Proposal for a Council Decision authorising Germany and France to apply a measure derogating from Article 3 of Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes
Date: 2002-09-10
Institutions: European Commission
Subjects: France, Germany, VAT, basis of tax assessment, derogation from EU law, engineering structure, frontier region, maintenance, tax exemption

31.12.2002

EN

Official Journal of the European Communities

C 331 E/197

Proposal for a Council Decision authorising Germany and France to apply a measure derogating
from Article 3 of Directive 77/388/EEC on the harmonisation of the laws of the Member States
relating to turnover taxes

(2002/C 331 E/38)

COM(2002) 491 final

(Submitted by the Commission on 10 September 2002)

EXPLANATORY MEMORANDUM

INTRODUCTION

By two requests sent to the Commission on 28 December 2001 and 7 January 2002 respectively, Germany
and France sought authorisation under Article 27 of 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 (hereinafter ‘the Sixth Directive’) (1) to apply a measure
derogating from Article 3 of the Directive 77/388 in respect of the construction and maintenance of
cross-border bridges located on the Rhine. By letter of 25 February 2002 the Commission asked the
German and French authorities to give further information on the scope of the derogation requested in
respect of Article 3. The German authorities supplied the information requested in a letter of 19 June
2002, endorsed by the French authorities, which was registered by the Commission's Secretariat-General
on 22 July 2002. The derogation requested by Germany and France entails deeming that the territorial
boundary between Germany and France for the purposes of VAT territorial rules on the construction and
maintenance work on certain cross-border bridges lies in the middle of such bridges.

PURPOSE OF THE DEROGATIONS SOUGHT

The German and French authorities point out that, in the absence of a specific measure, the place of
taxation for construction and maintenance work on the cross-border bridges would be dictated by the
geographical territorial boundary between the two Member States. This boundary lies where the river is
deepest.

The geographical territorial boundary on each bridge is determined by the depth of the river and so is not
a straight line.

This makes it very difficult in practice to determine the geographical territorial boundary for the purposes
of applying VAT legislation. Furthermore, it changes constantly over time.

In view of the above, applying the VAT arrangements to the construction and maintenance of cross-border
bridges using the territorial principle would be extremely complex.

DESCRIPTION OF THE DEROGATION REQUESTED

The derogation sought by Germany and France consists in deeming that, for the construction and main-
tenance of certain cross-border bridges on the Rhine, including winter maintenance services and regular
cleaning, the territorial boundary between Germany and France lies in the middle of each bridge.

The cross-border bridges on the Rhine to which the derogation would apply are bridges which will be built
in future to link up with public highways not forming part of the network of motorways and trunk roads
in France and with public highways not forming part of the Federal trunk road network in Germany.

(1) OJ L 145, 13.6.1977, p. 1; Directive last amended by Directive 2002/38/EC (OJ L 128, 15.5.2002, p. 41).

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Official Journal of the European Communities

31.12.2002

Other bridges, to which different derogating measures may be applicable, would not be concerned by this
measure. Council Decision 97/189/EC of 17 March 1997 would therefore remain applicable (1).

OPINION OF THE COMMISSION

Article 27 of the Sixth Directive provides for derogations in order to simplify the procedure for charging
tax or to prevent certain types of tax evasion or avoidance.

It is undeniable that application of the normal VAT territoriality rules would, as described earlier, cause
major difficulties for operators involved in construction or maintenance work on cross-border bridges on
the Rhine.

The measure proposed by Germany and France, namely deeming that the territorial boundary between the
two Member States for the purposes of applying VAT legislation,
lies in the middle of each bridge
concerned, would eliminate these difficulties. The criterion chosen for fixing the boundary appears both
simple to apply and equitable.

The proposed measure is therefore a tax collection measure.

Lastly, the derogation would have no effect on the taxable amount for VAT and thus would not adversely
affect the Communities' own resources from VAT.

For these reasons the Commission proposes that the Council authorise Germany and France to apply the
measure derogating from Article 3 that they have requested.

(1) OJ L 80, 21.3.1997, p. 20.

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
taxes — common system of
States
value-added tax: uniform basis of assessment, and in particular
Article 27(1) thereof (1),

relating to turnover

Having regard to the proposal from the Commission,

Whereas:

(1) By two requests sent to the Commission on 28 December
2001 and 7 January 2002 respectively, Germany and
France sought authorisation to apply a measure derogating
from Article 3 of Directive 77/388/EEC in respect of the
construction and maintenance of certain cross-border
bridges on the Rhine.

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

2002/38/EC (OJ L 128, 15.5.2002, p. 41).

(2) By letter of 25 February 2002 the Commission asked the
German and French authorities to give further information
on the scope of the derogation.

(3) The German authorities

gave
information requested in a

the Commission the
supplementary
letter of
19 June 2002, endorsed by the French authorities, which
was registered by the Commission's Secretariat-General on
22 July 2002.

(4) The other Member States were informed of Germany and
France's request and the supplementary information by
letter dated 31 July 2002.

(5) The cross-border bridges on the Rhine concerned by this
measure are bridges which will be built in future to link up
with public highways not forming part of the network of
motorways and trunk roads in France and with public
highways not
trunk road
network in Germany.

forming part of

the Federal

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Official Journal of the European Communities

C 331 E/199

(6) The derogation sought by Germany and France consists in
for the construction and maintenance of
territorial
bridges
in the

deeming that,
cross-border
boundary between Germany and France
middle of each bridge.

the Rhine,

lies

the

on

(7) In the absence of a specific measure, the place of taxation
of construction and maintenance work on the cross-border
bridges would be dictated by the geographical territorial
boundary between the two Member States, which runs
where the river is deepest. This boundary is difficult in
practice to determine and also changes over time. The
VAT arrangements applicable to construction and main-
bridges would
tenance work
therefore
the operators
carrying it out.

cross-border
for
complex

the
extremely

on

be

(8) This derogation, which fixes

the territorial boundary
between Germany and France in the middle of the cross-
border bridges concerned, will
therefore simplify the
collection of VAT on the construction and maintenance
of these bridges.

(9) The derogation will not reduce the taxable amount for
the

VAT.
Communities' own resources from VAT,

adversely

therefore

affect

does

not

It

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Article 3 of Directive 77/388/EEC
Germany and France are hereby authorised, in the case of the
cross-border bridges on the Rhine referred to in Article 2, to
set
the territorial boundary between the two States in the
middle of the bridges concerned as the place of taxation for
the supply of goods and services, intra-Community acquisitions
and imports of goods for the construction and maintenance of
these bridges,
including winter maintenance and regular
cleaning.

Article 2

The cross-border bridges on the Rhine to which this Decision
applies are those to be built in future which will link up with
public highways not
the network of
in France and with public
motorways and trunk roads
highways not
trunk road
network in Germany.

forming part of

forming part of

the Federal

Article 3

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