Proposal for a COUNCIL DECISION authorizing the Federal Republic of Germany and the French Republic to apply a measure derogating from Article 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: 1996-12-17
Institutions: European Commission
Subjects: France, Germany, VAT rate, engineering structure, territorial law

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  17.12.1996 
COM(96) 687  final 

Proposal for a 

COUNCIL DECISION 

authorizing the Federal Republic of Germany and the French Republic to apply a 
measure derogating from Article 3 of the Sixth Council Directive (77/388/EEQ 
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  letters  received  by  the  Secretariat-General  of  the  Commission  on  13 August and 
11 September 1996, the German and French Governments, acting on the basis of Article 27 of 
the Sixth Council Directive 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  requested  authorization  to  apply  a measure  derogating from Article 3  of that 
Directive. 

In  accordance  with  Article  27(3)  of  the  Sixth  Directive,  the  other  Member  States  were 
informed of the request presented by Germany and France by letter dated 10 October 1996. 

The special measure requested  by the Federal  Republic of Germany and the French Republic 
concerns  the  arrangements  for  taxing  the  work  of  constructing  and  maintaining  a  frontier 
bridge over the Rhine between Altenheim, France, and Eschau, Germany. 

In this connection,  the German and French authorities have agreed,  as regards indirect taxes, 
for supplies of goods and services, for intra-Community acquisitions and for imports of goods 
intended  for  the construction  or  maintenance of the bridge over  the Rhine,  including winter 
maintenance and day-to-day cleaning of the bridge, to regard: 
- the construction site as being on French territory until acceptance of the bridge; 
-  the frontier bridge  as  being  on  French  territory  as from its  acceptance  and  for  ten  years 
thereafter. 

By  this  agreement,  the  contracting  States  are  altering  the  territorial  scope  of  VAT  so  that 
transactions  on  which  VAT  is  chargeable  and  which  are  intended  for  the  construction  or 
maintenance  of  the  bridge  in  question,  which  under  the  normal  rules  would  be  located  in 
Germany are, for  a period running from the beginning of the construction  works to ten years 
after  the  acceptance  of  the  bridge,  regarded  as  being  carried  out  on  French  territory  and 
therefore subject to VAT in France. 

In accordance with the common system of VAT, and more particularly with the principle of 
territoriality laid down by Article 3 of the Sixth Directive, taxable transactions connected with 
the construction  or maintenance of the bridge, carried out on German territory, are subject to 
VAT in Germany, while those carried out on French territory are subject  to  VAT in France. 
Application  of  this  provision  would  mean  that  for  every  transaction  connected  with  the 
construction  or maintenance of the bridge it would have to be established  whether it had been 
carried out in France or Germany.  For transactions covering both countries, an apportionment 
would have to be made. 

The contracting States consider that application of these aiies would make payment of the tax 
considerably more complicated for the contractors in charge of the works. 

OJ  No L  145.  13.6.1977. p.  1.  Directive  as  last  amended  by  Directive %/42/EC  (OJ  No L 170. 
9.7.19%,  p. 34). 

9L 

Article 27(1)  of  the  Sixth  Directive  provides  for  the  introduction  of  special  measures 
derogating from the provisions of the Directive in order  to simplify  the procedure  for  charging 
the tax.  However  such  measures,  except  to  a negligible extent,  may  not  affect  the  amount  of 
tax due at the final consumption stage. 

The  Commission  agrees  that  the  uniform  taxation  of  the  works  instead  of  application  of  the 
normal  rules  of  taxation  would  simplify  matters  for  the  contractors.  In  view  of  the  limited 
scope  of  the  special  measure,  which  only  covers  the  construction  and  maintenance  of  the 
frontier  bridge  over  the  Rhine described  above,  the  Commission  feels  that  its  introduction  on 
the basis of Article 27 of the Directive is justified. 

Since, under the proposed  arrangements, the entire construction  and  maintenance of the bridge 
will be  subject  to  value added  tax  in France,  the  amount  of tax  due  at  the final consumption 
stage is not affected.  Consequently,  there is no adverse impact  on the Community's VAT own 
resources. 

It  should  be  noted  that  the  Council  has  on  several  occasions  already  authorized  a  similar 
derogation  from  Article 3, on the basis of Article 27, in order to  simplify  the  arrangements  for 
taxing construction  works carried out on the frontier territory of two Member States.2 

The  Commission  therefore  considers  it  appropriate  for  the Federal  Republic  of  Germany  and 
the French Republic to be authorized to apply the planned special measure. 

Decision 83/333/EEC of 18 March 1983 (OJ No L 181, 6.7.1983. p.25). 
Decision 84/468/EEC of 10 September  1984 (OJ No L 264. 5.10.1984. p.26) 
Decision 95/114/EC of 3D March  1995 (OJ No L 80, 8.4.1995. p.46). 

Proposal for a 

COUNCIL DECISION 

authorizing  the  Federal  Republic  of Germany  and the French  Republic  to  apply  a  measure 
derogating from Article 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) 

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 assessment1, and in particular Article 27 thereof, 

Having regard to the proposal from the Commission, 

Whereas,  under  Article  27(1)  of the  Sixth  Directive, 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 and avoidance; 

letters  officially 

Whereas,  by 
the  Commission  on  13 August and 
11 September  1996, the Federal Republic of Germany and the French Republic have requested 
authorization to introduce a special measure concerning the construction and maintenance of a 
cross-frontier  road bridge over the Rhine between Altenheim, France, and Eschau, Germany. 

received  by 

Whereas,  in accordance with  Article 27(3)  of the  Sixth Directive,  the  other  Member  States 
were informed  on  10 October  1996 of the requests for authorization received from the Federal 
Republic of Germany and the French Republic; 

Whereas, for supplies of goods and services, for intra-Community acquisitions and for imports 
of goods intended for the construction or maintenance of the bridge, the purpose of the special 
measure is to  regard  the  entire site until  acceptance  of the bridge and  the frontier bridge as 
from  its acceptance and for ten years thereafter  as being on French territory; 

1  OJ No L  145,  13.6.1977, p.  I.  Directive as last amended by Directive 96/42/EC (OJ No L 170, 
9.7.1996, p. 34). 

Whereas, in the absence of a special measure, for each supply of goods and  services used for 
the construction and maintenance of the bridge in question, it would be necessary to ascertain 
whether the place of taxation  was the Federal  Republic of Germany  or the French Republic; 
whereas, therefore,  such taxation arrangements would in practice be veiy complicated  for the 
contractors in charge of the works concerned; 

Whereas the purpose of this derogation is to simplify the procedure for charging the tax on the 
construction and maintenance of the bridge in question; 

Whereas the derogation will not affect  the amount of tax due at the final consumption state and 
will not therefore have an adverse effect  on the European Communities1 own resources arising 
from  value added tax, 

HAS ADOPTED THIS DECISION. 

5~ 

Article 1 

By  way  of  derogation  from  Article 3  of  Directive  77/388/EEC,  the  Federal  Republic  of 
Germany and the French Republic are hereby authorized, in respect of the supplies of goods or 
services,  intra-Community acquisitions and imports of goods  intended  for the construction or 
maintenance  of  the  road  bridge  over  the  Rhine,  between  Altenheim,  France,  and  Eschau, 
Germany, to regard: 
- 

the whole  of the construction  site as being on French territory until  acceptance  of the 
bridge; 
the frontier bridge as being on French territory as from its acceptance and for ten years 
thereafter. 

- 

This Decision is addressed to the Federal Republic of Germany and the French Republic. 

Article 2 

Done at Brussels 

1996 

For the Council 
The President 

G 

ISSN 0254-1475 

COM(96) 687  final 

DOCUMENTS 

09  06  13 

Catalogue number  :  CB-CO-96-698-EN-C 

ISBN  92-78-13683-2 

Office for Official Publications of the European Communities 

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