Proposal for a COUNCIL DECISION authorizing the Federal Republic of Germany to conclude with the Czech Republic two agreements 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: 1996-06-19
Institutions: European Commission
Subjects: Czechia, Germany, VAT, approximation of laws, tax convention

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£ 

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

Brussels,  19.06.1996 
COM(%) 277 final 

Proposal  for a 

(X)UN(TI  DECISION 

AUTHORIZING  T HE FEDERAL  R E P U B L IC  OF  GERMANY 

TO  CONCLUDE  WITH  T HE C Z E CH  R E P U B L IC  T WO AGREEMENTS  CONTAINING 

MEASURES  DEROGATING  FROM  A R T I C L ES  2  AND 3  OF 
THE  SIXTH  COUNCIL  DIRECTIVE  (77/388/EEC)  OF 17 M AY 1977 
ON THE HARMONIZATION OF THE LAWS OF THE MEMBER  STATES 
RELATING TO TURNOVER  TAXES 

(presented  by the  Commission) 

Explanatory  memorandum 

received  by 

letters  officially 

the  Secretariat-General  of 

By 
the  Commission  on 
22  August  1995  and  26 March  1996,  the  German  Government  requested  authorization, 
on the basis of Article  30 of the  Sixth Council  Directive,  to  conclude two  agreements  with 
the  Czech  Republic  containing  derogations  from  Articles  2  and  3  of  that  Directive  (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 assessment1  ). 

In  accordance  with  Article 30,  the  other  Member  States  were  informed  of  Germany's 
request  by letter  dated  25 April  1996. 

The  first  agreement  concerns  the  construction  of a frontier  bridge  across  the  Rehlingbach 
linking  the  German  A6  motorway,  which  runs 
between  Waidhaus  and  Rozvadov 
eastwards  from  Nuremberg,  with  the  Czech  D5  motorway,  which  runs  westwards  from 
Plzen. 

The  agreement  provides  that,  in  so  far  as  they  extend  onto  the  sovereign  territory  of  the 
Czech  Republic,  the  area  of  the  construction  site  for  the  frontier  bridge  and,  after  its 
completion,  the  frontier  bridge  itself  are  to  be  treated  as  forming  part  of  the  sovereign 
territory  of  the  Federal  Republic  of  Germany  as  regards  supplies  of  goods  or  services 
intended  for  the  construction  of the frontier  bridge or for  its repair  and  renewal. 

The  second  agreement  concerns  the  construction  of  a frontier  bridge  between  Schônberg 
and  Vojtanov  extending  the E49  motorway. 

This  agreement  provides  that,  in  so  far  as  they  extend  onto  the  sovereign  territory  of  the 
Federal  Republic  of Germany,  the  area  of the  construction  site  for  the  frontier  bridge  and, 
after  its  completion,  the  frontier  bridge  itself  are  to  be  treated  as  forming  part  of  the 
sovereign  territory  of  the  Czech  Republic  as  regards  supplies  of  goods  or  services 
intended  for  the construction  of the frontier  bridge or  for  its repair and  renewal. 

The  two  agreements  also  stipulate  that,  with  the  exception  of  customs  duties,  no  import 
tax  is to  be  charged  on  goods  imported  from  the  sovereign  territory  of  one  Contracting 
State  into  the  sovereign  territory  of  the  other  Contracting  State,  provided  that  ihosc 
goods  are  used  for  the  construction  of  the  frontier  bridges  in  question  or  for  their  icpair 
and  renewal.  This  provision  does  not  apply  to goods  imported  by  public  authorities 

In accordance  with the  principle  of territorial  application  laid  down  by the  Sixth  Directive, 
the  bridge  construction,  repair  and  renewal  work  carried  out  on  German  sovereign 
territory  would  be  subject  to  value  added  tax  in Germany,  while such  work  carried  out  on 
Czech  sovereign  territory  would  lie  outside  the  scope  of  the  Sixth  Directive. 
If  these 
provisions  were  applied,  it would  be necessary  to  break  down  transactions  on  the  basis  of 
the  territory  on  which  they  were  carried  out.  In  addition,  each  importation  into  Germany 
from  the  Czech  Republic  of  goods  used  for  the  construction  of  the  bridges  or  for  their 
repair  or  renewal  would  be subject  to value added  tax  in  Germany. 

OJ No L 145, 13.6.1977, p. 1, as last amended by Directive 95/7TEC (OJ No L 102, 5.5.1995, p. 18). 

I 

The  Contracting  States  are  of the  opinion  that  application  of  these  rules  would  involve 
onerous tax complications for the contractors responsible for  the work  in question  They 
therefore take the view that the tax provisions of the draft  agreement are justified  in order 
to simplify the contractors' tax obligations. 

It should also be noted that, pursuant to Article 30 of the  Sixth Directive, the Council  has 
already authorized the Federal Republic of Germany to conclude a number  of agreements 
with  the  Republic  of  Poland  concerning  construction  work  in  the  frontier  area  which 
contain tax provisions similar to those set out in the present agreements. 

The  Commission  agrees  that  the  uniform  taxation  of  construction,  repair  and  renewal 
work,  and the waiving of collection  of value added  tax on imports  of goods intended  for 
use  in  such work,  simplify  matters  for  the  contractors  compared  with  application  of the 
normal rules of taxation. 

In  addition,  given  that  the  tax  provisions  of  the  two  agreements  balance  out,  their 
application will have only a negligible - but, in any event, positive - effect  on the European 
Communities'  own  resources  accruing  from  value  added  tax  According  to  information 
provided  by the German  authorities, the taxable turnover  on work  in Germany  under  the 
derogations  provided  for  by these  agreements is slightly  higher than that  which would  be 
subject to value added tax in Germany if the normal  rules of the common  system of value 
added tax were to be applied. 

Accordingly, the Commission takes the view that the Federal Republic of Germany should 
be authorized to conclude the proposed agreements. 

Proposal for a 

COUNCIL DECISION 
AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY 
TO CONCLUDE WITH THE CZECH REPUBLIC TWO AGREEMENTS 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 
harmonization  of  the  laws  of  the  Member States  relating  to  turnover  taxes  -  Common 
system  of  value  added  tax:  uniform  basis  of  assessment,1  and  in  particular  Article 30 
thereof, 

Having regard to the proposal from  the Commission, 

Whereas,  under  Article 30  of the  Sixth  Directive,  the  Council,  acting  unanimously  on  a 
proposal  from  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 letters officially  received by the Secretariat-General  of the Commission on 22 
August  1995  and  26 March  1996,  the  German  Government  requested  authorization  to 
conclude  two  agreements  with  the  Czech  Republic  which  contain  derogations  from 
Articles 2 and  3 of the  Sixth Directive as regards the construction,  repair and  renewal  of 
two frontier  bridges between the Contracting States; 

Whereas  the  other  Member States  were  informed  on  25 April  1996  of  the  German 
request; 

OJ No L 145, 13.6.1977, p. 1, as last amended by Directive 95/7/EC (OJ No L 102, 5.5.1995, p. 18). 

Whereas, in the absence of derogations, the construction,  repair and renewal work carried 
out  on  German  territory  would  be  subject  to  value  added  tax  in  Germany  while  that 
carried  out  on  Czech  territory  would  lie  outside  the  scope  of  the  Sixth  Directive  and 
whereas,  in  addition,  each  importation  from  the  Czech  Republic  into  Germany  of goods 
used  for  the  construction,  repair  and  renewal  of the frontier  bridges would  be  subject  to 
value added tax in Germany; 

Whereas  the  purpose  of  these  derogations  is  to  simplify  the  rules  of  taxation  for  the 
contractors carrying out the work in question; 

Whereas  the  derogations  will  have  only  a  negligible  effect  on  the  own  resources  of  the 
European Communities accruing from value added tax, 

HAS ADOPTED THIS DECISION: 

Article 1 

The Federal  Republic  of Germany is hereby authorized  to  conclude two  agreements  with 
the  Czech  Republic  containing  measures  derogating  from  the  Sixth  Council  Directive 
(77/388/EEC) of 17 May 1977. 

The first  agreement  concerns the construction  of a frontier  bridge across the Rehlingbach 
between  Waidhaus  and  Rozvadov  linking  the  German  A6  motorway,  which  runs 
eastwards  from  Nuremberg,  with  the  Czech  D5  motorway,  which  runs  westwards  from 
Plzen. 

The second  agreement  concerns the construction  of a frontier  bridge between  Schônberg 
and Vojtanov extending the E49 motorway. 

The derogations provided for by these agreements are spelt out in Articles 2, 3 and 4. 

Article 2 

By way of derogation  from  Article 3 of the Sixth Directive,  in so far  as they  extend  onto 
the  sovereign  territory  of  the  Czech  Republic,  the  area  of  the  construction  site  for  the 
frontier  bridge  referred  to  in the  second  paragraph  of Article  1 and,  after  its  completion, 
the frontier  bridge  itself  shall be treated  as forming  part  of the  sovereign  territory  of the 
Federal  Republic  of  Germany  as  regards  supplies  of  goods  or  services  intended  for  the 
construction of the frontier  bridge or for its repair and renewal. 

Article 3 

By way of derogation  from  Article 3 of the Sixth Directive,  in so far  as they extend  onto 
the  sovereign  territory  of the Federal  Republic  of  Germany,  the  area  of the  construction 
site  for  the  frontier  bridge  referred  to  in  the  third  paragraph  of  Article  1 and,  after  its 
completion,  the  frontier  bridge  itself  shall  be  treated  as  forming  part  of  the  sovereign 
territory  of the Czech Republic  as regards  supplies of goods  or  services intended  for  the 
construction of the frontier  bridge or for its repair and renewal. 

6 

Article 4 

By way of derogation from point 2 of Article 2 of the Sixth Directive,  the importation of 
goods into Germany from the Czech Republic shall not be subject to value added tax in so 
far as those goods  are used for the construction,  repair or renewal  of one of the bridges 
referred to in the second and third paragraphs of Article 1.  However, this derogation shall 
not apply to goods imported by a public authority for the same purpose. 

This Decision is addressed to the Federal Republic of Germany. 

Article S 

Done at Brussels 

1996 

For the Council 
The President 

Financial statement 

The proposed Decision, when adopted, will have only a negligible effect  for the collection 
of Community own resources. 

8 

ISSN  0254-1475 

COM(96) 277 final 

DOCUMENTS 

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