Commission Decision of 18 December 2006 concerning a request from the Republic of Latvia to apply a reduced rate of VAT to the supply of district heating, natural gas and electricity to households (notified under document number C(2006) 6592)
Date: 2006-12-18
Institutions: European Commission
Subjects: Latvia, VAT rate, electrical energy, heating, household consumption, natural gas, tax relief, town planning

6.2.2007

EN

Official Journal of the European Union

L 32/165

COMMISSION DECISION

of 18 December 2006

concerning a request from the Republic of Latvia to apply a reduced rate of VAT to the supply of
district heating, natural gas and electricity to households

(notified under document number C(2006) 6592)

(Only the Latvian text is authentic)

(2007/68/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

vis-à-vis legal persons who exercise the right to deduct VAT
and thus do not bear the final cost of VAT.

Having regard to the Treaty establishing the European Commu-
nity,

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 (1), and in particular
Article 12(3)(b) thereof,

Whereas:

(4) Moreover, the VAT rules regarding the place of supply of
natural gas and electricity, as laid down in the Sixth VAT
Directive, were amended by Council Directive 2003/92/
EC (2). The supply of natural gas through the distribution
networks and electricity in the final stage, from traders and
distributors to final consumers, is taxed at the place where
the customer has effective use and consumption of the
goods, in order to ensure that taxation takes place in the
country where actual consumption takes place. As regards
the supply of district heating, as there are no cross-border
transactions, the supply is thus local and there is no risk of
distortion of competition within the meaning of Article 12
(3)(b) of the Sixth VAT Directive.

(1)

By initial request of 19 April 2006 sent to the Commission,
followed by a formal letter registered on 10 July 2006, the
Republic of Latvia informed the Commission of
its
intention of applying a reduced rate of VAT to the supply
of district heating, natural gas and electricity to households.
final consumers with
Latvia defined households as all
whom contracts
concerned are
concluded as with natural persons.

supplies

about

the

(2) According to annex VIII of the Accession Treaty, by way of
derogation from Article 12(3)(a) of Directive 77/388/EEC
(hereinafter the Sixth VAT Directive), Latvia was allowed to
maintain an exemption from value added tax on the supply
of heating sold to households until 31 December 2004. In
fact, Latvia applied an exemption from value added tax on
the supply of district heating to households also after this
date.

(3)

Latvia wishes to apply a reduced rate (5 %) to supplies of
district heating, natural gas and electricity to households,
excluding supplies for commercial activities or for other
professional activities. This rate neither causes distortion of
competition, nor tax-induced changes in the consumption
of electricity, gas or heating sold to households. This is
mainly because from a technical-technological point of
view, those three products act as substitute goods only for
heating purposes. Moreover, since the application of this
reduced VAT rate is
such
application is not likely to cause distortion of competition

restricted to households,

(5)

(6)

The planned measure applying a reduced rate of VAT to the
supply of district heating, natural gas and electricity to
households pursuant to Article 12(3)(b) of the Sixth VAT
Directive is limited to the supplies made to final consumers
and does not apply to the supplies made to taxable persons
for the needs of their commercial, professional and other
economic activities.

for

the needs of

Since the measure is limited to the supplies made to final
consumers and does not apply to the supplies made to
taxable persons
their commercial,
the risk of
professional and other economic activities,
distortion of competition must be thus deemed non-
existent. Since the condition laid down by Article 12(3)(b)
of the Sixth Directive is thus fulfilled, Latvia should be
authorised to apply the measure concerned as soon as this
Decision is notified,

HAS ADOPTED THIS DECISION:

Article 1

Latvia may apply the measure notified in its letter registered by
the Commission on 10 July 2006, applying a reduced rate of

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

2006/69/EC (OJ L 221, 12.8.2006, p. 9).

(2) OJ L 260, 11.10.2003, p. 8.

L 32/166

EN

Official Journal of the European Union

6.2.2007

VAT to the supply of district heating, natural gas and electricity
to households, irrespective of the conditions of production and
supply.

Article 3

This Decision is addressed to the Republic of Latvia.

Article 2

Done at Brussels, 18 December 2006.

For the purposes of this Decision, households shall be defined as
natural persons who are the recipients of the supplies referred to
in Article 1 for
their final consumption,
excluding therefore any supplies made for the needs of their
commercial, professional and other economic activities.

the purposes of

For the Commission

Markos KYPRIANOU

Member of the Commission