes effect. 
– The elimination of the adjustment  related to pre-accession aid. 
– The new adjustment related to expenditure in the new Member States. 
– The ceiling on the total reducti on of the United Kingdom corre ction related to the new 
adjustment above. 
– The adjustment to further enlargement( s) of the ceiling referred to above. 
– The elimination of the calculation of the ‘frozen rate’ and all references to the impact of 
the UK correction on the VAT call rate. 
Some other modifications have also been introdu ced to improve the coherence of the text and 
to facilitate comprehension. These changes ar e purely presentational and have no impact on 
the calculation method. They concern: 
– The elimination of a redundant double calcula tion of the financing of the correction. The 
current working document reproduces the fina ncing rules of the Own Resources Decision 
in section 2 point a) and b), but then adds in  point c) ‘In order to ensure this result, a 
corresponding adjustment of the GNP bases shall take place’. This provision fulfils no practical purpose and it is therefore proposed to simplify the text and only retain the 
calculation method laid down in  the Own Resources Decision, which is also the method 
presented in the financing tables of the annual budget. 
– The mathematical presentation of the different steps in th e calculation has been improved. 
– The presentation of allocated expenditure has been adapted to the nomenclature and 
structure of the 2007-2013 financial framework. 
– Some purely linguistic a nd presentational improvements to the text. 
 
EN 6   EN 4. O THER ADJUSTMENTS TO THE CURRENT OWN RESOURCES DECISION 2000/597/EC,  
EURATOM  
4.1. Removal of distinction betw een agricultural and custom s duties – Article 2(1)(a) 
and (b) 
Following the implementation in EU law of the agreements concl uded during the Uruguay 
round of multilateral trade negotiations, there is no longer any material difference between 
agricultural duties and customs duties. The differe nce is not related to the duties themselves, 
but only to the character of the products (agric ultural vs. non-agricultural) on which they are 
levied. 
In order to better refl ect this situation the proposal fo r a Council Decision merges points (a) 
and (b) in Article 2(1) of the current Council Decision and slig htly modifies the wording in 
order to remove any e xplicit distinction between import du ties in the agricultural and non-
agricultural field. As a conseque nce, the VAT-based resource becomes Article 2(1)(b) and the 
GNI-based resource Article 2(1)(c). 
Reference is still made to othe r levies, duties etc. that are no longer in force, since there may 
still be related outstanding customs debt in  the so-called B-accounts (i.e. related to 
outstanding disputed claims). 
4.2. Application of significant statistical ch anges to GNI for own resources purposes 
– Article 2(7) 
According to the second subparagraph of Article  2(7) in the current Own Resources Decision 
‘Should modifications to the ESA [European system of nati onal and regional accounts] 95 
result in significant change s in the GNI … the Council, ac ting unanimously … shall decide 
whether these modifications shall appl y for the purposes of this Decision ’. 
There is, however, no reason why statistical changes adopted by the EU in order to improve 
the methodology of ESA and to achieve a more  accurate intra-European comparison of 
economic activity should not apply in the ow n resources area. On the other hand, it is 
important that agreed changes are applied in a uniform manner across Member States before 
they are used as a basis for establishing their own resources payments. It  is therefore proposed 
to change the wording above to:  
‘Should modifications to the ESA 95 result in significant changes in the GNI … the Council, 
acting unanimously … shall decide when  these modifications shall apply for the purposes of 
this Decision.’  
4.3. Own resources and commitments ceilings – Article 3 In view of the change-over from ESA 79 to ESA 95 for budgetary and own resources 
purposes and in order to maintain unchanged th e amount of financial resources put at the 
disposal of the Communities the Commission re calculated the ceiling of own resources and 
the ceiling of appropriations for commitments, expressed to two decimal places, in accordance with the formula in Ar ticle 3(1) and 3(2) of the current Own Resources Decision 
2000/597/EC, Euratom. In December 2001
4, the Commission communi cated the new ceilings 
                                                 
4 COM(2001) 801. 
 
EN 7   EN to the Council and the European  Parliament. The ceiling of ow n resources is set equal to 
1.24 % of the total GNIs of the Member States at  market prices and a ceiling of 1.31 % of the 
total GNIs of the Member States is set for appropriations for commitments. 
The European Council of 15-16 December 2005 conc luded that these ceilings should remain 
at their current percentage level, which is re flected in the present proposal for a new Council 
decision. 
4.4. Deleted references to reserves – Articles 2(6), 6 and 7 
The provisions in the current Own  Resources Decision specify th at revenue needed to cover 
the reserves shall only be called when these are needed. 
However, as from 2003 the Monetary Reserve no longer exists. Furthermor e, in the draft new 
interinstitutional agreemen t (IIA) it is proposed to integrate the Emergency Aid reserve in the 
budget as a provision and finally, as mentioned in the draft II A presented by the Commission 
on 1 February 2006, the reserve for guaranteeing loans to non-member countries is to be 
transformed into a simplified provisioning m echanism whereby the appropriations necessary 
to provision the Loan Guarantee Fund will be entered in the budget, eliminating the need for any ad-hoc provision for the related call of resources. 
All references to the reserves have conse quently been removed in the proposed Council 
Decision. As a side effect, this means that pos sible changes in the existing reserves would no 
longer require a modification of the Own Resour ces Decision (entailing unanimity in Council 
and ratification by Member States). 
4.5. Stream-lining of reference to adoption of  implementing measu res – Article 8(2) 
In its opinion on the Commission’s 2004 proposal  for a new Own Resources Decision, the 
Court of Auditors criticised the proposed wording of Ar ticle 8(2) as well as its wording in the 
current Own Resources Decision, ‘ insofar as it interprets the subject of the Court's checks 
and audits, is tantamount to amending a provisi on of the Treaty outside the procedure laid 
down for that purpose ’
5. Furthermore, the Court criticised the fact that Article 279 of the 
Treaty was not referred to as the legal basis fo r adopting implementing measures and that the 
opinion of the Court was consequently not required. 
Since the references to the Court’s competences  are not required in th is context and it is 
standard practice to consult the Court on the implementi ng measures in this field, the 
proposed text has been str eamlined to this effect. 
                                                 
5 Opinion No 4/2005 (OJ C 167, 7.7.2005, p. 1). 
 
EN 8   EN 2006/0039 (CNS) 
Proposal for a 
COUNCIL DECISION 
on the system of the European Communities' own resources 
(//EC, Euratom) 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing th e European Community, and in particular 
Article 269 thereof, 
Having regard to the Treaty es tablishing the European Atomic Energy Community, and in 
particular Article 173 thereof, 
Having regard to the proposal from the Commission6, 
Having regard to the opinion of the European Parliament7, 
Having regard to the opinion of the Court of Auditors8, 
Having regard to the opinion of the Eu ropean Economic and Social Committee9, 
Whereas: (1) The European Council meeting in Br ussels on 15 and 16 December 2005 concluded, 
inter alia, that the own resources arrangements should be guided by the overall objective of equity. These arrangements s hould therefore ensure, in line with the 
relevant conclusions of the 1984 Fontaine bleau European Council, that no Member 
State sustains a budgetary burden which is  excessive in relation to its relative 
prosperity. It is therefore appropriate to introduce provisions  covering specific 
Member States. 
(2) The Communities' own resources system must ensure adequate resources for the 
orderly development of the Communities' pol icies, subject to the need for strict 
budgetary discipline. 
(3) For the purposes of this Decision, gross na tional income (GNI) is defined as annual 
GNI at market prices as pr ovided by the Commission in a pplication of the European 
                                                
 
6 OJ C 
7 Opinion delivered on  
8 OJ C  
9 OJ C  
 
EN 9   EN system of national and regiona l accounts (hereinafter referr ed to as the ‘ESA 95’) in 
accordance with Council Regulation (EC) No 2223/9610. 
(4) In view of the change-over from ESA 79 to ESA 95 for budgetary and own resources 
purposes and in order to maintain unchange d the amount of financ ial resources put at 
the disposal of the Communities the Comm ission recalculated, in accordance with 
Article 3(1) and 3(2) of C ouncil Decision 2000/597/EC, Euratom11, the ceiling of own 
resources and the ceiling for appropriations for commitments, expressed to two decimal places, on the basis of the formula in that Article. The Commission communicated the new ceilings to the C ouncil and the European  Parliament in 
December 2001
12. The ceiling of own resources is set equal to 1.24 % of the total 
GNIs of the Member States at market pric es and a ceiling of 1.31 % of the total GNIs 
of the Member States is set for appr opriations for commitments. The European 
Council of 15 and 16 December 2005 concluded that these ceilings should be maintained at their current levels. 
(5) In order to maintain unchanged the amount of  financial resources pu t at the disposal of 
the European Communities, it is appropriate to adapt these ceilings expressed in per cent of GNI in case of modifications to th e ESA 95 which entail a significant change 
in the level of GNI. 
(6) Following the implementation in EU law of the agreements concluded during the 
Uruguay round of multilateral trade negotia tions there is no l onger any material 
difference between agricultural duties and cust oms duties. It is ther efore appropriate to 
eliminate this distinction in the area of the EU budget. 
(7) In the interests of tran sparency and simplicity the European Council of 15 and 16 
December 2005 concluded that the uniform ra te of call of VAT should be fixed at 
0.30 %. 
(8) The European Council of 15 and 16 Dece mber 2005 concluded that Austria, Germany, 
the Netherlands and Sweden should benefit from reduced VAT rates of call during the 
period 2007–2013 and that the Netherlands and Sweden should benefit from gross reductions in their annual GNI-based contributions during the same period. 
(9) The European Council of 15 and 16 D ecember 2005 concluded that the correction 
mechanism in favour of the United Kingdo m should remain, along with the reduced 
financing of the correction benefiting Germ any, Austria, Sweden and the Netherlands. 
However, after a phasing-in period between 2009 and 2011, the United Kingdom 
should participate fully in the financing of the costs of enlargement, except for agricultural direct payments and market-rela ted expenditure as well as that part of 
rural development expenditure  originating from the EAGGF guarantee section. The 
calculation of the correction in favour of the United Kingdom will therefore be 
adjusted by progressively excluding expendi ture allocated to Member States which 
have acceded to the EU after 30 April 2004,  except for the agricultural and rural 
development expenditure mentioned above. Th e adjustment of the correction in favour 
                                                
 
10 OJ L 310, 30.11.1996, p. 1, as last amended by Regulation (EC) No 1267/2003 (OJ L 180, 18.7.2003, 
p. 1). 
11 OJ L 253, 7.10.2000, p. 42. 
12 COM(2001) 801. 
 
EN 10   EN of the United Kingdom as a result of this re duction in allocated expenditure should not 
exceed € 10.5 billion in 2004 prices durin g the period 2007–2013. In the event of 
further enlargement before 2013, except for the accession of Bulgaria and Romania, the amount should be adjusted accordingly. 
(10) The European Council of 15 and 16 Decem ber 2005 concluded that the provisions of 
Article 4(f) in Decision 2000/ 597/EC, Euratom regarding th e exclusion of the annual 
pre-accession expenditure in acceding countri es from the calculation of the correction 
in favour of the United Kingdom should cease to apply as from the correction to be 
budgeted for the first time in 2014. 
(11) The European Council of 15 and 16  December 2005 called on the Commission to 
undertake a full, wide-ranging review coveri ng all aspects of EU spending and of 
resources and to report in 2008/2009. Within  this framework, the Commission should 
therefore undertake a general review of the operation of  the own resources system, 
accompanied, if necessary, by appropriate proposals. 
(12) Provisions must be laid down to cover the changeover from the system introduced by 
Decision 2000/597/EC, Euratom to th at arising from this Decision. 
(13) The European Council of 15 and 16 D ecember 2005 concluded that this Decision 
should take effect on 1 January 2007, 
HAS LAID DOWN THESE PROVISIONS , WHICH IT RECOMMENDS TO THE 
MEMBER STATES FOR ADOPTION: 
Article 1 
The Communities shall be allocat ed own resources in accordance with the rules laid down in 
the following Articles in order to ensure, in  accordance with Artic le 269 of the Treaty 
establishing the European Community (hereinafter  referred to as the ‘EC Treaty’) and Article 
173 of the Treaty establishing the European At omic Energy Community (hereinafter referred 
to as the ‘Euratom Treaty’), the financ ing of the budget of the European Union. 
The budget of the European Union shall, without  prejudice to other revenue, be financed 
wholly from the Communities' own resources. 
Article 2 
1. Revenue from the following shall constitute own resources entered in the budget of the 
European Union: 
(a) levies, premiums, additional or compensa tory amounts, additional amounts or factors, 
Common Customs Tariff duties and other duties established or to be established by the 
institutions of the Communities in respect of trade with non-member countries, customs duties 
on products under the expired Treaty  establishing the European Coal and Steel Community as 
well as contributions and othe r duties provided for within the framework of the common 
organisation of the markets in sugar;  
 
EN 11   EN (b) without prejudice to the second subparagraph of paragra ph 4 of this Article, the 
application of a uniform rate valid for all Member States to the harmonised VAT assessment 
bases determined according to Community rule s. The assessment base to be taken into 
account for this purpose shall not exceed 50 % of GNI for each Member State, as defined in 
paragraph 7;  
(c) without prejudice to the second subparagraph of paragra ph 5 of this Article, the 
application of a uniform rate - to be determ ined pursuant to the budg etary procedure in the 
light of the total of all ot her revenue - to the sum of all the Member States' GNIs. 
2. Revenue deriving from any new charges in troduced within the framework of a common 
policy, in accordance with the EC Treaty or th e Euratom Treaty, provided that the procedure 
laid down in Article 269 of the EC Treaty or in Article 173 of the Euratom Treaty has been 
followed, shall also constitute own resources en tered in the budget of the European Union. 
3. Member States shall retain, by way of collect ion costs, 25 % of the amounts referred to in 
paragraph 1(a). 
4. The uniform rate referred to in pa ragraph 1(b) shall correspond to 0.30 %. 
However, for the period 2007–2013, th e rate of call of the VAT resource for Austria shall be 
fixed at 0.225 %, for Germany at 0.15 % and for the Netherlands and Sweden at 0.10 %. 
5. The uniform rate fixed under paragraph 1(c) sh all apply to the GNI of each Member State. 
However, for the period 2007–2013, the Netherlands shall benefit from a gross reduction in 
its annual GNI contribution of € 605 million and Sweden from a gross reduction in its annual 
GNI contribution of € 150 million, measured in 2004 prices. These amounts shall be adjusted 
to current prices by applying the most recent GD P deflator for the EU expressed in euro, as 
provided by the Commission, which is availabl e when the preliminary draft budget is drawn 
up. These gross reductions shall be granted after the calculation of the co rrection in favour of 
the United Kingdom and its financi ng referred to in Articles 4 and 5 of this Decision and shall 
have no impact thereupon. 
6. If, at the beginning of the financial year, the budget has not  been adopted, the previous 
VAT and GNI rates of call shall remain applicable until the entry into force of the new rates. 
7. For the purposes of applying this Decision, GNI  shall mean GNI for the year at market 
prices as provided by the Commission in appl ication of the ESA 95 in accordance with 
Regulation (EC) No 2223/96. 
Should modifications to the ESA 95 result in significant changes in the GNI as provided by 
the Commission, the Council, acting unanimously on a proposal of the Commission and after 
consulting the European Parliament, shall decide  when these modifications shall apply for the 
purposes of this Decision. 
Article 3 
1. The total amount of own resources assign ed to the Communities to cover payment 
appropriations may not exceed 1.24 % of the total GNIs of the Member States. 
 
EN 12   EN 2. The total amount of commitment appropria tions entered in the general budget of the 
European Union may not exceed 1.31 % of the total GNIs of the Member States. 
An orderly ratio between commitment appropri ations and payment appropriations shall be 
maintained to guarantee their compatibility a nd to enable the ceiling pursuant to paragraph 1 
to be respected in subsequent years. 
3. In the case of modifications to  the ESA 95 which result in si gnificant changes in the level 
of GNI that apply for the purposes of this  Decision, the ceilings for payments and 
commitments as determined in paragraphs 1 and 2 shall be recalculated by the Commission 
on the basis of the following formula: 
modified ESAtGNI1tGNI2tGNIcurrent ESAtGNI1tGNI2tGNI
*%)31.1%(24.1
+−+−+−+−
 
where t is the latest full year fo r which data according to C ouncil Regulation (EC, Euratom) 
No 1287/200313 (‘the GNI Regulation’) is available. 
Article 4 
1. The United Kingdom shall be granted a correction in resp ect of budgetary imbalances. 
This correction shall be established by: (a) calculating the difference, in the preceding financial year, between: 
- the percentage share of the United Kingdom in  the sum of uncapped VAT assessment bases, 
and 
- the percentage share of the United Ki ngdom in total allocated expenditure;  
(b) multiplying the difference thus obta ined by total allocated expenditure;  
(c) multiplying the result under (b) by 0,66;  (d) subtracting from the result under (c) the effects arising for the United Kingdom from the 
changeover to capped VAT and the payments refe rred to in Article 2(1)(c), namely the 
difference between: 
- what the United Kingdom would have had to pay for the amounts fina nced by the resources 
referred to in Article 2(1)(b) and (c), if the uniform rate had been applied to non-capped VAT 
bases, and 
- the payments of the United Kingdom pur suant to Article 2(1)(b) and (c);  
(e) subtracting from the result  under (d) the net gains of th e United Kingdom resulting from 
the increase in the percentage of resources referred to in Article 2(1)(a) retained by Member States to cover collection and related costs;  
                                                
 
13 OJ L 181, 19.7.2003, p. 1. 
 
EN 13   EN (f) calculating, at the time of each  enlargement of the European Union, an adjustment to the 
result under (e) so as to reduce the compensatio n, thereby ensuring that expenditure which is 
unabated before enlargement remains so after enlargement. This adjustment shall be made by reducing total allocated expenditure by an am ount equivalent to the annual pre-accession 
expenditure in the accedi ng countries. All amount s so calculated shall be carried forward to 
subsequent years and shall be adjusted annually by applying the latest available GDP deflator 
for the EU expressed in euro, as provided by the Commission. The present point shall cease to 
apply as from the correction to be  budgeted for the first time in 2014; 
(g) adjusting the calculation, by reducing tota l allocated expenditure  by total allocated 
expenditure in Member States that have acceded to the EU after 30 April 2004, except for 
agricultural direct payments and market-related expenditure as well as that part of rural 
development expenditure originating from the EAGGF guarantee section.  
This reduction shall be progressively phase d in according to the schedule below. 
 
UK correction to be budgeted 
for the first time in the year : Percentage of enlargement-related 
expenditure (as defined above) to be 
excluded from the calculation of the 
correction in favour of the United 
Kingdom 
2009 20 
2010 70 2011 100 
2. During the period 2007–2013 the total adjust ment of the United Kingdom correction 
resulting from the reduction of allocated expend iture referred to in paragraph (1)(g) above 
shall not exceed € 10.5 billion, measured in 200 4 prices. Each year, th e Commission services 
shall verify whether the cumulated adjustment  of the correction exceeds this amount. For the 
purpose of this calculation, amounts in current pr ices shall be converted into 2004 prices by 
applying the latest available GDP  deflator for the EU expressed in euro, as provided by the 
Commission. If the ceiling of € 10.5 billion is  exceeded, the United Kingdom’s contribution 
shall be reduced accordingly. 
In the event of further enlargement before  2013, with the exception of the accession of 
Bulgaria and Romania, the ceiling of € 10.5 b illion shall be adjusted upwards accordingly. 
Article 5 
1. The cost of the correction sha ll be borne by the other Member States in accordance with the 
following arrangements: 
The distribution of the cost shall first be calculated by reference to each Member State's share 
of the payments referred to in Article 2(1)(c), the United Kingdom being excluded and without taking account of the gross reductions  in the GNI-based contributions of the 
Netherlands and Sweden referred to in Article 2(5) ; it shall then be adjusted in such a way as 
to restrict the financin g share of Austria, Germany, the Neth erlands and Sweden to one fourth 
of their normal share resulting from this calculation. 
 
EN 14   EN 2. The correction shall be granted to the Un ited Kingdom by a reduction in its payments 
resulting from the application of Article 2(1)(b ) and (c). The costs bo rne by the other Member 
States shall be added to their payments resulting from the application for each Member State 
of Article 2(1)(b) and (c). 
3. The Commission shall perform the calculations required for the application of Article 2(5), 
Article 4 and this Article. 
4. If, at the beginning of the financial year, the budget has not been adopted, the correction 
granted to the United Kingdom and the costs born e by the other Member States as entered in 
the last budget finally adopted  shall remain applicable. 
Article 6 
The revenue referred to in Article 2 shall be  used without distinction to finance all 
expenditure entered in the budget. 
Article 7 
Any surplus of the Communities' revenue over total actual expenditure during a financial year 
shall be carried over to the following financial year. 
Article 8 
1. The Communities' own resources referred to in Article 2(1)(a) shall be collected by the 
Member States in accordance with the nationa l provisions imposed by law, regulation or 
administrative action, which shall, where appropri ate, be adapted to meet the requirements of 
Community rules. 
The Commission shall examine at regular interv als the national provisions communicated to it 
by the Member States, transmit to the Member St ates the adjustments it deems necessary in 
order to ensure that they comply with Co mmunity rules and report to the budget authority. 
Member States shall make the resources provided for in Article 2(1)(a) to (c) available to the 
Commission. 
2. The Council shall, in accordan ce with the procedure laid down in Article 279(2) of the EC 
Treaty, adopt the provisions necessary to ap ply this Decision and to make possible the 
inspection of the collection, the making availa ble to the Commission and payment of the 
revenue referred to in Articles 2 and 5. 
Article 9 
In the framework of the full, wide-ranging revi ew covering all aspects of EU spending and of 
resources on which it shall report in 2008/ 2009, the Commission shall undertake a general 
review of the own resources system, accompan ied, if necessary, by appropriate proposals. 
 
EN 15   EN Article 10 
1. Member States shall be notified of this Decision by the Secretary-General of the Council 
and the Decision shall be published in the Official Journal of the European Union . 
Member States shall notify the Secretary-Ge neral of the Council without delay of the 
completion of the procedures for the adoption of this Decision in accordance with their respective constitutional requirements. 
This Decision shall enter into force on the first day of the month following receipt of the last 
of the notifications referred to in the second subparagraph. It shall ta ke effect on 1 January 
2007. 
2. (a) Subject to (b), Decisi on 2000/597/EC, Euratom shall be repealed as of 1 January 2007. 
Any references to the Council Decision of 21 April 1970 on the replacement of financial 
contributions from Member States by the Communities' own resources
14, to Council Decision 
85/257/EEC, Euratom of 7 May 1985 on the Communities' system of own resources15, to 
Decision 88/376/EEC, Euratom16, to Decision 94/728/EC, Euratom17 or to Decision 
2000/597/EC, Euratom shall be construed as references to this Decision. 
(b) Articles 2, 4 and 5 of Decisions 88/376/EEC, Euratom, 94/728/EC, Euratom and 
2000/597/EC, Euratom shall continue to apply to  the calculation and adjustment of revenue 
accruing from the application of a uniform rate valid for all Member States to the VAT base 
determined in a uniform manner and limited be tween 50 % to 55 % of the GNP or GNI of 
each Member State, depending on the relevant year , and to the calculation of the correction of 
budgetary imbalances granted to the Un ited Kingdom for the years 1988 to 2006. 
(c) For amounts referred to in Article 2(1)(a) which should have been made available by the 
Member States before 28 February 2001 in accordance with the applicable Community rules, Member States shall continue to retain 10 % of these amounts by way of collection costs. 
Done at Brussels,  
 For the Council 
 The President 
                                                
 
14 OJ L 94, 28.4.1970, p. 19. 
15 OJ L 128, 14.5.1985, p. 15. 
16 OJ L 185, 15.7.1988, p. 24. 
17 OJ L 293, 12.11.1994, p. 9. 
 
EN 16   EN COMMISSION WORKING DOCUMENT 
on calculation, financing, payment and en try in the budget of the correction of 
budgetary imbalances in favour of the Un ited Kingdom (‘the UK correction’) in 
accordance with Articles 4 and 5 of Co uncil Decision 2006/xxx/EC, Euratom on the 
system of the European Communities’ own resources18 
                                                 
18 OJ L 
 
EN 17   EN INTRODUCTION 
In accordance with the conclusions of the Eu ropean Council of 15 and 16 December 2005 and 
the Council Decision on the system of the Co mmunities' own resources of (.........), this 
document replaces the Commission worki ng document 10646/00 of 21 September 200019. 
Unless otherwise stated, any references to Articl es relate to the Own Resources Decision of 
(…..), hereinafter referred to as the 2006 ORD. 
This document lays down the following provisions for the UK correction: (1) the calculation of the amount of the correction of a given year, 
(2) its financing in the following year, 
(3) definitions of budgetary aggregates, 
(4) the entry of the correction in the budget. 
The modifications to the own resources system deriving from the conclusions of the European 
Council of 15-16 December 2005 have no impact on the UK correction for the years prior to 
2007. Having regard to the entry into force of  the 2006 ORD, the provisions of the present 
document shall take effect on 1 January 2007. They shall, therefore, apply starting with the 
calculation of the UK correction originating in the year 2007, to be budgeted for the first time 
in 2008.  
1. T
HE UK  CORRECTION  
1.1. The calculation of the correctio n (Article 4 of the 2006 ORD) 
The calculation of the amount of the correction of year t in acco rdance with Article 4 shall be 
established by: 
(a) calculating the difference between: 
– the percentage share of the United Ki ngdom in the total sum of uncapped VAT 
bases, and 
– the percentage share of the United Ki ngdom in total allocated expenditure; 
(b) multiplying the difference thus obtained under (a) by total allocated 
expenditure; 
(c) multiplying the result obtained under (b) by 0.66; 
• The result obtained in steps (a) to (c) shall be called the original amount of the 
UK correction; 
                                                 
19 Calculation, financing, payment and entry in the b udget of the correction of budgetary imbalances in 
accordance with Articles 4 and 5 of the Council Decision on the syst em of the EU's own resources, 
Council of the European Union, 10646/00 ADD 2, of 21 September 2000. 
 
EN 18   EN (d) subtracting from the result obtaine d under (c) the difference between 
– the product of the percentage share of the United Kingdom in the uncapped VAT 
bases times the total payments by all Member  States referred to in Article 2(1)(b) 
and (c) relating to the financial year t in question (i.e. the payments that the United 
Kingdom would have made had the GNI  resource not existed and the VAT 
resource not been capped) for the financing of total expenditure (as defined in point 3.1 infra );  
 and 
– the payments by the United Kingdom referred to in Article 2(1)(b) and (c) relating 
to the financial year t for the financing of  total expenditure (as defined in point 3.1 
infra ), excluding payments to finance th e gross reductions in the GNI-based 
contributions of the Netherlands and Sweden referred to in Article 2(5); 
• the difference referred to in step (d) will be called the  UK advantage (because it 
is the advantage that the UK derives fr om the VAT capping, the reduction of the 
VAT uniform rate and the introduction of the GNI resource);  
• the result obtained by subtracting the  UK advantage  from the original amount 
(i.e. the result of step (d )) shall be called the core UK correction ; 
(e) subtracting from the result under (d ) the gains for the United Kingdom 
resulting from the increase (from 10 % to  25 %) in the percentage of resources 
referred to in Article 2(1)(a) retained by Member States to cover their collection costs.  This implies deducting from the result obtained under (d) the result of the 
multiplication between: 
– 20 % of the net total resources referred to in Article 2(1)(a) entered into the EU 
budget after deduction of th e collection costs, and 
– the difference between the United Kingdom's share in the resour ces referred to in 
Article 2(1)(a) and its share in  the uncapped EU VAT base.  
• the gains referred to in step (e) will be called the TOR (traditional own 
resources) windfall gains ; 
• Subtracting the TOR windfall gains  from the core UK correction will complete 
the calculation of the UK correc tion (i.e. the result under (e)); 
(f) From the first year of enlargement (i.e. 2004) total allocated expenditure, 
referred to above under (a) second hyphe n and (b), shall be reduced by an 
amount equal to pre-accession expenditure of the last year before enlargement 
(i.e. 2003).  This adjustment changes the result obtained under (c) (the original amount) and therefore the result under  (e). The amount equal to  pre-accession expenditure 
shall be carried forward to subsequent years and shall be adjusted annually by 
 
EN 19   EN applying the latest available GDP deflat or for the EU expressed in euro, as 
provided by the Commission.   On the occasion of any subsequent accession the same procedure shall be followed.  The present point (f) shall cease to a pply as from the 2013 correction, to be 
budgeted for the first time in 2014. 
(g) As from the 2008 correction, to be budgeted for the first time in 2009, total 
allocated expenditure, refe rred to above under (a) sec ond hyphen and (b), shall 
be reduced by total allocated expenditure in Member States that have acceded 
to the EU after 30 April 2004, except for agricultural direct payments and 
market-related expenditure as well as that part of rural development expenditure originating from the EAGGF guarantee section. 
 This reduction shall be progressively  phased in according to the schedule 
below.  
 
UK correction to be budgeted 
for the first time in the year : Percentage of enlargement-related 
expenditure (as defined above) to be 
excluded from the calculation of the 
UK correction: 
2009 20 
2010 70 
2011 100 
 
During the period 2007–2013 the total ad justment of the UK correction, 
resulting from the exclusion of enlargement-related expenditure referred to above, (hereinafter called the UK corre ction adjustment) shall not be higher 
than € 10.5 billion, measured in 2004 pric es. At the occasion of each budgeting 
of the UK correction, the Commission se rvices shall verify whether the 
cumulated UK correction adjustment ex ceeds this amount. For the purpose of 
this calculation, amounts in current prices shall be converted into 2004 prices 
by applying the latest available GDP defl ator for the EU expressed in euro, as 
provided by the Commission. If the cei ling of € 10.5 billion is exceeded, the 
UK contribution shall be reduced accordingly. The reduction of the UK contribution shall take place  through an adjustment of the amount of the UK 
correction.   In the event of enlargement in the period 2006–2012, with the exception of the 
accession of Bulgaria and Romania, the ceiling of € 10.5 billion shall be adjusted upwards by the impact of this(ese) enlargement(s) on the UK 
correction adjustment. This impact shal l be calculated by comparing the UK 
correction adjustment including th e acceding country(ies) with the UK 
correction adjustment excluding the acceding country(ies). The difference between the two shall be converted into  2004 prices and ad ded to the ceiling. 
 
EN 20   EN The adjustment of the ceiling shall be updated in each subsequent year in the 
context of the calculation a nd budgeting of the UK correction. 
1.2. Formalisation of the calculation of the UK correction 
The UK correction of a year t (to be budgeted fo r the first time in year t+1) is equal to: 
UK correction t =Original amount t – UK advantage t – TOR windfall gains t 
The precise determination of each element is as follows: 
ORIGINAL AMOUNT – (points 1.1(a) to 1.1(c), including points 1.1(f) and 1.1(g)) 
Original amount  t =  
= 0.66 * 



− −−
−AC
1t INFLnewMS
tEU
tUK
t
PAE NAgE AEAE
EU
tUK
t
ncVATncVAT*()AC
1t INFLnewMS
tEU
t PAE NAgE AE− − −
where 
XX
t ncVAT
 = non-capped VAT base of Member State/ group of Member States XX (where XX 
=  U K  o r  E U )  i n  y e a r  t ;  
XX
tAE = EU expenditure allocated to XX (where XX = UK or EU) in year t; 
newMS
t NAgE = non-agricultural EU expenditure (as defined  in point (g) above) allocated in 
year t to Member States which have acceded to the EU after 30 April 2004, subject to 
phasing-in as defined in point 1.1(g) above; 
AC
1t INFLPAE− = pre-accession expenditure (as defined in point 1.1(f) above) allocated to 
Acceding Countries in the year before accessi on, adjusted for inflation to year t-1. This 
element shall be eliminated from  the calculation as from the correction originating in 2013, to 
be first budgeted in 2014. It can be further expressed as: 
 AC
1t INFLPAE− = ∑ −− −
iGDP
1t/1iAC
1i 2012 ) Deflator* PAE( * Until
 
where 
2012 Until = 1 until year t equals 2012 and 0 as from 2013 onwards; 
i = the year(s) between 2004 and year t when an enlargement occurs; 
GDP
t i Deflator1/1−− = the latest available GDP deflator for the EU expressed in euro, as provided 
by the Commission, for the period i-1 to t-1. 
CEILING ON THE TOTAL 2007–2013 UK CO RRECTION ADJUSTMENT RELATED TO 
THE EXCLUSION FROM TH E UK CORRECTION OF ‘NON-AGRICULTURAL EU 
 
EN 21   EN EXPENDITURE’ IN MEMBER STATES THAT H AVE ACCEDED TO THE EU AFTER 30 
APRIL 2004  
During the period 2007–2013 the UK correction adjus tment related to the exclusion from the 
UK correction of ‘non-agricultur al EU expenditure’ (as defined in point (g) above) allocated 
to Member States which have acceded to the EU after 30 April 2004 shall not exceed, in 2004 prices, a ceiling of € 10.5 billion (this ceili ng being adjusted for any enlargement which may 
occur between the years 2006 and 2012, except fo r the enlargement to Bulgaria and 
Romania). 
This means that the following total 2008–2012 re duction of the UK correction (the reduction 
is phased in as from the 2008 correction, to be first budgeted in 2009, and the ceiling applies 
as to the 2012 correction, to be first  budgeted in 2013), wh ich is equal to 
∑
=−


2012
2008tGDP
t 2004ewMSlnal
t t Deflator/ NAgE* reduc%* *66.0EU
tUK
t
ncVATncVAT
 
shall not exceed the ceiling of € 10.5 billion, in creased, if applicable, by  the following amount 
(in €): 
∑
=−






−2012
2008tGDP
t 2004newMS12
tewMSlnal
t t Deflator/ NAgE* NAgE* * reduc% *66.027-EU
tUK
t
EU
tUK
t
ncVATncVAT
ncVATncVAT
 
where 
XX
t ncVAT
 = non-capped VAT base of Member State/gr oup of Member Stat es XX (where XX 
= UK, EU or EU-27) in year t; 
ewMSlnal
t NAgE = non-agricultural EU expenditure (as defin ed in point (g) above) allocated in 
year t to all Member States which have acceded to the EU after 30 April 2004; 
newMS12
t NAgE = non-agricultural EU expenditure (as defin ed in point (g) above) allocated in 
year t to the 10 Member States which have acceded to the EU on 1 May 2004 as well as 
Bulgaria and Romania. 
t reduc% = percentage reduction of NAgE corre sponding to year t (i.e. 0% before 2008; 
20% for 2008; 70% for 2009 and 100% from 2010 onwards); 
GDP
t 2004 Deflator− = the latest available GDP deflator for the EU expressed in euro, as provided 
by the Commission, for the period 2004 to year t. 
If the adjusted ceiling is exceeded (in any year until 20 13), the UK correction shall be 
increased by the excess amount. The UK correct ions of subsequent years shall also be 
adjusted to ensure that the ceiling is not exceeded, up until and including the UK correction 
originating in the year 2012, to be first budgeted in 2013. 
UK ADVANTAGE (point 1.1(d) above) 
 
EN 22   EN UK advantage t = () ()UK
tUK EU
tEU
EU
tUK
t
ncVATncVATcVATP GNIP cVATP GNIP*t t + − +
 
where 
XX
t ncVAT = non-capped VAT base of Member Stat e/group of Member States XX (where 
XX = UK or EU) in year t; 
XX
t GNIP = Total GNI payments made by XX (where XX = UK or EU) in year t; 
XX
t cVATP = Total capped VAT payments made by XX (where XX = UK or EU) in year t; 
TOR WINDFALL GAINS (point 1.1(e) above) 
TOR windfall gains t = 0.20 * EU
tTOR * 


−EU
tUK
t
ncVATncVAT
EU
tUK
t
TORTOR
 
where 
XX
tTOR = net traditional own resources of Me mber State/group of Member States XX 
(where XX= UK or EU) in year t; 
XX
t ncVAT = non-capped VAT base of XX (where XX = UK or EU) in year t. 
2. F INANCING OF THE UK  CORRECTION IN THE FOLLOWING YEAR (ARTICLE 5 OF THE 
2006  ORD) 
The cost of the UK correction of year t shall be  borne by the other Member States in year t+1 
in accordance with the following arrangements: 
a) The distribution of the cost  shall be calculated by refere nce to each Member State's 
share in the payments referred to in Article  2 (1) (c) relating to year t+1, the United 
Kingdom being excluded and without taking account of the gross reductions in the 
GNI-based contributions of the Netherlands a nd Sweden referred to in Article 2(5);  
b) it shall then be adjusted in such a way as to allow the restriction of the share of 
Germany, of the Netherlands, of Austria a nd of Sweden to one-f ourth of the shares 
resulting from the calculation under (a); 
The amount of the correction is granted to the United Kingdom by a reduction in its VAT 
payments; if the amount of the correction exceeds the VAT payments, the correction is 
granted by a reduction in its GNI payments. 
The costs borne by the other Member States sh all be added to their VAT and GNI payments. 
The table below presents an example to illustra te the implementation of the above calculation 
method on the basis of the GNI estimate s entered in the 2006 adopted budget. 
 
EN 23   EN Member StatesPercentage 
share in GNI(1)Percentage 
share excluding 
the UK3/4 of the shares 
of DE, NL, AT 
and SE in column 
(2)Column (3) 
distributed 
between Member 
States other than 
the UK, DE, NL, 
AT and SEFinancing scale
(1) (2) (3) (4) (5) = (2) + (3) + (4)
Belgiu m 2,82 3,41 1,45 4,86
Czech Republic 0,90 1,08 0,46 1,55
Denmar k 1,89 2,29 0,97 3,26
Germany 20,58 24,86 -18,65 0,00 6,22
Eston ia 0,09 0,11 0,05 0,15
Greece 1,71 2,06 0,88 2,94
Spain 8,12 9,81 4,18 13,99
France 15,89 19,20 8,18 27,37
Ireland 1,28 1,54 0,66 2,20
Italy 13,04 15,75 6,71 22,47
Cyprus 0,12 0,15 0,06 0,21
Latvia 0,12 0,14 0,06 0,20
Lithuania 0,19 0,23 0,10 0,33
Luxem bourg 0,23 0,28 0,12 0,40
Hungary 0,82 0,99 0,42 1,41
Malta 0,04 0,05 0,02 0,07
Netherlands 4,39 5,30 -3,98 0,00 1,33
Austria 2,24 2,70 -2,03 0,00 0,68
Poland 2,16 2,61 1,11 3,73
Portuga l 1,29 1,56 0,66 2,22
Sloven ia 0,26 0,32 0,14 0,46
Slovak Repu blic 0,36 0,43 0,18 0,61
Finland 1,46 1,76 0,75 2,51
Sweden 2,78 3,36 -2,52 0,00 0,84
United Kingdom 17,24 0,00 0,00 0,00
Total 100,00 100,00 -27,17 27,17 100,00
(1) GNI forecast entered in the adopted 2006 budget.CALCULATION OF THE FINANCING OF THE UK CORRECTION
 
Member States' shares in GNI payments (Article  2(1)(c)) in year t+1 are shown in the first 
column of the table. The second column presen ts the shares obtained according to point (a) 
supra . The third column shows the reduction in the shares of Germany, the Netherlands, 
Austria and Sweden (three- fourth of their shares resulting from point (a) supra ), and the 
fourth column reflects the distribution of the reductions for Germany, the Netherlands, 
Austria and Sweden among the other Member Stat es excluding these four countries and the 
United Kingdom. 
Finally, column 5 shows the shares in the fina ncing of the UK correction resulting from this 
calculation. 
3. D EFINITION OF BUDGETARY AGGREGATES  
3.1 Total expenditure of year t 
The concept of expenditure to be used in th e calculation of the UK correction corresponds to 
actual payments (execution of a ppropriations for payments) rela ting to the year in question 
 
EN 24   EN (year t), pursuant to either that year's budget appropriations or to carryovers of non-executed 
appropriations to the following year (from year t to the year t+1). Only utilised appropriations 
for payments, that is the amount of payments actually made, shall be taken into account. 
3.2. Total allocated expenditure 
The allocation across Member States of total e xpenditure, as defined under point 3.1 above, is 
governed by the following rules:  
In general, payments are allocated to the Me mber State in which the principal recipient 
resides. However, in those cases where the Co mmission is aware that the recipient in question 
acts as an intermediary, the payments must be allocated whenever it is possible to the Member 
State(s) in which the final beneficiary(ies) is(a re) resident, in accordance with their shares in 
these payments. 
Certain components of expenditure cannot be allocat ed either fully or partially to the Member 
States. Starting from total expenditure of th e general budget of the European Union as the 
basis, at least two main categories of expendi ture need to be excluded (though this list is 
indicative and not necessarily exhaustive): 
1. External expenditure , corresponding mainly to heading 4 – EU as a global player - of 
the financial framework for 2007–2013 appearin g in the conclusions of the European 
Council of 15–16 December 2005. 
This category also includes expenditure under other headings benefiting recipients 
outside the Union, such as development co-operation, research expenditure spent outside the EU, administrative expenditure paid to recipien ts outside the Union, etc.  
2. Expenditure that can not be  allocated or identified. This could be due to conceptual 
difficulties, such as expenditure on repr esentation, on missions and on formal and 
other meetings as well as payments relate d to cross-border Community initiatives, 
promotion of inter-regional co-operative operations and other cross border actions. 
The definition of allocated expenditure correspo nds in principle to Headings 1, 2, 3, 5 and 6 
of the financial framework for 2007–2013 appeari ng in the conclusions of the European 
Council of 15–16 December 2005. 
3.3. Pre-accession expenditure 
Pre-accession expenditure that has to be take n into account for the purpose of calculating the 
adjustment for enlargement in Article 4(1)(f) is  allocated expenditure (a s defined in points 3.1 
and 3.2 above) to acceding countries in the last year before the year of accession. 
4. E
NTERING THE UK  CORRECTION OF YEAR T INTO THE BUDGET  
4.1. Provisional estimate (to be entered in th e Preliminary Draft Budget of year t+1) 
A provisional calculation of th e amount of the UK correction of year t shall be performed on 
the occasion of the preliminary draft budget (PDB) of year t+1. The calcul ation shall be based 
on the most recent and available data fo r both contributions and expenditure.  
 
EN 25   EN The amount of the UK correction shall take th e form of a reduction of the UK VAT and GNI 
payments. The other Member States shall see their VAT and GNI payments increased by the 
amount of their respective share in the financing.  
4.2. Update of the provisional estimate (b etween the year t+1 and the year t+3) 
If need be, the Commission has the possibil ity to propose an update of the provisional 
estimate at any time between the year t+1 and the year t+3. Such an update shall be entered in 
a preliminary draft amending budget (PDAB). 
The update shall be proposed if the Commission has ground to believe that the initial forecast 
of the provisional calculation will differ si gnificantly from the definitive calculation (see 
infra ) of the UK correction to be propos ed in the PDAB of year t+4.  
An update could also be proposed if it emerges that the estimated GNI bases entered in the 
PDB of year t+1 will differ significantly fr om the definitive GNI bases, thus changing 
significantly the shari ng of the financing of the UK correction.  
4.3. Definitive calculation of the UK correcti on (to be entered in a PDAB of year 
t+4) 
4.3.1. Calculation of th e definitive amount 
The procedure to calculate the defi nitive amount of the correction is  set out in sect ion 1 of this 
document.  
The data to be used in the calculation of the definitive UK correction are the VAT and GNI 
bases and the allocated expenditure estimates re lating to year t as they are known at 31 
December t+3 and shall be converted to € at the annual average exchange rate of the year t.  
In order to estimate the ‘UK advantage’ fo r the definitive calcul ation (section 1.1(d)) 
contributions of traditional own resources and other revenues in  year t must be taken into 
account. This implies that it is necessary to  recalculate a notional budget on the basis of 
definitive data for any type of resource and revenue. 
4.3.2. Calculation of the definit ive financing of the correcti on and its entering in the budget 
Section 2 previously sets out the procedure to calculate the financing of the definitive 
correction. 
The definitive financing data shall be the VAT and GNI bases of year t+1 as they are known 
at 31 December t+3. 
The final financing data shall be compared wi th the payments already entered in the budget 
(i.e. in the budget of t+1 and po ssibly in the budget of t+2 or t+ 3 if an update has been made 
in those years).  
The differences per Member State shall be en tered in an appropriate budget chapter of a 
PDAB of the year t+4 and conve rted into national currency at the annual average exchange 
rate of the year of the financ ing of the correction (year t+1).