No C 37/8 Official Journal of the European Communities 10.2.83 
II 
(Preparatory Acts) 
COMMISSION 
Proposal for a Twelfth Council Directive on the harmonization of the laws of the 
Member States relating to turnover taxes — Common system of value added tax: 
expenditure not eligible for deduction of value added tax 
(Submitted by the Commission to the Council on 25 January 1983) 
THE COUNCIL OF THE EUROPEAN 
COMMUNITIES, 
Having regard to the Treaty establishing the 
European Economic Community, 
Having regard to Sixth Council Directive 
77/388/EEC of 17 May 1977 on the harmonization 
of the laws of the Member States relating to turnover 
taxes — Common system of value added tax: uniform 
basis of assessment ('), and in particular Article 17 (6) 
thereof, 
Having regard to the proposal from the Commission, 
Having regard to the opinion of the European 
Parliament, 
Having regard to the opinion of the Economic and 
Social Committee, 
Whereas Article 17 (6) of Sixth Directive 
77/388/EEC stipulates that the Council shall decide 
what expenditure shall not be eligible for a deduction 
of value added tax; 
Whereas some items of expenditure, even where 
incurred in connection with the normal operation of a 
business, nevertheless have the characteristics of final 
consumption and apportionment of such expenditure 
between business and private use cannot be accurately 
verified; 
Whereas the nature of such expenditure presents the 
risk of abuse or tax evasion, not only on the part of 
resident taxable persons, but also on the part of non­
resident taxable persons who are entitled to the 
refund of tax in a Member State other than that in 
which they are resident; 
Whereas Article 17 (6) of Sixth Directive 
77/388/EEC stipulates that value added tax shall in 
no circumstances be deductible on expenditure which 
is not strictly business expenditure, such as that on 
luxuries, amusements or entertainment; 
Whereas the establishment of common rules on the 
expenditure referred to in Article 17 (6) of the aforementioned Directive is not intended to affect the 
general arrangements governing the right to deduct 
that result from First Council Directive 67/227/EEC (2) 
and from Sixth Council Directive 77/388/EEC or the 
other cases of non-deductibility that result from the 
Sixth Directive, and in particular from Articles 17 (7), 
24 (5), 25 (5) and 26 (4) thereof; 
Whereas it is necessary to achieve greater uniformity 
of the basis of assessment for the collection of own 
resources as provided for in Council Decision 
70/243/ECSC, EEC, Euratom of 21 April 1970 on 
the replacement of financial contributions from 
Member States by the Communities' own resources (3); 
Whereas the harmonization of national provisions 
relating to exclusion of the right to deduct 
contributes at the same time to the harmonization of 
the arrangements for the refund of value added tax to 
taxable persons not established in the territory of the 
country as provided for in Eighth Council Directive 
79/1072/EEC (4), 
HAS ADOPTED THIS DIRECTIVE: 
Article 1 
1. Value added tax shall not be deductible in 
respect of expenditure on the purchase, manufacture, 
importation, leasing or hire, use, modification, repair 
or maintenance of passenger cars, pleasure boats, 
private aircraft or motor cycles. 
Nor shall value added tax be deductible in respect of 
expenditure on supplies (fuels, lubricants, spare parts, 
etc.) for, or services performed in relation to, such 
vehicles and craft. 
'Passenger car' means any road vehicle (including any 
trailer) other than one which, by its design and 
(') OJNoL 145, 13.6. 1977, p. 1. O OJ No 71, 14. 4. 1967, p. 1301. 
O OJ No L 94, 28. 4. 1970, p. 19. 
O OJ No L 331, 27. 12. 1979, p. 11. 
10. 2. 83 Official Journal of the European Communities No C 37/9 
equipment, is intended solely for the transport of 
goods or is intended for industrial or agricultural use 
or has a seating capacity of more than nine persons 
including the driver. 
2. The exclusions of the right to deduct referred to 
in paragraph 1 shall not apply to vehicles or craft 
which are: 
(a) used for carriage for hire or reward; 
(b) used for driving training or instruction; 
(c) hired out; 
(d) part of the stock in trade of a business. 
Article 2 
1. Value added tax shall not be deductible in 
respect of transport expenses incurred on business 
travel by a taxable person or by members of his staff; 
'business travel' means a journey undertaken by a 
taxable person or by a member of his staff for 
business reasons away from the place of establishment 
or away from the place at which the traveller's 
functions are exercised. 
2. The exclusion of the right to deduct referred to 
in paragraph 1 shall not apply to transport expenses 
relating to the movement of an undertaking's staff 
between particular places of work or to those relating 
to transport of staff to and from their homes. 
Article 3 
1. Value added tax shall not be deductible in 
respect of expenditure on accommodation, food and 
drink. 
2. The exclusion of the right to deduct referred to 
in paragraph 1 shall not apply: 
(a) to expenditure incurred by a taxable person in 
respect of the supply of accommodation, meals, 
food or drink for consideration; 
(b) to expenditure on accommodation provided free 
of charge for security or caretaking staff on 
works, sites or business premises. 
Article 4 
Value added tax shall not be deductible in respect of 
expenditure on entertainment, including expenditure on hospitality extended to business contacts or, more 
generally, persons outside the business or in respect 
of expenditure relating to buildings, parts of buildings 
or their fittings intended primarily for such enter­
tainment. 
Article 5 
Value added tax shall not be deductible in respect of 
expenditure on amusements and luxuries. 
'Expenditure on luxuries' means expenditure which, 
by its nature and amount, does not constitute normal 
operating expenditure, or which relates to items 
which are not normally installed as fittings in 
buildings. 
Article 6 
The words 'Article 17 (6)' in Article 13B (c) of Sixth 
Directive 77/388/EEC are hereby replaced by the 
following: 'the provisions of Twelfth Directive .../ 
... ./EEC. 
Article 7 
Member States shall bring into force the provisions 
necessary to comply with this Directive not later than 
1 January 19 ... 
This Directive shall apply only with respect to value 
added tax charged on the purchase of goods or 
services invoiced, and on imports effected, from that 
date. 
Member States shall communicate to the Commission 
the texts of the main provisions of national law which 
they adopt in the field covered by this Directive. The 
Commission shall inform the other Member States 
thereof. 
Article 8 
The second subparagraph of Article 17 (6) of Sixth 
Directive 77/388/EEC shall cease to have effect in 
each Member State as from the date of 
implementation of this Directive. 
Article 9 
This Directive is addressed to the Member States.