Proposal for a COUNCIL DECISION AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY AND THE REPUBLIC OF POLAND TO CONCLUDE AN AGREEMENT CONTAINING MEASURES DEROGATING FROM ARTICLES 2 AND 3 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
Date: 1994-11-18
Institutions: European Commission
Subjects: Germany, Poland, VAT, engineering structure, maintenance, tax harmonisation

COMMISSION OF THE EUROPEAN  COMMUNITIES 

C0M(94)  509 
B r u s s e l s,  18.11.1994 

f i n al 

Proposal for a 

COUNCIL DECISION 

AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY AND 
THE REPUBLIC OF POLAND TO CONCLUDE AN AGREEMENT CONTAINING MEASURES 
DEROGATING FROM ARTICLES 2 AND 3 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. 

(presented by the Commission) 

Explanatory  Memorandum 

By letter received by the Secretariat  General of the Commission,  and registered  on 23 August 
1994, the German  Government  requested  authorisation,  on the basis of article 30 of the  Sixth 
Council  Directive,  to  conclude  an  agreement  with  the  Republic  of  Poland,  containing 
derogations  from  articles  2  and  3  of  the  said  Directive.  (The  Sixth  Council  Directive 
77/388/EEC, of 17 May  1977, on the harmonisation of the laws of the Member  States relating 
to tufn-over taxes - the Common system of Value Added Tax: uniform basis of assessment 1.) 

In accordance with the provisions of article 30, the other member states were informed  of the 
German request by letter of 23 September  1994. 

The  agreement  designates  which  of  the  contracting  states  is  to  be  responsible  for  the 
maintenance  of  each  frontier  bridge  currently  operating.  The  agreement  also  regulates  the 
maintenance and other related  matters in the event of a new frontier  bridge being  constructed, 
or an existing bridge being put back into service; the agreement  would  have to be amended in 
such cases. Modification  would  also be required where a bridge, currently in use, is put out of 
service. 

As  far  as  possible,  the  division  of  responsibility  between  the  contracting  States  for  the 
maintenance of complete bridges is divided between the contracting States in proportion to the 
surface areas of all the bridges on each respective sovereign territory. 

Under  the  principle  of  territoriality,  German  Value  Added  Tax  would  be  applied  only  to 
maintenance work  on the bridges  carried  out  on  German  territory;  maintenance  work  carried 
out on Polish territory would be outwith the scope of application of the Sixth Directive. Work 
carried out on both territories would have to be apportioned. 

The  application  of  these  rules  would  involve  considerable  tax  difficulties  for  the  firms 
contracted to carry out this maintenance work. In order to simplify the tax obligations of these 
firms,  the agreement contains tax provisions providing for the uniform taxation of maintenance 
work, either in accordance with the German turnover tax law, or in accordance with the Polish 
tax law on goods and services. 

In  particular,  the  agreement  states  that  the  right  to  tax  in  a. given  case  will  lie  with  the 
respective countries responsible for maintaining the frontier bridges. 

Moreover,  the  agreement  provides that,  with  the  exception  of  customs  duties,  no  import  tax 
shall be charged  on goods imported from  the territory of one contracting  state into that  of the 
other  contracting  state,  provided  that  the  goods  are  used  for  maintaining  frontier  bridges. 
However,  imports for  the  public  authorities  (final  consumption)  are  expressly  excluded  from 
the measure. 

1 OJ no. L 145 of 13.6.1977, p.1. Directive last modified by Directive 94/5/EC (OJ no. L 60 of 
3.3.1994, p. 16) 

Under the provisions of Article 30 of the Sixth Directive  any Member  State may be  authorised 
to  conclude  with  a non  member  country  or an international  organisation,  an agreement  which 
may contain derogations from the said Directive. 

The  uniform  taxation  of  maintenance  work  on  the  frontier  bridges,  either  in  the  form  of 
German VAT, or a Polish tax, constitutes an important simplification  for those  carrying out the 
maintenance  work,  when  compared to  the normal  rules of the  Sixth Directive.  The decision  to 
waive  the  collection  of  German  VAT  on  imports  of  goods  into  Germany  is  also  aimed  at 
helping firms and the authorities avoid the practical difficulties  connected with the VAT  refund 
procedures. 

The  Commission  considers  that  the  application  of  the  proposed  measures  will  have  only  a 
negligible effect  on the European Community's VAT receipts. 

In  effect,  since  the  obligation  to  maintain  the  frontier  bridges  (which  also  determines  the 
applicable  tax  law)  is  divided  between  the  two  contracting  states  according  to  the  territorial 
location  of  each  different  part  of  all  the  frontier  bridges,  taxation  of  maintenance  work 
according to the provisions of the agreement will  hardly affect  the amount of the German VAT 
due  from  these  operations.  On  the  other  hand,  considering  the  exclusion  of  the  public 
authorities  from  this  measure,  the  decision  to  waive  the  collection  of  German  VAT  on 
importation will not affect  the amount of VAT due at the stage of final consumption,  as even if 
this  VAT  on  importation  was  collected,  it  would  be  recoverable  by the  operator  who  carried 
out the maintenance work. 

Consequently,  the  Commission  considers  it  advisable  to  authorise  the  Federal  Republic  of 
Germany to conclude the proposed agreement. 

Proposal for a 

COUNCIL DECISION 

AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY AND 

THE REPUBLIC OF POLAND TO CONCLUDE AN AGREEMENT CONTAINING MEASURES 
DEROGATING FROM ARTICLES 2  AND 3  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. 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  the  Sixth  Council  Directive  77/388/EEC  of  17  May  1977,  on  the 
harmonisation  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 30 thereof, 

Having regard to the proposal from the Commission, 

Whereas, under Article  30 of the  Sixth VAT Directive, the Council,  acting unanimously  on a 
proposal of the Commission, may authorize any Member State to conclude with a non member 
country or an international organization, an agreement which may contain derogations from the 
said Directive; 

Whereas,  by  letter  officially  received  by  the  Secretary  General  of  the  Commission  on  23 
August  1994, the German Government requested authorisation to conclude an agreement  with 
Poland, concerning the maintenance of frontier  bridges linking German motorways to the main 
roads in Poland, which contains derogations from  Articles 2 and 3 of the Sixth Directive; 

Whereas, the  other  Member  States were  informed  on  23  September  1994 of  the  request  for 
authorisation received from Germany; 

1  OJ no. L 145 of 13.6.1977,  p.1. Directive  last modified  by Directive  94/5/EC  (OJ no. L 60 of 
3.3.1994, p. 16) 

S 

Whereas  in  the  absence  of  a  special  measure,  only  the  maintenance  work  carried  out  on 
German  territory  would  be  subject  to  German  VAT,  those  carried  out  on  Polish  territory 
would  be  outwith  the  scope  of  the  Sixth  Directive.  In  addition,  each  import  of  goods  from 
Poland  into  Germany,  used  for  the  maintenance  of  frontier  bridges,  would  be  subject  to 
German VAT; 

Whereas the purpose of these derogations is to simplify  the taxation rules for those responsible 
for carrying out the maintenance work on the frontier bridges; 

Whereas the derogations will only have a negligible effect  on the European  Community's own 
resources arising from value added tax; 

HAS ADOPTED THIS DECISION: 

Article 1 

The Federal Republic of Germany is authorised to conclude an agreement with the Republic of 
Poland  containing  measures derogating from the  Sixth  Council Directive  77/388/EEC.  These 
derogations are defined  in articles 2 and 3  hereinafter. 

Article 2 

By  way  of  derogation  from  Article  3  of  the  Sixth  Directive,  the  frontier  bridges  of  the 
contracting  States for  which,  on the basis of the agreement,  the Federal Republic of Germany 
has maintenance responsibility, are considered to be a part of German territory. This is in so far 
as  the  deliveries  of  goods  and  the  supply  of  services  are  consistent  with  the  maintenance  of 
these bridges. 

By  way  of  derogation  from  Article  3  of  the  Sixth  Directive,  the  frontier  bridges  of  the 
contracting  states  for  which,  on  the  basis  of  the  agreement,  the  Republic  of  Poland  has 
maintenance  responsibility,  are considered  to  be a part  of Polish  territory.  This is in so  far  as 
the deliveries of goods and the supply of services are consistent  with the maintenance of these 
bridges. 

Article 3 

By way  of  derogation  from  Article 2,  paragraph  2 of the  Sixth Directive,  the  importation  of 
goods into Germany from  Poland is not subject  to value added tax, in so far as these goods are 
used  for  the maintenance of the frontier  bridges for  which, on  the basis of the  agreement,  the 
Republic of Poland  is responsible. However,  the derogation  does not apply to  importations of 
goods effected  by a public authority. 

4-

This Decision is addressed to the Federal Republic of Grermany. 

Article 4 

Done at Brussels, 

1994 

For the Council 
The President 

^ SN 0254-1475 

DOCUMENTS 

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ISBN 92-77-82301-1 

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