2007/441/EC: Council Decision of 18 June 2007 authorising the Italian Republic to apply measures derogating from Articles 26(1)(a) and 168 of Directive 2006/112/EC on the common system of value added tax
Date: 2007-06-18
Institutions: Council of the European Union
Subjects: Italy, VAT, derogation from EU law, tax exemption, tax relief, type of business, vehicle tax

27.6.2007

EN

Official Journal of the European Union

L 165/33

(Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)

II

DECISIONS

COUNCIL

COUNCIL DECISION

of 18 June 2007

authorising the Italian Republic to apply measures derogating from Articles 26(1)(a) and 168 of
Directive 2006/112/EC on the common system of value added tax

(2007/441/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
Community,

establishing the European

Having regard to Council Directive 2006/112/EC of 28
November 2006 on the common system of value added
tax (1), and in particular Article 395(1) thereof,

Having regard to the proposal from the Commission,

Whereas:

(1)

(2)

(3)

In a letter dated 9 October 2006 and registered by the
Secretariat-General of the Commission on 11 October
2006, Italy sought authorisation to introduce measures
derogating from the provisions 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
assessment (2), which govern a taxable person's right to
deduct VAT paid on purchases and those which require
tax to be accounted for on business assets used for
private purposes.

Directive 77/388/EEC has been replaced with Directive
2006/112/EC.

accordance with Article

In
of Directive
2006/112/EC, the Commission transmitted, by a letter

395(2)

(4)

(5)

dated 28 February 2007, to the other Member States the
request made by Italy. By a letter dated 21 November
2006, the Commission notified Italy that it had all the
information that it considered necessary for appraisal of
the request.

right

Article 168 of Directive 2006/112/EC establishes a
taxable person's
to deduct VAT charged on
supplies of goods and services received by him for use
in his taxable transactions. Article 26(1)(a) of the same
Directive contains a requirement
for VAT
when a business asset is put to private use.

to account

for business purposes

The private use of vehicles is difficult to identify accu-
rately and even where it is possible, the mechanism for
doing so is often burdensome. Under
the requested
measures, the amount of VAT on expenditure eligible
for deduction in respect of vehicles which are not used
entirely
should, with some
exceptions, be set at a flat percentage rate. Based on
currently available information,
the Italian authorities
believe that a rate of 40 % is justifiable. At the same
time,
the requirement of
accounting for VAT on the private use of a vehicle
should be suspended where it has been subject to this
restriction. These measures can be justified by the need to
simplify the procedure for charging VAT and to prevent
evasion through incorrect record keeping.

to avoid double taxation,

(1) OJ L 347, 11.12.2006, p. 1. Directive as last amended by Directive

2006/138/EC (OJ L 384, 29.12.2006, p. 92).

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

2006/98/EC (OJ L 363, 20.12.2006, p. 129).

(6)

These derogating measures should be limited in time to
allow for an evaluation of their effectiveness and of the
appropriate percentage, since the proposed percentage is
based on initial findings on business use.

L 165/34

EN

Official Journal of the European Union

27.6.2007

(7)

On 4 November 2004 the Commission presented a
proposal
for a Council Directive amending Directive
77/388/EEC, now 2006/112/EC, as regards the right to
deduct VAT (1). The derogating measures should end at
the entry into force of the proposed Directive if earlier
than the date specified in this Decision,

HAS ADOPTED THIS DECISION:

Article 1

By way of derogation from Article 168 of Directive
2006/112/EC, Italy is hereby authorised to limit to 40 % the
right to deduct the VAT charged on expenditure on motorised
road vehicles not wholly used for business purposes.

Article 4

The related expenditure shall cover the purchase of a vehicle,
including contracts of assembly and the like, manufacture, intra-
Community acquisition,
leasing or hire, modifi-
importation,
cation, repair or maintenance, and expenditure on supplies or
services performed in relation to vehicles and their use,
including lubricants and fuel.

Article 5

Articles 1 and 2 shall apply to all motorised vehicles, other than
agricultural or forestry tractors, which are normally used for
carrying persons or goods by road with a maximum authorised
mass not exceeding 3 500 kilograms and having not more than
eight seats in addition to the driver's seat.

Article 2

Article 6

By way of derogation from Article 26(1)(a) of Directive
2006/112/EC, Italy is also required not to treat as supplies of
services for consideration the use for private purposes of
vehicles included in the assets of a taxable person's business,
where that vehicle has been subject to a restriction of the right
to deduct under this Decision.

An assessment covering the first two years of the application of
this Decision, including a review of the percentage restriction
applied, shall be submitted to the Commission after the second
anniversary of this Decision, and in any case by 31 December
2009.

Article 7

Article 3

Expenditure relating to vehicles is excluded from the restriction
on the right to deduct as authorised by this Decision where the
vehicle falls into any of the following categories:

— the vehicle forms part of the taxable person's stock-in-trade

in the exercise of his activity,

— the vehicle is used as a taxi,

This Decision shall expire on the date of entry into force of the
Community rules determining the expenditure relating to
motorised road vehicles
full
deduction of value added tax, but on 31 December 2010 at
the latest.

is not

eligible

that

for

a

This Decision is addressed to the Italian Republic.

Article 8

— the vehicle is used for instruction by a driving school,

Done at Luxembourg, 18 June 2007.

— the vehicle is used for hire or leasing,

— the vehicle is used by sales representatives.

For the Council
The President

F.-W. STEINMEIER

(1) OJ C 24, 29.1.2005, p. 10.