Proposal for a Council Decision extending the application of Decision 2000/91/EC authorising the Kingdom of Denmark and the Kingdom of Sweden 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: 2006-12-13
Institutions: European Commission
Subjects: Denmark, Sweden, VAT, derogation from EU law, tax harmonisation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.12.2006 
COM(2006) 796 final 

Proposal for a 

COUNCIL DECISION 

extending the application of Decision 2000/91/EC authorising the Kingdom of Denmark 
and the Kingdom of Sweden 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) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

110 

•  Grounds for and objectives of the proposal 

Pursuant to Article 27(1) of 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, the Council, acting 
unanimously on a proposal from the Commission, may authorise any Member State to 
apply  special  measures  for  derogation  from  that  Directive  in  order  to  simplify  the 
procedure for charging the tax or to prevent certain types of tax evasion or avoidance. 

By letter registered with the Secretariat-General of the Commission on 22 March 2006, 
the Danish authorities requested an extension to their existing derogation from Article 
17(2), (3) and (4) of Directive 77/388/EEC authorised under Decision 2000/91/EC (as 
amended  by  Decision  2003/65/EC).  In  accordance  with  Article  27(2)  of  Directive 
77/388/EEC,  the  Commission,  in  a  letter  dated  4  October  2006,  informed  the  other 
Member  States  of  the  request  by  Denmark.  By  letter  dated  5  October  2006,  the 
Commission  notified  Denmark  that  it  had  all  the  information  it  considered  necessary 
for appraisal of the request. 

By letter registered with the Secretariat-General of the Commission on 22 March 2006, 
the Swedish authorities requested an extension to their existing derogation from Article 
17(2), (3) and (4) of Directive 77/388/EEC authorised under Decision 2000/91/EC (as 
amended  by  Decision  2003/65/EC).  In  accordance  with  Article  27(2)  of  Directive 
77/388/EEC,  the  Commission,  in  a  letter  dated  4  October  2006,  informed  the  other 
Member  States  of  the  request  by  Sweden.  By  letter  dated  5  October  2006,  the 
Commission notified Sweden that it had all the information it considered necessary for 
appraisal of the request. 

120 

•  General context 

Both Denmark and Sweden have introduced simplified rules on the recovery of VAT in 
connection  with  tolls  on  the  Öresund  fixed  link  between  Denmark  and  Sweden.  This 
was deemed necessary as the normal VAT rules would create excessive paperwork for 
taxpayers and administrations alike. 

Under  the  normal  VAT  rules  as  contained  in  Article  17  of  the  Sixth  Directive,  VAT 
must be deducted in the Member State where it was due or paid. As the Öresund fixed 
link is based partly in the territory of Denmark and partly in the territory of Sweden the 
VAT paid on the toll charge for using the link would be recoverable to the extent that 
the  charge  relates  to  the  territory  of  each  country.  Specifically  50%  would  be 
recoverable from Denmark and 50% from Sweden. 

In practice this would mean taxable persons established in either Denmark or Sweden 
would only be able to recover 50% of the VAT on their periodic VAT returns in the 
Member  State  of  registration.  The  remaining  50%  would  be  claimed  via  an  Eighth 
Directive refund from the other Member State. Also, taxable persons in Member States 
other  than  Denmark  and  Sweden  would  be  required  to  recover  VAT  via  two  Eighth 
Directive refund claims, one submitted to Denmark and the other to Sweden. Likewise 

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taxable persons established outside the territory of the Community would need to send 
Thirteenth Directive refund claims both to Denmark and to Sweden. 

The existing derogation for Denmark and Sweden simplifies the VAT rules concerning 
the  recovery  of  VAT.  In  effect  they  allow  a  single  claim  for  recovery  of  VAT  in 
relation to the toll. The simplified rules are: 

- 
Taxable persons established in Denmark and Sweden are entitled to deduct, on 
their normal VAT return, the full amount of deductible VAT on the tolls including that 
part relating to the use of the link in the territory of the Member State in which they are 
not established. 

To recover VAT deductible via the procedure laid down in the Eighth Directive 
- 
regarding  taxable  persons  established  in  a  Member  State  other  than  Denmark  or 
Sweden or via the procedure laid down in the Thirteenth Directive for taxable persons 
established  outside  of  the  Member  States,  the  application  should  be  made  to  the 
Swedish authorities only. 

Denmark and Sweden request that these existing simplification rules be extended for a 
further  period.  As  the  current  simplification  of  the  VAT  rules  appears  to  be  working 
well, the Commission considers that a further extension is appropriate.  

130 

•  Existing provisions in the area of the proposal 

An  existing  derogation  granted  to  Denmark  and  Sweden  on  24  January  2000  and 
renewed on 21 January 2003. 

141 

•  Consistency with other policies and objectives of the Union 

Not applicable. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

219  Not relevant 

•  Collection and use of expertise 

229 

There was no need for external expertise. 

230 

•  Impact assessment 

The proposed Decision aims at simplifying the procedure for recovery of VAT on tolls 
for  taxable  persons  using  the  Öresund  fixed  link  between  Denmark  and  Sweden  and 
therefore potentially has a positive economic impact. 

Impact will in any case be limited because of the narrow scope of the derogation. 

3)  LEGAL ELEMENTS OF THE PROPOSAL 

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305 

•  Summary of the proposed action 

Authorisation  for  Denmark  and  Sweden  to  apply  a  measure  derogating  from  Article 
17(2),  (3)  and  (4)  of  the  Sixth  Council  Directive  77/388/EEC  as  regards  the  right  of 
deduction for taxable persons. 

310 

•  Legal basis 

Article  27(1)  of  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. 

329 

•  Subsidiarity principle 

The proposal falls under the exclusive competence of the Community. The subsidiarity 
principle therefore does not apply. 

•  Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s): 

331 

This Decision concerns an authorisation granted to two Member States upon their own 
request and does not constitute any obligation. 

332  Given the limited scope of the derogation, the special measure is proportionate to the 

aim pursued. 

•  Choice of instruments 

341 

Proposed instruments: other. 

342  Other means would not be adequate for the following reason(s): 

Under Article 27 of the Sixth Council Directive 77/388/EEC on the harmonisation of 
the laws of the Member States relating to turnover taxes, derogation from the common 
VAT  rules  is  only  possible  on  the  authority  of  the  Council  acting  unanimously  on  a 
proposal  from  the  Commission.  A  Council  Decision  is  the  only  suitable  instrument 
since it can be addressed to an individual member state. 

4)  BUDGETARY IMPLICATION 

409 

The proposal has no implication for the Community budget. 

5)  ADDITIONAL INFORMATION 

•  Review/revision/sunset clause 

533 

The proposal includes a sunset clause. 

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Proposal for a 

COUNCIL DECISION 

extending the application of Decision 2000/91/EC authorising the Kingdom of Denmark 
and the Kingdom of Sweden 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 

(Only the Danish and Swedish versions are 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 assessment1, and in particular Article 27(1) thereof, 

Having regard to the proposal from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

By letters registered by the Secretariat-General of the Commission on 22 March 2006, 
Denmark  and  Sweden  requested  authorisation  to  extend  the  application  of  the 
derogation  granted  to  them  by  Council  Decision  2000/91/EC  of  24  January  2000 
authorising the Kingdom of Denmark and the Kingdom of Sweden 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 taxes2. 

In accordance with Article 27(2) of Directive 77/388/EEC, the Commission informed 
the  other  Member  States  by  letter  dated  4  October  2006  of  the  requests  made  by 
Denmark  and  Sweden.  By  letter  dated  5  October  2006,  the  Commission  notified 
Denmark  and  Sweden  that  it  had  all  the  information  it  considered  necessary  for 
appraisal of the requests. 

These applications relate to the recovery of value added tax (hereinafter VAT) paid on 
tolls for the use of the Öresund fixed link between Denmark and Sweden. Under the 
VAT rules on the place of supply of immovable property, part of the VAT on tolls for 
the Öresund fixed link is payable to Denmark and part to Sweden. 

1 

2 

OJ L 145, 13.6.1977, p.1. Directive as last amended by Directive 2006/69/EC (OJ L 221, 12.08.2006, p. 
9).  
OJ L 28, 3.2.2000, p. 38. Decision as last amended by Decision 2003/65/EC (OJ L 25, 30.1.2003, p. 
40). 

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(4) 

(5) 

By way of derogation from the provisions of Article 17 of Directive 77/388/EEC, in 
the  version  set  out  in  Article  28f  thereof,  requiring  taxable  persons  to  exercise  their 
right  to  deduct  or  obtain  a  refund  of  VAT  in  the  Member  State  where  it  was  paid, 
Denmark  and  Sweden  were  authorised  to  introduce  a  special  measure  enabling 
taxpayers to recover VAT from a single administration. 

The  authorisation  granted  by  Decision  2000/91/EC  expires  on  31  December  2006. 
Since  it  will  not  be  possible  to  adopt  rules  under  the  Commission  proposal  for  a 
Council Directive3 amending Directive 77/388/EEC as regards the rules governing the 
right to deduct VAT on the basis of the first subparagraph of Article 17(6) of Directive 
77/388/EEC  before  that  date  and  considering  that  the  legal  situation  and  the  facts 
which  justified  this  authorisation  have  not  changed,  that  authorisation  should  be 
extended. 

(6) 

The  derogation  has  no  negative  effect  on  the  Communities'  own  resources  accruing 
from VAT, 

HAS ADOPTED THIS DECISION: 

Article 2 of Decision 2000/91/EC is replaced by the following: 

Article 1 

This Decision shall expire on 31 December 2013." 

"Article 2 

Article2 

This Decision is addressed to the Kingdom of Denmark and the Kingdom of Sweden. 

Done at Brussels,  

For the Council 

The President 

3 

OJ C 219, 15.7.1998, p. 16 

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