Proposal for a COUNCIL DECISION AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY TO CONCLUDE WITH THE CZECH REPUBLIC 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: 1997-04-30
Institutions: European Commission
Subjects: Czechia, Germany, VAT, derogation from EU law, engineering structure

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

Brussels,  30.04.1997 
COM(97) 181  final 

Proposal  for a 

COUNCIL  DECISION 

AUTHORIZING THE FEDERAL REPUBLIC OF GERMANY 
TO CONCLUDE WITH THE CZECH REPUBLIC 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 registered by the Secretariat-General  of the Commission  on 5 February  1997,  the 
Federal  Republic  of  Germany  requested  authorization,  on  the  basis  of  Article 30  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  -  Common  system  of  value  added  tax: 
uniform  basis  of  assessment1,  to  conclude  an  agreement  with  the  Czech  Republic 
containing tax provisions derogating from  Articles 2 and 3 of the Sixth Directive. 

In  accordance  with  Article 30,  the  other  Member States  were  informed  of  the  request  of 
the Federal Republic of Germany by letter dated 3 March  1997. 

This agreement  concerns constructing  in the  Spitzberg  area a frontier bridge,  which partly 
is  on  the  territory  of  the  Federal  Republic  of  Germany  and  partly  on  the  territory  of  the 
Czech  Republic,  linking  the  German  A17  motorway  heading  east  with  the  Czech  D8 
motorway heading west. 

The  agreement  provides  that  for  the  application  of  the  German  turnover  tax  law  and  the 
Czech  value  added  tax  law,  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 agreement  also  stipulates 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  those  goods  are 
used  for  the  construction  of  the  frontier  bridge  in  question  or  for  its  maintenance.  This 
provision does not apply to goods imported for the same purpose 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  bridge  or  for  its 
maintenance would be subject to value added tax in Germany. 

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. 

OJ No L 145, 13.6.1977, p. 1, as last amended by Directive 96/95/EC (OJ No L 338, 28.12.1996, 

The  German  government  is  aware  that  the  tax  provisions  of  the  agreement  affect  in  a 
negative way the total amount  of VAT chargeable  on construction,  repair  and  renewal  of 
the frontier bridge. 

However,  the  German  government  indicates  that  by the  Council  Decision  of  17  March 
19972 the Federal Republic of Germany has been  authorized  to conclude two  agreements 
with the Czech Republic concerning construction  of frontier  bridges, whereby  application 
of the tax  provisions will  have only a negligible - but,  in  any  event,  positive -  effects  for 
the collection of European Communities' own resources accruing from VAT. 

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 agreement. 

Furthermore,  the  German  authorities  make  known  that  until  now,  as  regards  application 
of the tax provisions of all the agreements which  Germany has concluded  with its Eastern 
European  neighbour  countries,  and  whereby  the  construction  work  extends  on  the 
sovereign  territory  of  both  Contracting  parties,  the  overall  balance  is  positive  from  the 
point of view of the European Communities'  own resources accruing from  VAT. 

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. 

The Commission  considers  that  the effect  of the  agreement  in question  on  the  European 
Communities' own resources accruing from  value added tax, should not be an obstacle for 
granting  the  Federal  Republic  of  Germany  the  requested  authorization,  given  its  minor 
importance,  and  moreover,  the  compensating  effect  of  the  several  similar  agreements 
which the Federal Republic of Germany has already conluded in the past. 

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

OJ No L 80, 21.3.1997, p. 18 

Proposal for a 

COUNCIL DECISION 
AUTHORIZING  THE FEDERAL  REPUBLIC  OF  GERMANY 
TO CONCLUDE WITH THE CZECH  REPUBLIC 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 
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  letter  registered  by  the  Secretariat-General  of  the  Commission  on  5 
February  1997,  the  German  government  requested  authorization 
to  conclude  an 
agreement  with  the  Czech  Republic  relating  to  the  construction  of  a  frontier  bridge 
between the Contracting States in question; 

Whereas,  the  agreement  contains  provisions  in  the  field  of  value  added  taxation  which 
derogate from  the Articles 2 and 3 of the Sixth Directive as regards, on the one hand, the 
supplies of goods and  services in connection  with the construction,  repair  and renewal  of 
the frontier  bridge, and on the other hand,  importation  of goods used  for the construction 
work or the maintenance of this bridge; 

OJ No L  145,  13.6.1977,  p.  1, as last amended  by Directive  96/95/EC (OJ No L 338,  28.12.1996, 
p. 89). 

Whereas  the  other  Member States  were  informed  on  3 March  1997  of  the  German 
request; 

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  and the  maintenance  of  the  frontier  bridge  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: 

5^ 

Article 1 

The Federal Republic of Germany is hereby authorized to conclude an agreement with the 
Czech  Republic  concerning  the  construction  of  a frontier  bridge  in the  Spitzberg  area, 
which  partly  is  on  the  territory  of  the  Federal  Republic  of  Germany  and  partly  on the 
territory of the Czech Republic, linking the German A17 motorway heading east with the 
Czech  D8  motorway  heading  west,  containing  measures  derogating  from  the  Sixth 
Council Directive (77/388/EEC) of 17 May 1977. 

The derogations provided for by this agreement are spelt out in Articles 2 and 3. 

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 Federal Republic of Germany, the area of the  construction 
site for the frontier bridge referred to in Article 1  of this decision 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. 

Article 3 

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  and  the  maintenance  of  the  bridge 
referred to in Article  1  of this decision.  However, this derogation shall not apply to goods 
imported for the same purpose by a public authority. 

This Decision is addressed to the Federal Republic of Germany. 

Article 4 

Done at Brussels, 

1997 

For the Council 
The President 

£" 

Financial  statement 

The proposed  Decision,  when  adopted,  will  have only  a negligible  effect  on  the own 
resources of the European Communities accruing from the value added tax. 

Q-

ISSN 0254-1475 

COM(97) 181 final 

DOCUMENTS 

EN 

09  07 

Catalogue number  :  CB-C0-97-175-EN-C 

ISBN 92-78- 19025-X 

Office  for Official  Publications of the European Communities 

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