EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 3.8.2004 
COM(2004) 501 final/2 
2004/0170 (CNS) 
2004/0171 (CNS) 
  
CORRIGENDUM 
Annule et remplace la page 8 du document  COM(2004) 501 final du 14.7.2004. Concerne uniquement la version EN. 
Proposal for a 
COUNCIL DECISION 
on the system of the European Communities’ own resources 
Proposal for a 
COUNCIL REGULATION 
on the implementing measures for the corre ction of budgetary imbalances in accordance 
with Articles 4 and 5 of the Council decisi on of (…) on the system of the European 
Communities’ own resources 
  
(presented by the Commission) 
 
EN 2   EN EXPLANATORY MEMORANDUM  
1. I NTRODUCTION  
The European Union creates a community of shared aims. Parts of the EU budget 
serve a clear cohesion goal. Other parts f und the achievement of specific objectives 
through EU agreed programmes. As a re sult, net beneficiaries of, and net 
contributors to, the EU budget will always exist, although the policy benefits accrue 
to the Union as a whole. 
Budgetary balances (also called net balanc es), measured by the difference between 
contributions to and receipts from the EU budget, fail to account fully for the benefits 
accruing to Member States from participati ng in the EU. For example, research or 
border protection expenditure benefits not only the immediate recipients but also 
gives rise to spill-over effects transcending national borders1. It may not be possible 
to quantify the extent of these spill-overs , but their consideration would modify the 
assessment of the accounting imbalances. 
The definition of budgetary balances is also  fraught with signifi cant conceptual and 
accounting problems. Numerous choices have  to be made in computing budgetary 
balances on the items to be included in the receipts and expenditure flows, and on the 
reference periods (e.g. cash vs. accrual figures , surpluses from prev ious years, etc.). 
The resulting budgetary balances vary si gnificantly depending on the choices made. 
Nevertheless, the size of some of these imbalances has been at the centre of 
discussions. After years of budgetary stal emate and agonizing discussions, the 1984 
Fontainebleau agreement introduced the existing UK correction, which was given 
effect by the own resources decision of 7 May 1985. The decision was based on the following general principle
2: 
'… any Member State sustaining a budgetary bu rden which is excessi ve in relation to 
its relative prosperity may benefit from  a correction at the appropriate time .' 
The principle of a generalis ed correction was therefor e already acknowledged by the 
European Council in 1984 ('any Member State'). The decision for granting a 
correction should be based on two criteria: the size of the budgetary imbalance ('excessive') and the wealth of a Member  State compared to the EU as a whole 
('relative prosperity').  
The justifications for granting a correction on an exclusive basis
 to the UK are today 
less relevant than at the tim e of the Fontainebleau European Council, since several 
other Member States can legitimately claim th at their current situation is comparable 
to the UK's (section 2). Furthermore, the cost  of enlargement should be fairly shared. 
Consequently, it is argued that, in light of the princi ple set in the Fontainebleau 
                                                 
1 These spill-over effects include the spending of in come generated in the receiving Member State on 
goods or services produced in another Member State, the purchase of financial asset denominated in various Member States currencies etc.  
2 See Fontainebleau European Council, ‘Conclusions  of the Presidency’, Bulletin of the European 
Communities, 6-1984.  
 
EN 3   EN conclusions, the conditions exist for the introduction of a generalised correction 
mechanism. The parameters defining such a correction mechanism are examined and a proposal is made which woul d respect the twin goals of: 
• preventing excessive negative budgetary ba lances combined with a reduction of 
differences between net contributors at  comparable levels of prosperity; 
• ensuring that the financing costs of the m echanism are kept at a reasonable level. 
2. C
URRENT SITUATION OF THE UK  COMPARED TO OTHER NET CONTRIBUTORS  
The following two subsections examine the rela tive prosperity and the size of the net 
budgetary balances for all net contributors to the EU budget3. 
2.1. Relative degree of prosperity 
The table below gives an overview of th e gross national income (GNI) per capita 
expressed in purchasing power standards (PPS4) for the year 2003 for all Member 
States that were net c ontributor in the year 20025. 
Table 1.  GNI per capita  of net contributors (in PPS) 
(EU-15 average. = 100)  
 2003 1984 
United Kingdom 111.2 90.6 
Denmark 111.1 104.0 
Austria 109.8 -- 
Netherlands 106.6 95.0 
Sweden 104.6 -- 
France 104.2 104.0 
Germany 98.6 109.6 
Italy 97.3 92.9 
This table clearly illustrates that in 2003-  GNI per capita, expressed in PPS, ranges 
between 97% and 111% of the EU-15 averag e for all net contributors to the EU 
budget. At 111.2%, the UK's relati ve prosperity is at  the top of the range. This is in 
sharp contrast with the situation in  1984, when the UK was th e least prosperous of 
the net contributors. 
In view of the dramatic shift in the UK's position compared to the other net 
contributors, it is legitimate to re-consider the existing correction system, in light of 
the Fontainebleau principle whereby a Member  State's net balance should be viewed 
in relation to its relative prosperity. 
                                                 
3 The assessment and proposal made in this communication are based on the more detailed information 
and analysis contained in the technical anne x to the Commission’s own resources report. 
4 The PPS is an artificial currency th at reflects differences in national price levels that are not taken into 
account by exchange rates. This unit allows mean ingful volume comparisons of economic indicators 
among countries. Data on PPS are calculated by Eurostat. 
5 Net balances presented in this document, like thos e used for the UK correction, are calculated including 
administrative expenditure. For this reason, Belgium and Luxembourg do not appear among the net 
contributors. 
 
EN 4   EN 2.2. Net budgetary balances before UK correction 
The net budgetary balance of the UK for th e year 1985 (the first year for which the 
correction was calculated) amounted to - 0.48% of GNI before correction. (Although 
accurate data are not available for the ot her Member States, Germany was the only 
other major net contributor to the EU budget at  that time.) As illustrated in the table 
below, the UK’s net balance has on average re mained at a comparable level in recent 
years. Over the period 1996-2002 the net budgetary balance – before UK correction and including administrative expenditure - of EU-15 net contributors, was on average 
the following: 
Table 2.  
Net budgetary balances before  UK correction   
for EU-15 selected members (annual averages 1996-2002 ) 
 in % of GNI 
United Kingdom -0.47% 
Germany -0.44% 
Netherlands -0.43% 
Sweden -0.38% 
Austria -0.24% 
Italy -0.06% 
France -0.04% 
If the current system remained unchanged, average net budgetary balances for the 
period 2008-20136 would deteriorate for all ne t contributors across-the-board 
because of the financing cost of enlarg ement. According to Commission estimates 
and assuming expenditure levels equal to  the financial perspective ceilings as 
proposed by the Commission in its communication of 10 February 20037, the 
estimated net balances of the net contributors would be the following. 
Table 3.  Estimated net budgetary balances before  UK correction 
for EU-15 selected members (annual averages 2008-2013
8) 
 In % of GNI 
United Kingdom -0.62% 
Netherlands -0.55% 
Germany -0.52% 
Sweden -0.47% 
Austria -0.37% 
Italy -0.29% 
France -0.27% 
Denmark -0.20% 
Finland -0.14% 
Under the assumption that the level of agricultural expenditure for the EU-25 agreed 
by the Brussels European C ouncil in October 2002 and th e ‘cohesion’ expenditure 
                                                 
6 Details on the hypotheses used in calculating these es timates are presented in the technical annex to the 
own resources report.  
7 COM(2004) 101 final. 
8 As corrections are reimbursed one year later, av erages in this table and the following ones are 
calculated over a six-year period since the 2007 correctio n is to be paid in 2008 and the 2013 correction 
would take place in 2014. 
 
EN 5   EN proposed by the Commission under the so -called Objective 1 and Cohesion fund 
remained unchanged, a reduction of the overall level of payment a ppropriations from 
the 1.14% of GNI proposed by the Commi ssion to, say, 1.00%, would only have a 
very limited impact on the size of the esti mated net balances. This is because the 
expenditure for the new Member States w ould in essence not be touched and the 
reduction would be achieved by drastically cutting the other non-agricultural 
expenditure going to th e EU-15 and/or external actions that do not enter into the 
allocated expenditure. As a consequence, the resulting reduction of own resources 
payments for the net contributors woul d to a large extent be offset by a 
corresponding reduction in EU allocated e xpenditure in these same Member States. 
In the absence of any correction mechanis m, the UK would have been on average the 
largest net contributor over the last 7 year s, and would probably remain the largest 
net contributor to the EU budget over the pe riod till 2013. However, the net balances 
of NL, DE and, to a lesser ex tent, SE have been and are expected to remain of a 
comparable order of magnitude. As shown in the previous section, all these three 
Member States are currently relatively less prosperous than the UK. 
Whether the size of net budgetary balances is  ‘excessive’ in view of the relative 
prosperity of the Member States con cerned largely depends on the political 
perception of the acceptable degree of fina ncial solidarity within the Union. If the 
UK net balance was judged ‘excessive’, then  the application of the Fontainebleau 
principle would rather point to the exte nsion of a correction mechanism to other 
Member States, who – at lower levels of pr osperity - bear negative net balances of a 
similar order of magnitude. 
In any event, granting a correction on an exclusive basis to one Member State 
appears to be unjustified, especially when taking into account th e expected evolution 
of the net budgetary balances in the enlarged Union under unchanged conditions, as 
illustrated in the next section. 
3. E STIMATED NET BALANCES WITH UNCHANGED OWN RESOURCES DECISION  
Estimates indicate that over  the period 2007-2013 the UK correction will increase by 
more than 50%  compared to the average over the la test 7 years to reach an estimated 
€ 7.1 billion from € 4.6 bill ion in the period 1997-2003. 
As a result of the additional expenditure required for enlargement, net balances of all  
the EU-15 will deterior ate. Although the enlargement to 10 new Member States was 
unanimously agreed at the Berlin Europ ean Council in March 1999, the UK insisted 
and obtained that enlargement-related expenditure be taken into account9 when 
calculating the UK correction, thus shielding it from most of the financial 
consequences of enlargement. That is the main reason for the expected future increase in the UK correction. 
                                                
 
9 Pre-accession expenditure relating to actual payments  in the last year before accession of any acceding 
country is permanently deducted from the allocated expenditure. 
 
EN 6   EN As a consequence, the cost for the Member  States that pay a full share in the 
financing of the UK correction, including a ll the new Member States, will increase 
proportionally. 
Should the current own resources decision re main in force, the average net balance 
for the net contributors over th e 2007-2013 period after UK correction  is estimated to 
be as follows: 
Table 4.  Estimated net budgetary balances after  UK correction   
(annual averages 2008-2013 ) 
 in % of GNI  
Netherlands -0.56% 
Germany -0.54% 
Sweden -0.50% 
Austria -0.38% 
Italy -0.41% 
Cyprus10 -0.37% 
France -0.37% 
Denmark -0.31% 
Finland -0.25% 
United Kingdom -0.25% 
According to these estimates, the UK will become (together with Finland) the 
smallest net contributor  to the EU budget, in evid ent contradiction with the 
Fontainebleau principle men tioned above. The current syst em of a unique correction 
for the UK therefore must be reconsider ed. Instead, the gene ralization of the 
correction mechanism, evolving from the existing correction would allow bringing 
the system closer to the original objec tive of avoiding excessive budgetary burdens 
in relation to the relative prosperity of  Member States. By introducing a sort of 
‘safety net’ for large net contributors be yond a certain level, it may also facilitate a 
more constructive approach to ensure the budgetary means to meet the policy 
challenges of the enlarged Union. 
4. OUTLINING A GENERALISED CORRECTION MECHANISM  
4.1. General outline of the mechanism 
The proposed generalised correction mechanism has to be seen in the context of the 
Commission overall ‘package’ for the post- 2006 financial framework. The final net 
position of Member States before and after co rrection is thus likely to be affected by 
decisions to be taken on the expe nditure side of the package. 
The generalised correction mechanism is to be calculated on the basis of the net 
budgetary balance of each Member State in relation to the budget of the EU. The 
mechanism should be triggered beyond a th reshold, expressed as a percentage of 
each Member State’s GNI, reflecting th e minimum accepted level of unlimited 
financial solidarity between Member Stat es. and representing a sort of basic  
reasonable net contribution . Net positions exceeding such a threshold will be eligible 
                                                 
10 Throughout this document estimates are based on areas controlled by the Republic of Cyprus. 
 
EN 7   EN for a correction (partial refund). The amount of the correction is to be based on the 
part of the net balance exceeding this thre shold, multiplied by a refund rate (i.e. the 
percentage of the amount in excess of the ag reed threshold to be compensated). If the 
sum of all corrections exceeds a total pr edetermined volume, the refund rate is 
reduced accordingly. Annex 1 explains the steps required and the functioning of the 
proposed correction mechanism. 
4.2 The level of the threshold 
Simulations have been run for different leve ls of the threshold (using a refund rate of 
66%) ranging from zero to 0.50% of GNI. 
The total sum of the corrections at different threshold levels is estimated as follows: 
Table 5.  Estimated gross corrections (average 2008-2013 ) 
Level of the threshold   
(as a % of GNI, EU-27)  Sum of all corrections  
(in billion of euros)  
0.00% 25.8 
0.10% 19.8 
0.20% 13.8 
0.25% 11.1 
0.30% 8.8 
0.40% 5.2 
0.50% 1.9 
A threshold level of around -0.25% would represent a sort  of neutral point whereby 
the estimated future cost of financing th e generalised correction mechanism would be 
equal to the estimated future cost of fina ncing the current UK correction mechanism. 
A threshold lower than 0.25% would mean that  the Member States paying in full the 
UK rebate (they currently bear more than 90% of the total cost ) would have to pay 
more than the estimated cost of financ ing the current UK correction mechanism in 
the future. With a threshold higher than 0.25%, the mechanism would be less costly 
than financing the estimated future UK correction for those Member States, 
including all net recipients from the EU budget. 
The table above illustrates that the total su m of the corrections with a 0.25% 
threshold would be substantially higher th an the estimated level of the future UK 
correction with the current own resour ces decision (ORD) unchanged. Applying a 
threshold of -0.25% would generate a level of (gross) corrections  slightly above € 11 
billion, which is significantly higher than the approximately € 7 billion average (net) 
UK correction for the same period. This diffe rence is linked to the assumption that 
the financing of the corrections would be shared by all  Member States according to 
their share in GNI (see section 4.3 below). 
So an overall volume of up to € 11 billion of corrections could be financed before the 
GCM became more expensive than the con tinuation of the current ORD for those 
Member States who would not benefit from the GCM. 
The impact of introducing a generalised m echanism with a threshold is not linear. 
The effect on Member States’ net balances , compared to the cu rrent situation, is 
influenced by a combination of the following elements: a) the level of the Member 
 
EN 8   EN States’ budgetary imbalance before correction;  b) the level of the threshold; and c) 
the financing rules under the existing UK correction. 
All major net contributors to the EU budge t (UK, DE, NL, SE) would benefit from 
the correction mechanism with thresholds lower than or equa l to 0.50% of GNI. 
Smaller net contributors would receive corre ctions depending on the threshold level. 
The relative position of each individual net contributor, compared to their estimated 
future position under the current ORD, is  determined by a combination of the 
following two factors: 
¾ the size of the negative net balan ce before correction, whereby larger net 
contributors such as DE, NL, SE tend to benefit more at lower threshold 
levels (compared to smaller net contributors); 
¾ the current financing regime of  the UK correction, whereby Member 
States currently benefiting from a sp ecial arrangement (DE, NL, SE, AT) 
tend to benefit less at higher threshol d levels (compared to smaller net 
contributors). 
Any future ‘fairer’ mechanism should ensure in particular that the resulting financing 
cost does not lead to a heavier burden  than under the curr ent UK correction 
mechanism for ‘cohesion’ Member States. 
4.3. Financing rules 
Technically the correction could be financed in three different ways: 
• Member States who receive a correction do not participate in the financing. Under 
this option the entire burden of the fina ncing would be concen trated on countries 
representing less than 50% of the total EU-27 GNI, many of them with relatively low levels of prosperity. Consequently, their net budgetary position would either 
deteriorate in an unacceptable manner, or  the volume of th e corrections would 
have to be severely restricted. Furthe rmore, distortions could result when a 
Member State with a net position just  below the threshold would have to 
participate in the financing of the corr ections and another Member State just 
above the threshold would be excluded from the financing. 
• Member States participate in the financ ing of all corrections except their own. 
This alternative would add c onsiderable complexity to the proposal, since it would 
entail a separate financing round for each of the corrections. 
• All Member States participate in the fina ncing of all correcti ons. Their financing 
share in the global amount of the correcti ons would be determined by their share 
in GNI. 
For sake of feasibility, tr ansparency and simplicity, all Member States should 
participate in the financing of all corrections (third option). 
Although these financing rules are equivalent to adding th e amount of the corrections 
to the expenditure side of the budget (where by it would also be financed exclusively 
through an increase of the marginal reso urce GNI), it is proposed  to maintain the 
 
EN 9   EN GCM on the revenue side of the budget, as done for the existing UK correction. 
Adding the corrections to expenditure would artificially inflate the level of budgetary 
expenditure with a corres ponding decrease of availabl e margins under the global 
expenditure ceilings. 
4.4. Comparing corrections levels 
A threshold set at -0.35% of GNI  will give rise to an estimated average volume of 
gross corrections of around € 7 billion for the period 2007-2012 (t o be financed in 
2008-2013). 
The generalisation of the correction mechan ism combined with the change in the 
financing rules means that the comparison with the level of th e correction under the 
current system is somewhat blurred. As all Member States, including those 
benefiting from such a mechanism, will partic ipate in the financing of all corrections, 
the overall net correction will always be lower than the gross correction, whereas 
under the current system there is no diffe rence between net a nd gross correction 
(what the UK gets is what other Member States pay). 
The resulting net balances of the large net contributors after the correction will be 
higher than the established threshold because  of the combined effect of the partial 
refund and the participation in the financ ing of the correction system. Conversely, 
the burden for Member States having to pa y fully their share of the financing cost 
and not benefiting from the correction is lo wer than at present even if the overall 
gross correction is larger . Thus, with a threshold set at 0.35% of GNI and a 
maximum predetermined correction volume set at € 7.5 billion, the combined burden for these Member States would be even lo wer (by about € 1 billion) than the average 
level paid during the 2001-2004 period and much lower when compared to the 
estimated cost of the continuation of th e current system over the next financial 
framework (see table 6). 
5. T
HE COMMISSION ’S PROPOSAL  
Any correction mechanism enta ils an additional complicati on to the financing of the 
budget. Therefore the basic propos al should be relatively a nd sufficiently transparent. 
In this respect, the current parameters of the UK correction calculation should be 
modified only where necessary a nd simplified whenever feasible. 
The Commission therefore proposes to use the following parameters for a 
generalised correction mechanism: 
– keeping the categories of revenue to be taken into account (VAT + GNI) 
unchanged. Any other existing complication11 should be abolished; 
– keeping the expenditure headings in cluded in the allo cated expenditure 
unchanged; 
                                                 
11 Such as the calculation of the 'UK ad vantage' and the TOR windfall gains. 
 
EN 10   EN – simplifying the financing by basing it onl y on GNI shares, whereby all Member 
States would participate in the financing of the global amount of the corrections in proportion to their relative prosperity; 
– setting the threshold le vel at -0.35% of GNI; 
– using the refund rate as the adjustment variable w ith a maximum rate of 66%, to 
be reduced automatically when the agr eed maximum refund volume is exceeded 
in a given year; 
– capping the maximum available refund volume at € 7.5 billion. 
In absolute terms, the UK would be by far the largest beneficiary from the 
generalised correction mechanism, rece iving on average a net compensation in 
excess of € 2 billion per year, approximatel y twice as much as the net amount DE 
would receive. 
The table below illustrates the estimated net budgetary balances for the period under 
consideration with the proposed GCM a nd compares them with the other two 
alternative scenarios. 
Table 6.  Estimated net budgetary balances (average 2008-2013 ) 
 in % of GNI 
 GCM Current ORD No correction 
United Kingdom -0.51% -0.25% -0.62% Netherlands -0.48% -0.56% -0.55% Germany -0.48% -0.54% -0.52% Sweden -0.45% -0.50% -0.47% Austria -0.41% -0.38% -0.37% Italy -0.35% -0.41% -0.29% France -0.33% -0.37% -0.27% Cyprus -0.33% -0.37% -0.28% Denmark -0.25% -0.31% -0.20% Finland -0.19% -0.25% -0.14% Spain 0.26% 0.23% 0.32% Ireland 0.51% 0.47% 0.56% Malta 1.10% 1.06% 1.16% Belgium12
 1.27% 1.21% 1.32% Slovenia 1.34% 1.31% 1.40% Portugal 1.54% 1.50% 1.60% Greece 2.20% 2.16% 2.25% Hungary 3.09% 3.06% 3.15% Czech Republic 3.21% 3.17% 3.26% Slovakia 3.31% 3.27% 3.36% Estonia 3.79% 3.76% 3.85% Poland 3.80% 3.76% 3.85% Lithuania 4.44% 4.41% 4.50% Latvia 4.45% 4.40% 4.51% Luxembourg13 5.84% 5.80% 5.89% 
                                                 
12 When excluding administrative expenditure, Belgium and Luxembourg appear as net contributors. 
 
EN 11   EN With the proposed mechanism, on average,  the net balances of the largest net 
contributors would be at comparable levels , with the UK, DE, NL and SE all 
between -0.51% and -0.45%, to be compar ed with a range between -0.56% and -
0.25% under the UK correction mechanism (and between -0.62% and -0.47% with 
no correction). Several Member States (FR, IT, CY and AT) would have net balances 
averaging between -0.40% and -0.30%, with A somewhat hi gher than the other three. 
DK and FI would be the two remaining sm aller net contributors with estimated 
average net balances of - 0.19% and -0.25%, respectively. 
Even with a threshold level of -0.35%, the largest net contributors will end up having 
net balances above the threshol d because of the combined e ffect of the partial refund 
and the participation in th e financing of the correcti on system. Nonetheless, the 
resulting net budgetary balances for net cont ributors would be more in line with the 
Fontainebleau principle when co mpared to the current system. 
On the other hand, the estimated burden of financing the overall co rrection for all the 
other Member States would be lower than under the current system. 
6. T RANSITIONAL MEASURES  
It is appropriate that the introduction of the generalised system for correcting 
budgetary imbalances (GCM) shall be accompanied by transitional measures for the UK to alleviate the financial impact of th e changeover for this Member State. In 
order not to increase excessively the total cost of the corrections , the application of 
the generalised system should be progressi vely phased in for the other eligible 
Member States. 
The option presented here is relatively st raightforward and is based on the one hand 
on additional top-up payments for the UK an d on the other hand a phasing-in of the 
other Member States into the GCM (while the UK would enter immediately into the 
GCM). 
6.1 Additional top-up payments for the UK 
In addition to the corrections the UK will receive under the GCM, it is proposed to 
grant the following top-up payments  to the UK over a 4-year period: 
• in 2008: € 2.0 billion 
• in 2009: € 1.5 billion 
• in 2010: € 1.0 billion 
• in 2011: € 0.5 billion 
These top-up payments would alleviate the fi nancial impact of the introduction of the 
GCM for the UK in 4 gradual steps. The UK has received in recent years a net 
correction of on average € 4.6 billion annually over the period 1997-2003. Under the GCM the UK is expected to receive € 2.1 billion annually on average over the 
period. The proposed transitional measures ra ise this annual average amount to € 3.1 
billion. 
 
EN 12   EN Since these lump sum payments represent a phasing-out of the current system, they 
would continue to be financed according to  the current financing rules, i.e.: the UK 
does not participate in the financing and the share of DE, NL, AT and SE in the financing is restricted to 25% of their normal share. 
It is further proposed that neither thes e payments to the UK nor their financing 
should impact the calculation of the co rrections under the pr oposed generalised 
correction mechanism (GCM). Specifically this means: 
• the corrections under the GCM will be based on Member State's net balances 
excluding the effect of the top-up payments; 
• the top-up payments to the UK will not be taken into account for the maximum 
available refund volume (the cap). 
6.2 Phasing-in of the GCM fo r the other Member States 
In order to offset the increased cost brought about by the proposed top-up payments 
for the UK so as to limit the overall financ ing cost during the tran sitional period, it is 
appropriate to foresee a phasing-in period fo r the other Member States into the GCM. 
(In order to preserve the logic presente d in the previous paragraph, the UK should 
fully enter into the GCM immediately.) 
To this effect it is proposed to phase-in the re fund rate, which is applied to the part of 
any Member State's net balance in excess of  the threshold, in the following way for 
all Member States (except the UK, which woul d be granted 66% as of the first year): 
• in 2008: 33% 
• in 2009: 50%  
• in 2010: 50%  
• in 2011: 66% 
6.3 Results of simulation 
The overall volume of the corrections (so in cluding both the top-up payments to the 
UK and the GCM) resulting from this propo sal for a transitional regime would be € 
7.205 million compared to € 6.771 million under the proposed GCM on average over 
the period 2008-2013. This represents an increase of approx. € 430 million per year. 
The net balances resulting from the appli cation of this combined phasing-in are 
presented in the table below. The table allows for the comparison with the situation before correction, the situation under the current own resources decision and the 
situation under the GCM w ithout transitional period. 
 
EN 13   EN Estimated net budgetary balances for net contributors (average 2008-2013 ) 
in % of GNI 
 Without 
correction Current UK 
correction GCM with 
0.35% 
threshold & 
cap at € 7.5 bn Commission 
Proposal: 
GCM + 
transitional 
period 
 (1) (2)  (3) (4)  
Belgium 1,32% 1,21% 1,26% 1,26% 
Czech Republic 3,26% 3,17% 3,20% 3,20% 
Denmark -0,20% -0,31% -0,26% -0,26% 
Germany -0,52% -0,54% -0,48% -0,49% 
Estonia 3,85% 3,76% 3,79% 3,78% 
Greece 2,25% 2,16% 2,19% 2,19% 
Spain 0,32% 0,23% 0,26% 0,25% 
France -0,27% -0,37% -0,33% -0,34% 
Ireland 0,56% 0,47% 0,51% 0,50% 
Italy -0,29% -0,41% -0,35% -0,36% 
Cyprus -0,28% -0,37% -0,33% -0,34% 
Latvia 4,51% 4,40% 4,45% 4,44% 
Lithuania 4,50% 4,41% 4,44% 4,43% 
Luxembourg 5,89% 5,80% 5,83% 5,83% 
Hungary 3,15% 3,06% 3,09% 3,09% 
Malta 1,16% 1,06% 1,10% 1,09% 
Netherlands -0,55% -0,56% -0,48% -0,50% 
Austria -0,37% -0,38% -0,41% -0,41% 
Poland 3,85% 3,76% 3,79% 3,79% 
Portugal 1,60% 1,50% 1,54% 1,53% 
Slovenia 1,40% 1,31% 1,34% 1,33% 
Slovakia 3,36% 3,27% 3,30% 3,30% 
Finland -0,14% -0,25% -0,20% -0,20% 
Sweden -0,47% -0,50% -0,45% -0,46% 
United Kingdom -0,62% -0,25% -0,51% -0,46% 
7. C ONCLUSION  
On the basis of its review of the own res ource system, the Commission is of the view 
that the existing correction mechanism on an  exclusive basis is no longer justified 
and proposes the introducti on of a generalised mechanism to correct excessive 
negative budgetary imbalances. 
 
EN 14   EN ANNEX 1  
Key features of the proposed generalised correction mechanism 
Under the proposed mechanism, calculati ng the corrections involves the following 
steps: 
1. Calculate the aggregate amount of all expenditure allocated to each Member 
State. Allocated expenditure, as for th e current correction mechanism, includes 
all categories of expenditure that are ‘ internal ’ to the EU13. 
2. Calculate the percentage share of each Member State in total allocated 
expenditure. 
3. Determine the percentage share of each Member State in own resources 
payments. Since traditional own resources  are excluded from the categories of 
revenue to be taken into account, the combined share in VAT and GNI own 
resources is used to calculate any Member States’ share in EU budgetary 
revenue14. 
4. Deduct (2) from (3) above for each Member State, to obtain the corresponding 
percentage showing the corresponding positive/negative balance. 
5. For each Member State, multiply the percentage resulting from (4) above by 
total allocated expenditure, to obtain the net budgetary c ontribution/benefit 
expressed in euros. 
6. Multiply the threshold corresponding to the reasonable net contribution  (RNC) 
by the GNI (in €) of each Member Stat e and deduct from the result obtained 
under (5). 
7. If the result obtained under (6) is gr eater than zero, multi ply the result under 
(6) by the refund rate to obtain the correction for each Member State and 
reduce the refund rate as necessary if the sum of all corrections exceeds the 
predetermined maximum refund volume (see below). 
                                                 
13 This includes virtually the total amount of the current expenditure headings 1 (agriculture) and 2 
(structural operations) as well as the vast majority of expenditure under headings 3 (internal policies) 
and 5 (administration), excluding only some minor items of expenditure that cannot be reasonably 
allocated to any individual Member  State. Headings 4 (external policies), 6 (reserves) and 7 (pre-
accession expenditure) relate explicitly to ‘external’  expenditure and are therefore not taken into 
account. 
14 A proposal for a generalised correc tion mechanism should be as simp le and transparent as possible. 
Therefore all existing complications in the UK rebate  calculation which are related to the preservation 
of the UK’s 1984 revenue position (share in uncapped VAT, calculating the ‘advantage’ as well as the 
‘TOR windfall gains’), should be abolished. 
 
EN 15   EN The total cost of the correction mechanism, i.e. the sum of all corrections is limited 
by a maximum available refund volume  (MARV). The MARV should be determined 
ex-ante for the period of the financial perspective as a yearly ad-hoc amount15. 
Net positions exceeding the RNC are eligib le for a partial refund: the corrective 
percentage or the refund rate  (RR), to be applied to the part of the Member State's 
net budgetary balance exceeding the thresh old (RNC). This refund rate is a 
dependent variable for which an upper limit of 66% (currently used for the UK correction) applies. The actual refund rate will be derived from the available refund 
volume. Thus, the refund rate is automatica lly reduced when the application of the 
66% maximum refund rate breached the MARV. 
The partial refund is made ex-post as  currently done for the UK correction. 
The resulting formula for calculating the generalised correction mechanism is the 
following: 
RR
xC = RR Y RNCEEE
TPTP
xx x* * *
−

−  
if RR
xC > 0 
where RR = 0.66 if ∑
xxC66.0≤ MARV and 
RR = ∑
xxCMARV
66.0* 0.66 if ∑
xxC66.0 > MARV 
Where: TP = Total VAT- and GNI-based payments made by all Member States in respect of year t 
 TP x = VAT- and GNI-based payments made by Member State x in respect of year t 
 E = Total allocated expenditure in respect of year t 
 E x = Expenditure allocated to Member State x in respect of year t 
 RR
xC = Correction (at refund rate RR) to be granted to Member State x in respect of year t 
 RNC = Reasonable net contribution (= threshold) expressed in % of GNI 
 Y x = GNI of year t of Member State x 
 RR = Refund rate  MARV = Maximum available refund volume 
 ∑
xxC66.0= Total sum of corrections if RR is equal to 0.66 
                                                 
15 Fixing the level of the MARV is clearly a discretio nary decision which is not a-priori subject to any 
binding constraint. However, political realism would suggest that the cost of financing the corrections should not exceed the equivalent of the estimated future financing cost of the UK correction for those 
Member States currently financing a full sh are (i.e. all except UK, D, NL, S and A). 
 
EN 16   EN 2004/0170 (CNS) 
Proposal for a 
COUNCIL DECISION 
on the system of the European Communities’ own resources 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty esta blishing the European Communit y, 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 Commission16, 
Having regard to the opinion of the European Parliament17, 
Having regard to the opinion of the Court of Auditors18, 
Having regard to the opinion of the Eu ropean Economic and Social Committee19, 
Whereas: (1) The European Council meeting in Berlin on 24 and 25 March 1999 concluded, 
inter 
alia, that the system of the Communities'  own resources should be equitable, 
transparent, cost-effective, simple and based on criteria which best express each 
Member State's ability to contribute . 
(2) The Communities' own resources system mu st ensure adequate resources for the 
orderly development of the Communities' pol icies, subject to the need for strict 
budgetary discipline. 
(3) According to Council Decision 2000/597/EC , Euratom of 29 September 2000 on the 
system of the European Communities' own resources20, gross national income (GNI) 
for the year is defined at market prices as provided by the Commission in application 
of the European system of integrated econom ic accounts (hereinafter referred to as the 
‘ESA 95’) in accordance with Regulation (EC) No. 2223/96. 
                                                 
16 OJ C […], […], p. […]. 
17 Opinion delivered on (OJ C […], […], p. […]). 
18 OJ C […], […], p. […]. 
19 OJ C […], […], p. […]. 
20 OJ L 253, 7.10.2000, p. 42. 
 
EN 17   EN (4) It is appropriate, should modifications to the ESA 95 result in significant changes in 
GNI as provided by the Commission in accordance with Regulation (EC) No 2223/96, 
that the Council decide whet her these modifications apply for the purposes of own 
resources. 
(5) According to Article 3(1) and 3(2) of Council Decision 2000/597/ EC, the Commission 
calculated the new percentages of the ceiling for own resources and the ceiling for appropriations for payments, expressed in two decimal places, in December 2001 on 
the basis of the formula therein. 
(6) According to the communication
21 from the Commission to the Council and the 
European Parliament on the adaptation of th e ceiling of own resour ces and the ceiling 
for appropriations for commitments followi ng the entry into force of Decision 
2000/597/EC, Euratom of 12 December 2001, th e maximum ceiling of own resources 
is set equal to 1.24 % of the Communities' GNI at market prices and an overall ceiling 
of 1.31 % of the Communities' GNI was se t for appropriations for commitments. 
(7) It is appropriate that  a similar method be used in the future on the occasion of changes 
in the ESA 95 which may have effects on the level of GNI should Council decide that 
these modifications apply for the purposes of own resources. 
(8) Following the implementation in EU law of the agreements concluded during the 
Uruguay round of multilateral trade there is no longer any material difference between 
agricultural duties and customs duties. It is  therefore appropriate to eliminate this 
distinction in the area of the EU budget. 
(9) It is appropriate that the value added tax ba ses of the Member States continue to be 
restricted to 50 % of their GNI. 
(10) In the interest of transparen cy and simplicity it is propos ed to establish the uniform 
rate of VAT as a fixed percentage. In order to avoid that this technical change has an 
impact on Member States’ payments of the VAT resource, the fixed rate should reflect 
the current uniform rate of call. The uniform  rate of VAT should th erefore be fixed at 
0.30 %. 
(11) The European Council of 25 and 26 June  1984 concluded that 'any Member State 
sustaining a budgetary burden which is excessive in relation to its relative prosperity 
may benefit from a correction at the appropria te time'. Since several Member States at 
comparable levels of prosperity are su staining a similar budgetary burden, it is 
appropriate to replace the correction for budgetary imba lances granted to the UK 
under Article (4) of Council Decision 2000/597/ EC with a generalised system for 
correcting budgetary imbalances. 
(12) It is appropriate that the introduction of the generalised sy stem for correcting 
budgetary imbalances shall be accompanied by transitional measures for the UK to alleviate the financial impact of the changeove r for this Member Stat e. In order not to 
increase excessively the total cost of the co rrections, the application of the generalised 
system should be progressively phased in  for the other eligible Member States. 
                                                
 
21 COM(2001) 801 final. 
 
EN 18   EN (13) The Commission shall continue to examine the possibilities of modifying the own 
resources structure by introducing a ge nuinely tax-based own resource to be 
operational from 1 January 2014 and shal l submit a correspondi ng proposal to the 
Council. 
(14) 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. 
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 coming under the former Treaty es tablishing the European Coal and Steel 
Community as well as contributions and other dut ies provided for within the framework of the 
common organisation of the markets in sugar; 
(b) the application of a uniform rate valid for all Member States to the harmonised VAT 
assessment bases determined according to Community rules. 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) the application of a rate — to be determined pursuant to  the budgetary 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 introduced within the framework of a 
common policy, in accordance with the EC Treat y or the Euratom Treaty, provided that the 
procedure laid down in Article 269 of the EC Treaty or in Ar ticle 173 of the Euratom Treaty 
has been followed, shall also constitute own re sources entered in the budget of the European 
Union. 
3. Member States shall retain, by way of coll ection costs, 25 % of the amounts referred 
to in paragraph 1(a). 
 
EN 19   EN 4. The uniform rate referred to in pa ragraph 1(b) shall correspond to 0.30 %. 
5. The rate fixed under paragraph 1(c) shall apply to the GNI of each Member State. 
6. If, at the beginning of the fi nancial year, the budget has no t been adopted, the previous 
uniform VAT rate and rate applicable to Member States' GNIs shall remain applicable until the entry into force of the new rates. 
7. For the purposes of applying this Decision, GNI for the year  is calculated 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 Parliame nt, shall decide whether these modifications shall apply for 
the purposes of this Decision. 
Article 3  
1. The total amount of own resources assigned to the Communities to cover appropriations for payments may not exceed 1.24 % of the total GNIs of the Member States. 
2. Appropriations for commitments entered in  the general budget of the European Union 
must follow an orderly progression resulting in a total amount, whic h does not exceed 1.31 % 
of the total GNIs of the Member States. 
An orderly ratio between approp riations for commitments and appropriations for payments 
shall be maintained to guarantee their compatib ility and 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 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 r ecalculated by the Commi ssion on the basis of the 
following formula: 
modified ESAtGNI1tGNI2tGNIcurrent ESAtGNI1tGNI2tGNI
*%)31.1%(24.1
+−+−+−+− 
where t is the latest full year for which Eurostat data are available. 
Article 4 
1. Any Member State sustaining a negative budge tary imbalance in excess of a threshold 
equivalent to a certain percenta ge of its GNI shall be granted a correction. The total amount of 
the corrections in a given year shall not  exceed a maximum available refund volume 
expressed in euro. The Council, in accordance wi th the procedure laid down in Article 279(2) 
of the EC Treaty, shall lay down the implem enting measures for the calculation of the 
corrections and their financing, in particular the threshold and the maximum available refund 
volume. 
 
EN 20   EN The corrections shall be established by: 
(a) calculating for each Member State the budgetary  imbalance as the difference, in a financial 
year, between: 
- the percentage share of that Member State in  the sum of the total VAT-based and GNI-based 
own resources payments, and 
- the percentage share of that Member  State in total allocated expenditure; 
(b) multiplying the difference thus obta ined by total allocated expenditure; 
(c) deducting from the result under (b) the valu e of that Member State's GNI multiplied by the 
threshold;  
(d) if the result obtained under (c ) is positive, multiplying this re sult by a refund rate, fixed at 
a maximum of 0.66 and, if necessary, reduced proportionally to respect the maximum available refund volume. 
2. The following transitional  measures shall apply: 
(a) In addition to the corrections resulting fro m the application of Article 4(1) of this 
Decision, the United Kingdom shall receive the following payments: 
in 2008: € 2.0 billion 
in 2009: € 1.5 billion in 2010: € 1.0 billion in 2011: € 0.5 billion 
These amounts shall be financed in accordance with the rules laid down in Article 5 of 
Council Decision 2000/597/EC, Euratom. 
These amounts and their financing shall not be  taken into account for the calculation of the 
corrections mentioned under Articl e 4(1)(d) of th is Decision. 
(b) The maximum refund rate mentioned under Ar ticle 4(1)(d) of this  Decision shall be 
phased-in for all Member States other than  the United Kingdom according to the following 
schedule: 
in 2008: 33% 
in 2009: 50% in 2010: 50% in 2011: 66% 
Article 5 
1. The cost of the corrections shall be borne by all Member States in accordance with the 
following arrangements: the distri bution of the cost shall be calculated by reference to each 
Member State's share in total EU GNI. 
 
EN 21   EN 2. The correction shall be granted to any Me mber State by a reduction in its payments 
resulting from the application of Article 2(1 )(c). The costs borne by all the Member States 
shall be added to their payments resulting fr om the application for each Member State of 
Article 2(1)(c). 
3. The Commission shall perform the calculatio ns required for the application of Article 
4 and this Article. 
4. If, at the beginning of the financial year, the budget has not been adopted, the 
correction granted to any Member State and th e costs borne by all the 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 nati onal 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. Without prejudice to the auditing of the acc ounts and to checks that they are lawful 
and regular as laid down in Article 248 of th e EC Treaty and Article 160C of the Euratom 
Treaty, such auditing and checks being mainly c oncerned with the reliability and effectiveness 
of national systems and procedures for determin ing the base for own resources accruing from 
VAT and GNI and without prejudic e to the inspection arrangemen ts made pursuant to Article 
279(1)(b) of the EC Treaty and Article 183 point (c) of the Euratom Treaty, the Council shall, 
acting unanimously on a proposal from the Co mmission and after consulting the European 
Parliament, adopt the provisions necessary to apply 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. 
 
EN 22   EN Article 9 
The Commission shall submit to the Council a propos al to modify the own resources structure 
by introducing a genuinely tax-based own resour ce to be operational from 1 January 2014. 
Article 10 
1. Member States shall be notified of this  Decision by the Secret ary-General of the 
Council and the Decision sh all 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
22, to Council Decision 
85/257/EEC, Euratom of 7 May 1985 on the Communities' system of own resources23, to 
Decision 88/376/EEC, Euratom, to Decisi on 94/728/EC, Euratom, 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   
                                                 
22 OJ L 94, 28.4.1970, p. 19. 
23 OJ L 128, 14.5.1985, p. 15. Decision repealed by Decision 88/376/EEC, Euratom. 
 
EN 23   EN EXPLANATORY MEMORANDUM  
The purpose of this proposal is  to lay down the implementing m easures for the correction of 
budgetary imbalances laid down in the Council Decision on the system of the Communities' 
own resources of (.........). The present pr oposal for a Council Regulation replaces the 
“Calculation Method" of 29 September 200024. 
                                                 
24 Calculation, financing, payment and entry in the budget of the correction of budgetary imbalances in 
accordance with Articles 4 and 5 of the Council Deci sion on the system of the EU´s own resources  
(Council of the European Union, 10646/00 ADD 2). 
 
EN 24   EN 2004/0171 (CNS) 
Proposal for a 
COUNCIL REGULATION 
on the implementing measures  for the correction of budgetar y imbalances in accordance 
with Articles 4 and 5 of the Council decisi on of (…) on the system of the European 
Communities’ own resources 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing th e European Community, and in particular 
Article 279(2), 
Having regard to the Treaty es tablishing the European Atomic Energy Community, and in 
particular Article 183 thereof, 
Having regard to Council Decision 200x/xxx/EC , Euratom of (…) on the system of the 
European Communities' own resources25, and in particular Articles 4 and 5 thereof, 
Having regard to the proposal from the Commission26, 
Having regard to the opinion of  the European Parliament,27 
Having regard to the opinion of the Court of Auditors,28 
Whereas: (1) According to Council Decision of (…) the correction for budgetary imbalances 
granted to the UK under Article (4) of  Council Decision 2000/597/EC shall be 
replaced with a generalis ed system for correcting excessive negative budgetary 
imbalances. 
(2) According to Council Decision of (…), the Council shall lay down the implementing 
measures for the calculation of  these corrections and their financing, in particular the 
threshold and the maximum available refund volume. 
(3) It is appropriate to define the categories of expenditure and revenue to be taken into 
account for the calculation of the corrections. 
(4) It is appropriate to lay down the rules for entering the corrections in the budget. 
                                                
 
25 OJ L […], […], p. […]. 
26 OJ C […], […], p. […]. 
27 OJ C […], […], p. […]. 
28 OJ C […], […], p. […]. 
 
EN 25   EN HAS ADOPTED THIS REGULATION: 
Article 1 
1. The calculation of the amount of the corr ection based on the budgetary imbalances of 
Member States of year t in accordance with Article 4 of  Council decision (…) shall be 
established by: 
(a) calculating for each Member State the budgeta ry imbalance as the difference between: 
- the percentage share of that Member State in  the sum of the total VAT-based and GNI-based 
own resources payments relating to year t, and 
- the percentage share of that Member  State in total allocated expenditure; 
(b) multiplying the difference thus obtained by total allocated expenditure; (c) deducting from the result under (b) the value of that Member State's gross national 
income (GNI) multiplied by the threshold;  
(d) if the result obtained under (c) is positiv e, multiplying this result by a refund rate, 
fixed at a maximum of 0.66 and, if necessary, reduced proportio nally to respect the maximum 
available refund volume. 
2. The result obtained by steps (a) to (d) above corresponds to the following formula: 
RR
xC = RR Y RNCEEE
TPTP
xx x* * *
−

−  
if RR
xC > 0 
where RR = 0.66 if ∑
xxC66.0≤ MARV and 
RR = ∑
xxCMARV
66.0* 0.66 if ∑
xxC66.0 > MARV 
Where: TP = Total VAT- and GNI-based payments made by all Member States in respect of year t 
 TP x = VAT- and GNI-based payments made by Member State x in respect of year t 
 E = Total allocated expenditure in respect of year t 
 E x = Expenditure allocated to Member State x in respect of year t 
 RR
xC = Correction (at refund rate RR) to be granted to Member State x in respect of year t 
 RNC = Reasonable net contribution (= threshold) expressed in % of GNI 
 Y x = GNI of year t of Member State x 
 RR = Refund rate  MARV = Maximum available refund volume 
 ∑
xxC66.0= Total sum of corrections if RR is equal to 0.66 
 
EN 26   EN 3. For the purposes of calculating the corre ctions, VAT-based and GNI-based payments 
shall not include the payments relating to the corrections.  
Article 2 
1. The threshold referred to in Article 1 sh all be equal to 0.35 % of the GNI of the 
relevant Member State. 
2. The maximum available refund volume (MARV) referred to in Article 1 shall be equal 
to euro 7.5 billion. 
Article 3 
1. The distribution of the total cost of the corrections in accordance with Article 5 of 
Council decision (…) shall be calculated in pr oportion to each Member State's share in total 
EU GNI in year t. 
2. The correction shall be granted to any Me mber State by a reduction in its payments 
resulting from the application of Ar ticle 2(1)(c) of C ouncil decision (…). 
3. The cost of the corrections borne by all Member States shall be added to their 
payments resulting from the application for each Member State of Article 2(1)(c) of Council 
decision (…). 
Article 4 
1. The concept of expenditure to be used in the calculation of the corrections shall correspond to actual payments (execution of appropr iations for payments) made in the year in 
question (year 
t) under that year's appropriations for payments as well as payments under 
carryovers of non-executed appropriations for pa yments to the following year (from year t to 
year t+1). Only utilised appropriations for paymen ts, i.e. the amount of  payments actually 
made, shall be taken into account. 
2. The allocation of expenditure across the Member States shall be governed by the 
following rules:  
In general, payments shall be allocated to th e Member 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 shall be  allocated whenever this is possible to the 
Member State(s) in which the fi nal beneficiary(ies) is(are) resi dent, in accordance with their 
shares in these payments. 
Total allocated expenditure shall be based on total expenditure of th e general budget of the 
European Union, excluding the following two main categories of expenditure: 
- Expenditure on external policies , including pre-accession or enlargement-related 
expenditure in non-member countries as well as other expenditure benefiting recipients 
outside the Union, such as development co-ope ration expenditure, resear ch expenditure spent 
outside the EU, administrative expenditure paid to recipien ts outside the Union, etc. 
 
EN 27   EN - Expenditure that cannot be allocated or identified due to conceptual or other 
difficulties, such as expenditure on repres entation, on missions and on formal and other 
meetings as well as payments related to cr oss-border Community initiatives, promotion of 
inter-regional co-operative operations  and other cross-border actions. 
Article 5 
1. The amount of the corrections shall be budgeted in two steps: 
(a) The result of the first provisional calcula tion of the amount of th e corrections for year t 
shall be entered in  the preliminary draft budget of year t+1. The calculation shall be based on 
the most recent data available for both revenue and expenditure. 
(b) The result of the definitive calculation of the amount of the corrections for year t shall 
be budgeted in an amending budget of year t+3. The calculation shall be based on the data on 
VAT bases, GNI and allocated expenditure relating to year t as known at 31 December of year 
t+2, which shall, where applicab le, be converted into euro according to the annual average 
exchange rate of the year t. 
 In order to calculate the share of each Member State in the sum of the total VAT-
based and GNI-based own resources payments the budget of year t shall be recalculated on 
the basis of the outturn of appr opriations for payments for year t, reduced by other revenue 
relating to year t (not including the balanc e of the previous exercise  or other balances or 
adjustments of balances relating to previous years) and the actual amount of traditional own 
resources made available in year t. The remaining amount shall be financed by the VAT-
based own resource up to the uniform rate of call of VAT and by the GNI-based resource for 
the residual amount necessary to balance the budget. 
2. The financing of the corrections referred to in paragraph (1)( a) above shall be 
calculated on the basis of the latest data on Member States GNI for year t, available when the 
preliminary draft budget is drawn up. 
3. A definitive calculation shall also be ma de in respect of the financing of the 
corrections for year t referred to in paragraph (1)(b) above. The calculation shall be based on 
Member States’ GNI in year t, as known at 31 December of year t+2, which shall, where 
applicable, be converted into euro according to the annual average exchange rate of the year t. 
The definitive financing data shall be compared with the payments relating to the corrections 
for year t already entered in the budget in year t+1. The balances per Member State shall be 
entered in an appropriate budgetary chapter of  the amending budget referred to under 
paragraph (1)(b) above and converted into nati onal currency according to the annual average 
exchange rate of the year t. 
Article 6 
This Regulation shall enter into force on the day following that of its publication in the 
Official Journal of the European Union . It shall take effect as stipulated in Article 10 of 
Council decision (…). 
 
EN 28   EN This Regulation shall be binding in  its entirety and directly applicable in all Member States. 
Done at Brussels,  
 For the Council 
 The President