Proposal for a Council Decision authorising Germany to conclude an agreement with Switzerland that includes provisions derogating from Articles 2 and 3 of Council Directive 77/388/CEE on the harmonisation of the laws of the Member States relating to turnover taxes
Date: 2003-04-04
Institutions: European Commission
Subjects: Germany, Switzerland, VAT, derogation from EU law, engineering structure, public works, tax harmonisation

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 4.4.2003
COM(2003) 169 final

Proposal for a

COUNCIL DECISION

authorising Germany to conclude an agreement with Switzerland that includes
provisions derogating from Articles 2 and 3 of Council Directive 77/388/CEE on the
harmonisation of the laws of the Member States relating to turnover taxes

(presented by the Commission)

EXPLANATORY MEMORANDUM

In a letter registered at the Commission's Secretariat-General on 13 December 2002, Germany
requested authorisation, under Article 30 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 assessment1 (hereinafter referred to as the sixth
Directive), to conclude an agreement with Switzerland that includes tax provisions derogating
from Articles 2 and 3 of the said Directive.

As  required  by  the  abovementioned  Article  30,  the  other  Member  States  were  informed  in
writing of Germany's request, the letter being dated 4 February 2003.

The agreement between Germany and Switzerland will be on the building and maintenance of
a  frontier  bridge  intended  to  improve  road  links  between,  and  facilitate  transit  through,  the
two  countries.  This  frontier  bridge  will  carry  a  motorway,  will  be  built  across  the  Rhine
between Rheinfelden (in Baden Württemberg) and Rheinfelden (in Aargau) and will provide
access from either end to German motorway No A 861 and Swiss Route National N3.

The  agreement  provides  that  the  goods  and  services  supplied  for  the  building  and
maintenance of the bridge will be subject to German VAT laws and that no Swiss VAT will
be charged on these supplies.

It also provides that goods imported from the territory of one of the Contracting states to that
of the other will be exempt from import tax, provided the goods are used for the building or
maintenance of the frontier bridge in question. This does not apply to goods imported for the
same purposes by a public administration.

The principle of territoriality laid down in the sixth Directive would require bridge building
and maintenance work carried out in German territory to be  subject  to German value added
tax  whereas  corresponding  work  carried  out  in  Swiss  territory  would  not  be  subject  to  the
provisions  of  the  sixth  Directive.  Applying  these  provisions  would  mean  breaking  down
operations  according  to  the  territory  in  which  each  part  of  the  works  was  carried  out.  All
goods imported from Switzerland into Germany for use in building or maintaining the bridge
would also be subject to VAT in Germany.

The  Contracting  States  consider  that  applying  these  rules  would  mean  major  tax
complications for the entrepreneurs responsible for carrying out the works in question. They
therefore consider that the tax provisions in the draft agreement are justified in that they will
simplify the entrepreneurs' tax responsibilities.

It  should  be  pointed  out  that  the  Council  has  on  several  previous  occasions  authorised
Germany to conclude similar agreements with third countries on building projects in frontier
areas and that these earlier agreements included tax provisions similar to those proposed here.

The  Commission  accepts  that  uniform  taxation  of  the  building  and  maintenance  works  and
waiving VAT on goods imported for use in those works will represent a simplification which
will make it easier for the entrepreneurs to apply the tax rules than would be the  case if the
normal tax rules applied.

1

OJ L 145, 13.6.1977, p. 1, as last amended by Directive 2002/92/EC (OJ L 331, 7.12.2002, p. 27).

2

                                                
The Commission also notes that, if authorisation is granted, the project would have a minor
but positive incidence on Community own resources obtained from VAT.

3

Proposal for a

COUNCIL DECISION

authorising Germany to conclude an agreement with Switzerland that includes
provisions derogating from Articles 2 and 3 of Council Directive 77/388/CEE on the
harmonisation of the laws of the Member States relating to turnover taxes

(Only the German text is authentic)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community,

Having  regard  to  the  sixth  Council  Directive  77/388/CEE  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,2and in particular article 30 thereof,

Having regard to the proposal from the Commission,3

Whereas:

(1) 

(2) 

(3) 

(4) 

In  a  letter registered  at  the Commission's Secretariat-General  on 13  December  2002,
Germany  requested  authorisation  to  conclude  an  agreement  with  Switzerland  on  the
building  and  maintenance of  a frontier bridge  across the Rhine between  Rheinfelden
(in  Baden  Württemberg,  Germany)  and  Rheinfelden  (in  Aargau,  Switzerland)  which
will provide access from either end to German motorway No A 861 and Swiss Route
National N3.

The  other  Member  States  were  informed  of  the  German  request  in  a  letter  dated
4 February 2003.

The agreement contains provisions on VAT derogating from Articles 2(2) and (3) of
the  sixth  Directive  in  respect  of  goods  and  services  supplied  for  the  building  and
maintenance  of  the  frontier  bridge  and  of  goods  imported  for  the  building  or
maintenance of the bridge.

If  the  derogations  were  not  granted,  building  and  maintenance  works  carried  out  in
German territory would be subject to German VAT whereas those carried out in Swiss
territory would not be subject to the provisions of the sixth Directive; also, any goods
imported  from  Switzerland  into  Germany  for  use  in  building  and  maintaining  the
frontier bridge would be subject to German VAT.

(5) 

Application of these normal rules would therefore mean serious tax complications for
the entrepreneurs responsible for carrying out the works.

2

3

OJ L 145, 13.6.1977, p. 1. as last amended by Directive 2002/92/EC (JO L 331, 7.12.2002, p. 27).
OJ C …, …, p. …

4

                                                
(6) 

(7) 

This derogation is intended to simplify the collection of taxes on the works involved in
building and maintaining the bridge in question.

The  derogation  will  have  only  a  minor,  but  positive,  incidence  on  Community  own
resources obtained from VAT,

HAS ADOPTED THIS DECISION:

Article 1

Germany  is  hereby  authorised  to  conclude  an  agreement  with  Switzerland  that  includes
provisions  derogating  from  the  sixth  Council  Directive  77/388/CEE  of  17  May  1977  and
covers  the  building  and  maintenance  of  a  frontier  bridge  across  the  Rhine  between
Rheinfelden  (in  Baden  Württemberg)  and  Rheinfelden  (in  Aargau)  to  provide  access  from
either end to German motorway No A 861 and Swiss Route National N3.

The derogating tax provisions of the agreement are set out in Articles 2 and 3.

Article 2

By derogation from Article 3 of Directive 77/388/CEE, those parts of the construction site of
the  frontier  bridge  referred  to  in  Article  1  of  this  Decision,  and  of  the  frontier  bridge  itself
once work has been completed, that are situated in Swiss territory shall be deemed to be part
of  German  territory  for  the  purposes  of  goods  and  services  supplied  for  the  building  and
maintenance of the frontier bridge.

Article 3

By derogation from Article 2(2) of Directive 77/388/CEE, goods imported from Switzerland
into Germany shall not be subject to value added tax, provided they are used for the building
or  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 administration.

Article 4

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels,

For the Council
The President

5

FINANCIAL STATEMENT

If adopted, this Decision would have only a minor but positive incidence on Community own
resources obtained from VAT.

6