Proposal for a Council Decision on authorising France and Italy to apply a measure derogating from Article 3(1) of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes
Date: 2004-09-20
Institutions: European Commission
Subjects: France, Italy, VAT, approximation of laws, derogation from EU law, toll, tunnel

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 20.09.2004 
COM(2004) 598 final 

Proposal for a 

COUNCIL DECISION 

on authorising France and Italy to apply a measure derogating from Article 3(1) of the 
Sixth 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 

Under  Article  27  of  the  Sixth  Council  Directive  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  the  Council,  acting 
unanimously on a proposal from the Commission, may authorise any Member State 
to introduce special measures for derogation 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. 

In  a  request  submitted  to  the  Commission  and  registered  by  the  Commission's 
Secretariat-General  on  24.03.2004,  the  French  and  the  Italian  Governments  sought 
authorisation to derogate from Article 3 of Directive 77/388/EEC. 

In  accordance  with  Article  27(2)  of  the  Sixth  Directive,  the  Commission  informed 
the other Member States by letter on 01.06.2004 of the request made by the French 
and  the  Italian  Governments  and  by  a  letter  dated  03.06.2004  the  Commission 
notified  France  and  Italy  that  it  had  all  the  information  it  considered  necessary  for 
appraisal of the request.  

Between  France  and  Italy  there  are  two  tunnels:  Mont  Blanc  (Monte  Bianco)  and 
Fréjus.  The  border  between  the  two  States  is  inside  the  tunnel  but  it  would  be 
impractical  to  arrange  collection  of  tolls  inside.  The  current  article  3,  paragraph  1, 
first  indent  of  Directive  77/388/EEC  stipulates  that  the  “...  “territory  of  a  Member 
State” shall mean the territory of the country...”. Under the current rules, therefore, 
the  taxable  amount  of  the  tolls  should  be  related  to  the  length  of  the  tunnel  which 
belongs to each State. Since it would be expensive and disruptive to have a toll booth 
at each end of the tunnel for each Member State to collect their share of the toll, tolls 
are  collected  as  a  whole  at  the  entrance  of  the  tunnel.  Each  journey  through  the 
tunnel  should  be  invoiced  with  two  tolls  and  two  different  VAT  rates:  one  for  the 
French  territory  and  one  for  the  Italian  territory.  Moreover  the  taxable  amount  and 
the  VAT  should  afterwards  be  shared  between  the  two  Member  States.  Thus  the 
VAT  is  an  additional  complicating  factor  in  an  already  complex  mechanism  of 
financial  compensation  resulting  from  the  sharing  of  the  management  costs  for  the 
tunnel. 

The  above  mentioned  situation  is  highly  burdensome  for  the  administrations 
concerned  and  involves  a  high  cost  for  the  taxpayer  also.  In  effect  the  latter  has  to 
manage  a  single  invoice  with  two  different  rates  as  well  as  two  different  taxable 
amounts.  Such  a  situation  adds  burdens  to  the  taxpayer  who  has  to  deal  with  two 
administrations instead of a single one, for example in the case of a refund request. 

The purpose of the derogation requested by France and Italy is to seek authorisation 
to derogate from Article 3 of Directive 77/388/EEC in relation to the tunnel of Mont 
Blanc (Monte Bianco) and tunnel of Fréjus. For both tunnels the two States want to 
consider the entire length of the carriageway within the tunnel as the territory of the 
State  in  which  any  transit  journey  through  the  tunnel  using  the  carriageway  starts. 

OJ L 145, 13.6.1977, p. 1. Directive as last amended by Directive 2004/15/EC (OJ L 52, 21.02.2004, p. 
61). 

1. 

2. 

3. 

4. 

5. 

6. 

1  

EN 

2 

   EN 

 
                                                 
Thus  the  French  office  will  apply  French  VAT  to  the  entire  toll  for  all  journeys 
starting  from  the  French  side.  The  same  mechanism  will  be  applied  by  the  Italian 
office  to  all  journeys  starting  from  the  Italian  side.  This  derogation  only  has  effect 
with regard to the charging of tolls and in order to simplify the way in which VAT is 
calculated and accounted for. It does not affect the VAT territory of Italy or France 
for the purposes of any other supplies. 

The  intended  measure  is  designed  to  solve  the  problems  outlined  above  by 
simplifying  the  arrangements  for  paying  the  tax  and  is  essentially  of  a  technical 
nature. It does not adversely affect the Communities' own resources, nor does it have 
any effect on the amount of the tax due at the final stage of consumption. 

In the light of the above, the Commission considers that the derogation requested by 
Italy and France is covered by the conditions in Article 27, paragraph 1 and should 
be authorised. 

As the matter involved is the territorial definition for VAT purposes, to which it is 
unlikely that there will be future changes, the requested derogation should be granted 
for an indefinite period.  

7. 

8. 

9. 

EN 

3 

   EN 

 
Proposal for a 

COUNCIL DECISION 

on authorising France and Italy to apply a measure derogating from Article 3(1) of the 
Sixth 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 Treaty establishing the European Community, and in particular Article 
227 thereof, 

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,2 and in particular Article 27 thereof, 

Having regard to the proposal from the Commission,3 

Whereas: 

(1) 

(2) 

(3) 

(4) 

2 

3 
4 

Under Article 27 of the Sixth Council Directive 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,4  the  Council,  acting  unanimously  on  a 
proposal from the Commission, may authorise any Member State to introduce special 
measures for derogation 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. 

In  a  request  submitted  to  the  Commission  and  registered  by  the  Commission's 
Secretariat-General  on  24.03.2004,  the  French  and  the  Italian  Governments  sought 
authorisation to derogate from Article 3 of Directive 77/388/EEC. 

In accordance with Article 27(2) of the Sixth Directive, the Commission informed the 
other Member States by letter of 01.06.2004 of the request made by the French and the 
Italian Governments and by letter of 03.06.2004 the Commission notified French and 
Italy that it had all the information it considered necessary for appraisal of the request. 

Between  France  and  Italy  there  are  two  tunnels:  Mont  Blanc  (Monte  Bianco)  and 
Fréjus.  The  border  between  the  two  States  is  inside  the  tunnel  but  it  would  be 
impractical to arrange collection of tolls inside. The current article 3, paragraph 1, first 
indent  of  Directive  77/388/EEC  stipulates  that  the  “...  “territory  of  a  Member  State” 
shall  mean  the  territory  of  the  country...”.  Under  the  current  rules,  therefore,  the 

OJ L 145, 13.6.1977, p. 1. Directive as last amended by Directive 2004/15/EC (OJ L 52, 21.02.2004, p. 
61). 
OJ C […] […], p. […] 
OJ L 145, 13.6.1977, p.1. Directive last amended by Directive 2003/92/EC (OJ L 260, 11.10.2003, p.8) 

EN 

4 

   EN 

 
                                                 
taxable amount of the tolls should be related to the length of the tunnel which belongs 
to each State. Since it would be expensive and disruptive to have a toll booth at each 
end  of  the  tunnel  for  each  Member  State  to  collect  their  share  of  the  toll,  tolls  are 
collected  as  a  whole  at  the  entrance  of  the  tunnel.  Each  journey  through  the  tunnel 
should  be  invoiced  with  two  tolls  and  two  different  VAT  rates:  one  for  the  French 
territory and one for the Italian territory. Moreover the taxable amount and the VAT 
should  afterwards  be  shared  between  the  two  Member  States.  Thus  the  VAT  is  an 
additional  complicating  factor  in  an  already  complex  mechanism  of  financial 
compensation resulting from the sharing of the management costs for the tunnel. 

The purpose of the derogation requested by France and Italy is to seek authorisation to 
derogate  from  Article  3  of  Directive  77/388/EEC  in  relation  to  the  tunnel  of  Mont 
Blanc (Monte Bianco) and tunnel of Fréjus. 

For both tunnels the two States want to consider the entire length of the carriageway 
within the tunnel as the territory of the State in which any transit journey through the 
tunnel using the carriageway starts. Thus the French office will apply French VAT to 
the entire toll for all journeys starting from the French side. The same mechanism will 
be applied by the Italian office to all journeys starting from the Italian side.  

This  derogation  only  has  effect  with  regard  to  the  charging  of  tolls  and  in  order  to 
simplify the way in which VAT is calculated and accounted for. It does not affect the 
VAT territory of Italy or France for the purposes of any other supplies. 

The intended measure is designed to solve the problems outlined above by simplifying 
the arrangements for paying the tax and is essentially of a technical nature. It does not 
adversely affect the VAT Communities' own resources, nor does it have any effect on 
the amount of the tax due at the final stage of consumption. 

As  the  matter  involved  is  the  territory  definition  for  VAT  purposes  to  which  there 
should  be  no  changes,  the  requested  derogation  should  be  granted  for  an  indefinite 
period.  

(5) 

(6) 

(7) 

(8) 

(9) 

HAS ADOPTED THIS DECISION:  

Article 1 

By way of derogation from Article 3 of Directive 77/388/EEC, France and Italy are 
hereby  authorised  to  consider  the  carriageway  within  the  tunnels  of  Mont  Blanc 
(Monte  Bianco)  and  Fréjus,  for  their  entire  length,  as  part  of  the  territory  of  the 
Member State from which any journey using the carriageway starts. 

EN 

5 

   EN 

 
Article 1 is applied for the tunnels’ tolls only. 

Article 2 

This Decision is addressed to France and Italy. 

Article 3 

Done at Brussels,  

For the Council 
The President 

EN 

6 

   EN