Proposal for a Council Decision authorising Austria to conclude an agreement with Switzerland that includes provisions derogating from Article 2(1)(d) of Directive 2006/112/EC on the common system of value added tax (Only the German version is authentic)
Date: 2007-05-15
Institutions: European Commission
Subjects: Austria, Switzerland, VAT, bilateral agreement, capital goods, derogation from EU law, electrical industry, import, power plant, tax relief

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 15.5.2007 
COM(2007) 251 final 

Proposal for a 

COUNCIL DECISION 

authorising Austria to conclude an agreement with Switzerland that includes provisions 
derogating from Article 2(1)(d) of Directive 2006/112/EC on the common system of value 
added tax 

(Only the German version is authentic) 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1)  CONTEXT OF THE PROPOSAL 

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•  Grounds for and objectives of the proposal 

In  a  letter  registered  at  the  Commission's  Secretariat-General  on  13  September  2005, 
Austria requested authorisation under Article 30(1) of Directive 77/388/EEC (currently 
Article 396(1) of Directive 2006/112/EC), to conclude an agreement with Switzerland 
that includes tax provisions derogating from Article 2(1)(d) of the said Directive. 

In  accordance  with  Article  396(2)  of  Directive  2006/112/EC,  the  Commission 
informed the other Member States on 1 March 2007 of the request made and by letter 
of  6  March  2007,  the  Commission  notified  Austria  that  it  had  all  the  information  it 
considered necessary for appraisal of the request. 

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•  General context 

The agreement between Austria and Switzerland relates to the construction of a cross-
border  power  plant  across  the  river  Inn  between  Prutz  (Austria)  and  Tschlin 
(Switzerland). 

The agreement provides that no value added tax (VAT) will be charged in Switzerland 
on imports for the construction and related operation of the power plant, which would 
facilitate border formalities. In the same way, it is stipulated that goods, imported into 
Austria  for  use  in  connection  with  the  power  plant,  will  not  be  taxed  with  Austrian 
VAT.  

Under normal circumstances, importation of goods into Austria is a taxable transaction 
which  is  subject  to  VAT.  However,  in  order  to  obtain  similar  advantages  from  his 
Swiss counterpart, Austria, as a contracting party, agreed not to tax the imports related 
to the cross-border power plant. Nevertheless, it is to be understood that only taxable 
persons,  with  a  full  right  of  deduction,  would  be  involved  in  the  importation  of  such 
goods,  and  that,  in  any  case,  they  would  have  a  right  of  deduction  for  their  import 
VAT. 

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•  Existing provisions in the area of the proposal 

The Council has on several previous occasions authorised Member States to conclude 
agreements  with  third  countries  in  frontier  areas  and  these  agreements,  inter  alia, 
included tax provisions similar to those proposed here. 

•  Consistency with the other policies and objectives of the Union 

Not applicable. 

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

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Not relevant. 

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•  Collection and use of expertise 

There was no need for external expertise. 

•  Impact assessment 

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The proposed Decision proposal aims at authorising Austria to conclude an agreement 
with  Switzerland  in  order  not  to  tax  imports  into  Austria  as  regards  a  cross-border 
power plant so as to obtain similar advantages from Switzerland for goods imported in 
Switzerland. 

Because  of  the  very  narrow  scope  of  the  derogation  and  the  fact  that  the  importers, 
under  the  normal  system,  would  have  a  full  right  of  deduction  for  the  VAT  paid  at 
import, the impact will be negligible. 

3)  LEGAL ELEMENTS OF THE PROPOSAL 

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•  Summary of the proposed action 

Authorisation  for  Austria  to  conclude  an  agreement  with  Switzerland  that  includes 
provisions derogating from the VAT Directive 2006/112/EC as regards the taxation of 
imports in relation to a cross-border power plant. 

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•  Legal basis 

Article 396 of the VAT Directive 2006/112/EC of 28 November 2006 on the common 
system of value added tax. 

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•  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). 

The  Decision  concerns  an  authorisation  granted  to  a  Member  State  upon  its  own 
request and does not constitute any obligation. 

Given the very limited scope of the derogation, the special measure is proportionate to 
the aim pursued. 

•  Choice of instruments 

Proposed instruments: other. 

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

Under Article 396 of the VAT Directive 2006/112/EC on the common system of value 
added  tax,  derogation  from  the  common  VAT  rules  is  only  possible  with  the 

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authorisation 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 
individual Member States. 

4)  BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget since the importers would 
have, in any case, a full right of deduction for the VAT paid at import under the normal 
system. 

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Proposal for a 

COUNCIL DECISION 

authorising Austria to conclude an agreement with Switzerland that includes provisions 
derogating from Article 2(1)(d) of Directive 2006/112/EC on the common system of value 
added tax 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  the  VAT  Directive  2006/112/EC  of  28  November  2006  on  the  common 
system of value added tax1, and in particular Article 396 thereof, 

Having regard to the proposal from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

Under Article 396(1) of Directive 2006/112/EC, the Council, acting unanimously on a 
proposal of the Commission, may authorise any Member State to conclude with a third 
country an agreement which may contain derogations from that Directive. 

By letter registered with the Secretariat-General of the Commission on 13 September 
2005,  Austria  requested  authorisation  to  conclude  an  agreement  with  Switzerland  in 
relation to a cross-border power plant across the river Inn between Prutz (Austria) and 
Tschlin (Switzerland). 

In  accordance  with  Article  396(2)  of  Directive  2006/112/EC,  the  Commission 
informed the other Member States by letter dated 1 March 2007 of the request made 
by Austria. By letter dated 6 March 2007, the Commission notified Austria that it had 
all the information it deemed necessary to consider the request. 

The  agreement  is  to  contain  provisions  on  VAT  derogating  from  Article  2(1)(d)  of 
Directive  2006/112/EC  in  respect  of  goods  imported  into  Austria  in  relation  to  the 
cross-border  power  plant.  These  imports  of  goods  from  Switzerland  into  Austria  by 
taxable persons with a full right of deduction will not be subject to VAT in order to 
obtain a similar arrangement from Switzerland for goods imported from Austria into 
Switzerland. 

(5) 

The  derogation  will  therefore  not  have  an  adverse  effect  on  the  European 
Communities' own resources accruing from value added tax, 

1 

OJ L 347, 11.12.2006, p. 1. Directive amended by Directive 2006/138/EC (OJ L 384, 29.12.2006, p. 92) 

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HAS ADOPTED THIS DECISION:  

Article 1 

Austria  is  hereby  authorised  to  conclude  an  Agreement  with  Switzerland  that  includes 
provisions  derogating  from  the  VAT  Directive  2006/112/EC  covering  the  construction, 
maintenance,  renewal  and  operation  of  a  frontier  power  plant  station  across  the  river  Inn 
between Prutz (Austria) and Tschlin (Switzerland). 

The derogating tax provisions in respect of the Agreement are set out in Article 2. 

Article 2 

By  way  of  derogation  from  Article  2(1)(d)  of  Directive  2006/112/EC,  goods  imported  by 
taxable  persons  with  a  full  right  of  deduction  from  Switzerland  into  Austria  shall  not  be 
subject to value added tax, provided they are used for the construction, maintenance, renewal 
and operation of the frontier power plant referred to in Article 1. 

This Decision is addressed to Austria. 

Done at Brussels,  

Article 3 

For the Council 
The President 

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