Proposal for a Council Decision authorising Austria to apply a measure derogating from Article 17 of the Sixth Council Directive (77/388/EEC) on the harmonisation of the laws of the Member States relating to turnover taxes
Date: 2004-08-17
Institutions: European Commission
Subjects: Austria, VAT, derogation from EU law, tax harmonisation, tax system

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 17.8.2004 
COM(2004) 561 final 

Proposal for a  

COUNCIL DECISION 

authorising Austria to apply a measure derogating from Article 17 of the Sixth Council 
Directive (77/388/EEC) on the harmonisation of the laws of the Member States relating 
to turnover taxes 

(presented by the Commission) 

EN 

   EN 

 
 
 
  
  
EXPLANATORY MEMORANDUM 

By  letter  registered  at  the  Commission’s  Secretariat-General  on  12  December  2003,  the 
Austrian  authorities  requested  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  assessment1 
(hereafter  referred  to  as  the  Sixth  Directive),  to  apply  a  special  measure  derogating  from 
Article 17 of the Sixth Directive. 

As  required  under  Article  27  of  Directive  77/388/EEC,  the  other  Member  States  were 
informed of Austria’s request in a letter dated 26 March 2004. 

The measure involves completely excluding expenditure on goods and services from the right 
to  deduct  VAT  when  less  than  10%  of  those  goods  and  services  are  used  for  business 
purposes. 

Article  27  allows  the  introduction  of  special  measures  derogating  from  the  Sixth  Directive 
which either simplify the procedure for charging tax or prevent certain types of tax evasion or 
avoidance. The measure in question, which is designed to prevent "tax-free consumption", is 
justified  under  the  terms  of  this  provision  since  it  simplifies  administration  by  relieving  the 
tax  administration  of  the  need  to  supervise  the  exercise  of  the  right  to  deduct  VAT  on 
expenditure  on  goods  and  services  where  non-business  use  of  those  goods  and  services 
accounts for over 90% of total use.  

The  Commission  has  already  responded  favourably  to  comparable  requests  from  other 
Member States by presenting proposals for decisions that were subsequently adopted by the 
Council,2 thereby authorising those Member States to apply the same measures. 

However,  the  validity  of  the  authorisation  should  be  limited  to  the  period  ending  on 
31 December 2008. This will allow an evaluation of whether it is appropriate to maintain the 
derogation in the light of Austria's experience over this period. 

1 
2 

EN 

OJ L 145, 13. 6.1997, p.1. Directive last amended by Directive 2004/15/EC (OJ L 52, 21.2.2004, p.61). 
Council  Decision  93/109/EEC  of  15.2.1993  (OJ  L  43,  20.2.1993,  p.  42)  and  Council  Decision 
2000/186/EC of 28.2.2000 (OJ L 59, 4.2.2000, p. 12), extended by Council Decision 2003/354/EC of 
13.5.2003 (OJ L 123, 17.5.2003 p. 47). 

2 

   EN 

 
                                                 
Proposal for a  

COUNCIL DECISION 

authorising Austria to apply a measure derogating from Article 17 of the Sixth Council 
Directive (77/388/EEC) on the harmonisation of the laws of the Member States relating 
to turnover taxes 

THE COUNCIL OF THE EUROPEAN UNION, 

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,3 and in particular Article 27 (1) thereof, 

Having regard to the proposal from the Commission,4 

Whereas: 

(1) 

By  letter  registered  at  the  Commission’s  Secretariat-General  on  12  December  2003, 
the Austrian authorities requested authorisation to apply a special measure derogating 
from Article 17 of the Sixth Directive. 

(2) 

The other Member States were informed of this request on 26 March 2004. 

(3) 

(4) 

The  derogation  is  intended  completely  to  exclude  VAT  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. The measure represents a derogation from Article 17 and 
is justified by the need to simplify value added tax. 

The  duration  of  the  authorisation  should  be  limited  to  31  December  2008.  This 
maximum  period  will  allow  the  derogation  to  be  evaluated  in  the  light  of  Austria’s 
experience over this period. 

(5) 

The derogation will not adversely affect the Communities’ own resources from VAT, 

HAS ADOPTED THIS DECISION: 

By  way  of  derogation  from  Article  17(2)  of  Directive  77/388/EEC,  Austria  is  authorised  to 
exclude expenditure on goods and services from the right to deduct VAT when over 90% of 

Article 1 

3 
4 

OJ L 145, 13. 6.1997, p.1. Directive last amended by Directive 2004/15/EC (OJ L 52, 21.2.2004, p.61). 
OJ C , , p. . 

EN 

3 

   EN 

 
                                                 
the  goods  and  services  are  used  for  the  private  purposes  of  a  taxable  person  or  of  his 
employees, or, more generally, for non-business purposes. 

This Decision shall apply until 31 December 2008. 

Article 2 

Article 3 

This Decision is addressed to the Republic of Austria. 

Done at Brussels,  

For the Council 
The President 

EN 

4 

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