COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 24.10.1996 
COM(96) 521 final 
COMMUNICATION FROM THE COMMISSION TO THE COUNCIL 
REQUEST SUBMITTED BY THE GOVERNMENT OF 
THE UNITED KINGDOM FOR AUTHORIZATION TO MAINTAIN SPECIAL 
MEASURES PURSUANT TO ARTICLE 30 OF THE SIXTH COUNCIL 
DIRECTIVE (77/388/EEC) AND ARTICLE 23 (2) OF COUNCIL DIRECTIVE 
92/12/EEC 

Introduction 
By letter registered at the Secretariat General of the Commission on 29 July 1996, the 
British Government, acting on the basis of Article 30 of the Sixth Council Directive 
(77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States 
relating to turnover taxes - Common system of value added tax: uniform basis of 
assessment and Article 23 (2) of Council Directive 92/12/EEC of 25 February 1992 on the 
general arrangements for products subject to excise duty and on the holding, movement 
and monitoring of such products, requested authorization to maintain special measures 
derogating from the said Directives. 
In accordance with Article 30 of the Sixth Council Directive and Article 23 (2) of Council 
Directive 92/12/EEC, the other Member States were informed of the British request by 
letter of 29 August 1996. Under the said Articles, the Commission or the Member States 
may request that the matter be raised before the Council. 
Description of the measure 
The United Kingdom would like to continue affording relief from VAT and excise duty to 
visiting non-NATO Commonwealth forces and their personnel similar to the one granted 
to NATO forces. Since the late 1940s, such relief has been granted on the basis of 
bilateral agreements concluded between the United Kingdom and many of the 
Commonwealth countries. 
Currently, 6 non-NATO Commonwealth forces with personnel serve in the United 
Kingdom claiming reliefs. These forces are Australia, Bangladesh, India, Maylasia, New 
Zealand and Pakistan. In total, approximately 400 personnel are presently serving in the 
United Kingdom. 
The British request covers: 
a) import of goods by Commonwealth forces and their personnel. 
Presently, Commonwealth forces enjoy relief from customs duties along the same 
lines as NATO forces. Personnel of visiting Commonwealth forces may import their 
household effects for use while in the United Kingdom without payment of customs 
duties. The personnel are furthermore, under existing warehouse arrangements, 
granted a ration of duty and VAT free alcohol and tobacco products each month; 
b) domestic purchases of goods and services' by Commonwealth forces and their 
personnel. 
For goods and services purchased for official use, visiting Commonwealth forces are 
at the moment enjoying relief from VAT and excise duty without any fixed limitation. 
The personnel of such forces only enjoy relief from tax(es) when purchasing 
consumer durables with a minimum value of 10 £. As consumer durables are 
considered goods capable of at least one year of sustained used and of being exported 
at the end of a tour of duty. The personnel also enjoy relief from taxes on fuel 
purchased for use on official duty journeys. 
Relief is given by means of a refund of tax(es). All claims for refund of tax(es) on 
purchases are forwarded by the visiting forces to the customs authorities. When 
purchase is made by personnel of visiting forces, the claim for refund has to be routed 
through the force auhorizing it prior to forwarding to the authorities; 
c) intra-Community purchases of goods and services by Commonwealth forces and their 
personnel. 
Commonwealth forces are not currently making purchases in other Member States. 
However, it is the intention to extend the relief facilitated to Commonwealth forces to 
purchases from other Member States 
Legal situation 
Community legislation does not, at present, allow for VAT and excise duty exemption to 
be afforded to Commonwealth forces 
At importation, relief from VAT is only granted for goods falling within the scope of 
Article 14 (l)(d) of the Sixth VAT Directive as set out in Council Directive 83/181/EEC 
of 28 March 1983. Importations by Commonwealth forces do not qualify for exemption in 
this respect. 
Domestic supplies, including intra-Community purchases, are exempted from VAT 
pursuant to Article 15 (10) of the Sixth Directive which does, however, only cover NATO 
forces which take part in the common defence effort. Supplies to Commonwealth forces 
cannot be exempted under this provision 
Products which are subject to excise duty are exempted from payment of tax under Article 
23 (1) of Directive 92/12/EEC where these products are intended for certain beneficiaries 
This exemption does not cover supplies to Commonwealth forces. 
Commission's opinion 
The procedure provided for in Article 30 of the Sixth Directive and Article 23 (2) of 
Directive 92/12/EEC permits Member Stales to conclude with non-member countries or 
organizations an agreement containing derogations from the said Directives. Such 
derogations are however only justified while complying with the basic principles of the 
common system of value added tax and of the general arrangements for excise products. 
The British Government has requested for this procedure u> be applied in relation to the 
relief from VAT and excise duy afforded to visiting Commonwealth forces and their 
personnel. The request covers both import iu\d domestic supplies of goods, including 
intra-Community supplies. 
In the Commission's opinion, the procedure must however be applied with constraint. The 
British request, where authorization is sought to allow Commonwealth forces to be 
treated the same way as NATO forces, does not take this into consideration. 
Giving authorization to such a request in tact means that Commonwealth forces would 
benefit from a VAT exemption on supplies of goods and services similar to the one under 
Article 15 (10) of the Sixth Directive. It has to be mentioned that the same applies to 
importations of goods by these forces which are not covered by Article 14 (l)(d) the 
scope of which is set out in Directive 83/1 SI/EEC. It follows that, in an internal market, 
such an exemption would not be restricted to one Member State but would have to be 
applied throughout the Community, subject to the limitations laid down by the United 
Kingdom as host Member State. Consequently, an authorization to apply an exemption to 
Commonwealth forces would result in a de facto extension of the scope of the exemption 
under Article 14 (l)(d), as this has been set out in Directive 83/1 SI/EEC, and Article 15 
(10) of the Sixth Directive. An extension oi' that son would require a change of the 
relevant directives which would have effect for all Member States In this respect, the 
derogation procedure is not seen by the Commission as an appropriate measure. 
On these ground, the Commission considers it inappropriate to submit a proposal for a 
Council Decision authorizing the United Kingdom to apply measures derogating from the 
comm(5h VAT system. 
The Commission considers it essential to assure coherence between VAT and excise duty 
provisions governed by Community legislation. Since it gives rise to fundamental 
objections applying a derogative measure to exempt Commonwealth forces from VAT, 
the Commission urges the United Kingdom to reconsider its request for such a measure in 
the excise duty field. 
Conclusion 
Since it gives rise to fundamental objections to apply the derogation procedure to the 
arrangements in question, the Commission requests that the matter be raised before the 
Council in accordance with Article 30 of the Sixth Council Directive and Article 23 (2) of 
Council Directive 92/12/ECC 
ISSN 0254-1475 
COM(96) 521 final 
DOCUMENTS 
EN 09 
Catalogue number : CB-C0-96-526-EN-C 
ISBN 92-78-10400-0 
Office far Official Publications of the European Communities 
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