COMMISSION OF THE EUROPEAN COMMUNITIES 
COM(89) 346 final 
Brussels, 10 July 1989 
Proposal for a 
COUNCIL DECISION 
authorizing France to apply a measure derogating from the 
second subparagraph of Article 17(6) of the Sixth 
Directive 77/388/EEC on the harmonization of 
the laws of the Member States relating to 
turnover taxes 
(presented by the Commission) 
EXPLANATORY MEMORANDUM 
1. By letter received on 17 April 1989, the French Government submitted 
to the Commission a request for a derogation under Article 27 of the 
Sixth VAT Directive in respect of a special measure to counter tax 
evasion and avoidance. This measure, which derogates from the second 
subpragraph of Article 17(6) of the Sixth Directive, is intended to 
exclude expenditure in respect of accomodation, food, hospitality and 
entertainment, from the right to deduct value added tax previously 
charged regardless of the beneficiary. However, it does not concern 
expenditure incurred by a taxable person in certain circumstances 
spelt out in the proposal for a decision. 
2. In support of its request, the French Government stresses the risks of 
tax evasion and avoidance stemming from the deduction of tax charged 
on expenditure that intrinsically constitutes final consumption. 
3. In line with the French Government's request, the proposal for a deci­
sion authorizes it to apply the derogation on a temporary basis and 
until such time as Community rules determining expenditure not eligi­
ble for a deduction of value added tax pursuant to the first subpara­
graph of Article 17(6) of the Sixth Directive come into force. 
4. The Commission informed the other Member States of the request by let­
ter dated 17 May 1989. 
10J No L 145, 13.6.1977. 
Proposal for a 
COUNCIL DECISION 
authorizing France to apply a measure derogating from the second 
subparagraph of Article 17(6) of the Sixth Directive 77/388/EEC 
on the harmonization of the laws of the Member States 
relating to turnover taxes 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic Community, 
Having regard to the Sixth Council Directive (77/388/EEC) of 17 May 1977 
on the harmonization of the laws of the Member States relating to turn­
over taxes - Common system of value added tax : uniform basis of assess-
ment , as last amended by the Act of Accession of Spain and Portugal, and in 
particular Article 27 thereof. 
Having regard to the proposal from the Commission, 
Whereas, under Article 27(t) of Directive 77/388/EEC, the Council, 
acting unanimously on a proposal from the Commission, may authorize 
any Member State to introduce special measures for derogation from that 
Directive, in order to simplify the procedure for charging the tax or to 
prevent certain types of tax evasion or avoidance; 
10J No L 145, 13.6.1977, p. 1. 
- 2 -
Whereas, by letter recorded received by the Commission on 17 April 1989, 
France requested authorization to introduce a special measure 
derogating from the second subparagraph of Article 17(6) of the Sixth 
Directive; 
Whereas this measure, described as being designed to prevent tax evasion 
and avoidance, is aimed at excluding expenditure in respect of accommoda­
tion, restaurants, hospitality and entertainment from the right to deduct 
value added tax previously charged; 
Whereas the exclusion would not concern expenditure incurred by a taxable 
person in respect of the supply by him of accommodation, meals, food or 
drink for consideration, expenditure on accommodation provided free of 
charge for security or caretaking staff on works, sites or business pre­
mises, or expenditure incurred by a taxable person in carrying out his 
contractual or legal responsibility towards customers; 
Whereas the authorization requested by France can be 
granted only on a temporary basis and until such time as Community rules 
determining expenditure not eligible for a deduction pursuant to the first 
subparagraph of Article 17(6) of the Sixth Directive come into force; 
Whereas this derogation does not have a negative effect on the European 
Communities1 own resources accruing from value added tax; 
Whereas the other Member States were informed of the French 
request on 17 May 1989, 
HAS ADOPTED THIS DECISION : 
4 
- 3 -
Article 1 
1. Notwithstanding the second subparagraph of Article 17(6) of 
the Sixth Directive 77/388/EEC, France is hereby authorized, on a 
temporary basis and until such time as Community rules determining the 
treatment of expenditure referred to in those provisions come into 
force, to exclude expenditure in respect of accommodation, food, hospi­
tality and entertainment from the right to deduct value added tax pre­
viously charged. 
2. The exclusion referred to in paragraph 1 shall not apply to : 
- expenditure incurred by a taxable person in respect of the supply by 
him of accommodation, meals, food or drink for consideration; 
- expenditure on accommodation provided free of charge for security or 
caretaking staff on works, sites or business premises; 
- expenditure incurred by a taxable person in carrying out his con­
tractual or legal responsibility towards customers. 
Article 2 
This Decision is addressed to the French Republic 
Done at Brussels, For the Council 
The President 
Commission of the European Communities 
COM(89) 346 final 
Proposal for a 
COUNCIL DECISION 
authorizing France to apply a measure derogating from the second 
subparagraph of Article 17(6) of the Sixth Directive 77/388/EEC on the 
harmonization of the laws of the Member States relating to turnover 
taxes 
(submitted by the Commission) 
10.7.1989 
Office for Official Publications of the European Communities 
L - 2985 Luxembourg 
Series : DOCUMENTS 
1989 — 5 pp. — Format: 21.0 x 29.7 cm 
EN 
ISSN 0254-1475 
ISBN 92-77-51955-X 
Catalogue number: CB-CO-89-305-EN-C 
ISSN 0254-1475 
COM(89) 346 final 
DOCUMENTS 
Proposal for a 
COUNCIL DECISION 
authorizing France to apply a measure 
derogating from the second subparagraph of 
Article 17(6) of the Sixth Directive 77/388/EEC 
on the harmonization of the laws of the Member 
States relating to turnover taxes 
(submitted by the Commission) 
09 
Catalogue number: CB-CO-89-305-EN-C 
ISBN 92-77-51955-X 10.7.1989 
€ 
COMMISSION OF THE EUROPEAN COMMUNITIES