2000/186/EC: Council Decision of 28 February 2000 authorising the Federal Republic of Germany to apply measures derogating from Articles 6 and 17 of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes - common system of value added tax: uniform basis of assessment
Date: 2000-02-28
Institutions: Council of the European Union
Subjects: Germany, VAT rate, basis of tax assessment, derogation from EU law, motor car, tax harmonisation

L 59/12

EN

Official Journal of the European Communities

4.3.2000

COUNCIL DECISION

of 28 February 2000

authorising the Federal Republic of Germany to apply measures derogating from Articles 6 and 17
of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the Member States relating
to turnover taxes — common system of value added tax: uniform basis of assessment

(2000/186/EC)

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 (1), and in particular
Article 27 thereof,

Having regard to the proposal from the Commission,

Whereas:

(1)

(2)

(3)

(4)

(5)

the Commission's Secretariat-
By letters registered at
General on 8 January and 27 August 1999 respectively
the Government of the Federal Republic of Germany
communicated a request, under Article 27 of Directive
77/388/EEC to apply two measures derogating from
Articles 6 and 17 of the said Directive.

Under Article 27(1) of Directive 77/388/EEC the
Council, acting unanimously on proposal
from the
Commission, may authorise any Member State to intro-
duce, or extend the period of validity of, special meas-
ures derogating from the provisions of the Directive, in
order to simplify the procedure for charging the tax or
to prevent certain types of tax evasion or avoidance.

As
required under Article 27(3) of Directive 77/
388/EEC, the Commission, in a letter dated 11 October,
informed the other Member States of the request of the
German Government.

The first derogating measure is intended completely to
exclude the value added tax (VAT) which is charged on
expenditure on goods and services from the right to
deduct when over 90 % of the goods and services are
used for the private purposes of the taxable person, or of
his employees, or for non-business purposes in general.
This measure represents a derogation from Article 17
and is justified by the need to simplify the procedure for
charging the VAT.

The second measure derogates from Article 17(2) and
Article 6 of Directive 77/388/EEC and is intended to
limit to 50 % a taxable person's right under Article 17(2)
to deduct VAT in respect of all expenditure on vehichles

not used solely for business purposes, and also not to
charge the VAT due on passenger cars used for private
purposes; this ceiling on a taxable person's right to
deduct VAT is justified by the proven difficulty of
actually verifying the breakdown between business and
private expenditure on this type of good and by the
consequent likelihood of tax evasion or abuse; in addi-
tion such measure will allow a more simplified system
of taxation of the private use of vehicles.

Nevertheless, the ceiling on a taxable person's right to
deduct VAT may not be applied to expenditure on
vehicles which represent a taxable person's current
assets; furthermore, the flat-rate ceiling on the right to
deduct may not be applied where a vehicle is used up to
a maximum of 5 % for private purposes; in these cases
the normal rules on deduction set out in Article 17(2) of
Directive 77/388/EEC remain applicable.

These provisions ensure that this degoration from the
principle of a taxable person's right to deduct all the tax
paid in connection with his taxable activities does not go
beyond what is needed to counteract the risk of tax
as defined in the Court's
evasion or
case-law (2)
interpreting Article 27 of Directive 77/
388/EEC.

avoidance

the Commission submitted a
On 17 June 1998,
proposal
for a Council Directive amending Directive
77/388/EC as regards the right to deduct VAT (3); the
purpose of the proposal
is to harmonise definitively
some of the disparate rules regarding ceilings on the
right to deduct currently applied in the Member States as
these could distort competition in international trade
since such differences affect prices
for goods and
services.

The authorisation to apply these derogating measures
should therefore limit their period of validity so that this
ends with the entry into force of the above proposed
Directive, but not later than 31 December 2002 if that
Directive is not yet in force by then; such a maximum
period of validity would allow evaluation of whether the
derogation is still appropriate in the light of progress in
discussions in the Council or the proposed Directive at
the time.

(6)

(7)

(8)

(9)

(1) OJ L 145, 13.6.1977, p. 1. Directive as last amended by Directive

1999/85/EC (OJ L 277, 28.10.1999, p. 34).

(2) See Case of 29 May 1997, Werner Skripalle (C-63/96, 1997 ECR,

p. I-2847).

(3) OJ C 219, 15.7.1998, p. 16.

4.3.2000

EN

Official Journal of the European Communities

L 59/13

(10)

The derogation would have no negative effect on the
Communities' own resources provided from value added
tax,

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Article 17(2) of Directive 77/
388/EEC, as amended by Article 28f of that Directive, the
Federal Republic of Germany is hereby authorised to exclude
from the right to deduct the VAT charged on expenditure on
goods and services where more than 90 % of those goods and
services are used for the private purposes of a taxable person or
for non-business
of his
purposes.

employees or, more generally,

Article 2

By way of derogation from Article 17(2) of Directive 77/
388/EEC, as amended by Article 28f of that Directive, and
from Article 6(2)(a) of that Directive, the Federal Republic of
Germany is hereby authorised to limit to 50 % the right to
deduct the VAT charged on expenditure on vehicles not used
exclusively for business purposes and not to treat as supplies of

services for consideration the use for private purposes of
vehicles belonging to a taxable person's business.

The provisions of the first paragraph shall not apply where a
vehicle represents a taxable person's current assets or, where
such a vehicle is used up to a maximum of 5 % for private
purposes.

Article 3

This Decision shall apply as from 1 April 1999.

It shall cease to be applicable on the date the Directive on
expenditure not giving rise to the right to deduct VAT enters
into force or shall expire on 31 December 2002 at the latest.

This Decision is addressed to the Federal Republic of Germany.

Article 4

Done at Brussels, 28 February 2000.

For the Council

The President

J. PINA MOURA