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
Date: 1989-07-10
Institutions: European Commission
Subjects: France, VAT, allowances and expenses, derogation from EU law, tax exemption

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 

COM(89)  346  final 

ISSN 0254-1475 

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 

€ 

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

10.7.1989