EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

Taxation of energy products and electricity in the Union is governed by Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity (the ‘Energy Taxation Directive’ or the ‘Directive’).

Pursuant to Article 19(1) of the Directive, in addition to the provisions laid down in particular in its Articles 5, 15 and 17, the Council, acting unanimously on a proposal from the Commission, may authorise any Member State to introduce further exemptions or reductions in the level of taxation for specific policy considerations.

By virtue of Council Implementing Decision 2014/921/EU of 16 December 2014, Croatia has already been authorised to apply a tax exemption to gas oil used to operate machinery in humanitarian demining in accordance with Article 19 of Directive 2003/96/EC.

The objective of this proposal is to extend that authorisation as requested by Croatia, given that the current derogation expired on 19 December 2020. This exemption is meant to reduce the costs for legal persons registered to conduct demining activities and thus speed up these activities and contribute to the implementation of humanitarian demining policy in Croatia.

The demining activities are taking place in accordance with the international Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti-Personnel Mines and on their Destruction (Ottawa Convention) of 1998, and the international Convention on Cluster Munitions signed in Oslo in 2018, which prohibits all use, production, transfer and stockpiling of cluster munitions and establishes a framework for cooperation and assistance to ensure clearance of contaminated areas, as well as the Croatian Mine Action Act (OG 110/15, 118/18 and 98/19).

In accordance with Article 5 of the Ottawa Convention, in 2018 the Republic of Croatia submitted a second Request for extension of the demining deadline. The request was granted at the Seventeenth Meeting of the States Parties of the Convention and a new deadline of 1 March 2026 is now set for the completion of the demining activities.

In line with the extension of the deming deadline and by letter dated 18 September 2020, the Croatian authorities informed the Commission of their intention to prolong the tax exemption to gas oil used to operate machinery in humanitarian demining until 19 December 2026. Additional information was provided by letters dated 13 October 2020 and 6 November 2020.

The intention of the Croatian authorities is to continue to apply a tax exemption to gas oil used to operate machinery in humanitarian demining in accordance with Article 19 of Directive 2003/96/EC.

The requested period of validity of the derogation is from 19 December 2020 until 19 December 2026, which is in continuity with the current derogation and within the maximum period allowed by Article 19 of the Energy Taxation Directive.

The aim of of the measure to be applied by Croatia is to give an incentive for quicker clearance of suspected minefields, freeing-up of agricultural land and forests thus making them accessible again for economic activities. The measure is also expected to have immediate positive effects on human life and health in the areas contaminated by mines and unexploded ordnance.

The measure consists of a tax exemption from excise duty on gas oil used to operate machinery in humanitarian demining of areas contaminated with mines, in such a way that the exemption is provided only to legal entities registered for demining. The measure is implemented through the application of excise duty refunds. Machines that will use gas oil exempted from payment of excise duties will be classified according to their purpose, their working tools and their method of operation. The competent Croatian Mine Action Centre departments will oversee and keep records of the operation of the machinery. There will be a special form for each machine in which hours of operation, performance and fuel consumption will be recorded for each day. When a project has ended, the demining operator will submit an excise tax return form for its machinery employed on the site, accompanied by a log form for each machine. In line with its general responsibility to monitor the implementation of excise legislation, the Tax Administration of the Ministry of Finance will perform, on the basis of information about the site where demining activity is taking place, systematic checks of fuel used in demining machinery.

According to the figures provided by the Croatian authorities, in Croatia there are 44 authorized legal entities with 43 machines used in humanitarian demining. However, the measure is not meant to be restricted only to these accredited operators but will apply to any new accredited operator and demining machinery that may be used for this purpose, in the future. The Croatian Mine Action Centre accredits and keeps a record of all new mine clearance machines intended to be used for humanitarian demining.