Proposal for a Council Decision Authorising the Czech Republic and the Federal Republic of Germany to apply measures derogating from Article 5 of Council Directive 2006/112/EC on the common system of value added tax
Date: 2008-11-17
Institutions: European Commission
Subjects: Czechia, Germany, VAT, basis of tax assessment, derogation from EU law, tax exemption, tax harmonisation

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 17.11.2008 
COM(2008) 753 final 

Proposal for a 

COUNCIL DECISION 

Authorising the Czech Republic and the Federal Republic of Germany to apply 
measures derogating from Article 5 of Council Directive 2006/112/EC on the common 
system of value added tax 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

1.1. 

Grounds for and objectives of the proposal 

Pursuant  to  Article  395  of  Directive  2006/112/EC  of  28  November  2006  on  the 
common system of value added tax (hereafter: 'VAT Directive'), the Council, acting 
unanimously on a proposal from the Commission, may authorise any Member State 
to  apply  special  measures  for  derogation  from  the  provisions  of  that  Directive,  in 
order  to  simplify  the  procedure  for  collecting  value  added  tax  (VAT)  or  to  prevent 
certain forms of tax evasion or avoidance. 

By  letters  registered  with  the  Secretariat-General  of  the  Commission  on  19  May 
2008,  the  Czech  Republic  and  the  Federal  Republic  of  Germany  requested 
authorisation  to  apply  derogating  measures  in  relation  to  the  construction  and  the 
maintenance  of  border  bridges  forming  part  of  the  respective  road  networks  of  the 
two countries. 

In accordance with Article 395(2) of the VAT Directive, the Commission informed 
the other Member States by letter dated 2 October 2008 of the requests made by the 
Czech  Republic  and  the  Federal  Republic  of  Germany.  By  letter  dated  7  October 
2008,  the  Commission  notified  the  Czech  Republic  and  the  Federal  Republic  of 
Germany that it had all the information necessary to consider the requests. 

1.2. 

General context 

With a view to facilitate road traffic between their two countries, the Czech Republic 
and  the  Federal  Republic  of  Germany  decided  to  adopt  an  agreement  on  the 
construction (and subsequent maintenance) of one border bridge and the maintenance 
of twenty-two other existing border bridges. This agreement would contain measures 
which derogate from the VAT Directive as regards the principle of territoriality. 

According to the agreement, the Czech Republic or the Federal Republic of Germany 
would  become  responsible  for  the  construction  or  the  maintenance  of  a  number  of 
individual bridges. The agreement provides that the VAT of that Member State shall 
apply  in  relation  to  the  supplies  of  goods  and  services  and  intra-Community 
acquisitions of goods for the construction or maintenance of a border bridge, when 
that Member State is responsible for the construction or maintenance of that bridge. 

This implies that for VAT purposes, as regards the supply of goods and services and 
intra-Community acquisitions of goods for the construction or maintenance of these 
border  bridges,  the  Czech  part  of  the  border  bridge  will  be  considered  as  being  on 
German territory when Germany is responsible for the construction or maintenance 
of this bridge and vice versa. 

Under  the  agreement,  the  Federal  Republic  of  Germany  will  be  responsible  for  the 
construction  and  maintenance  of  one  new  bridge  and  the  maintenance  of  fourteen 
existing  bridges.  The  Czech  Republic  will  be  responsible  for  the  maintenance  of 
eight existing bridges. 

Under the normal rules, the principle of territoriality laid down in the VAT Directive 
would  require  supplies  of  goods  and  services  and  intra-Community  acquisitions  of 
goods in the Federal Republic of Germany to be subject to German VAT. Likewise, 
supplies  of  goods  and  services  and  intra-Community  acquisitions  of  goods  in  the 

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Czech Republic would be subject to Czech VAT. Applying the normal rules would 
imply establishing the exact place of taxable transactions according to the territory in 
which each part of the works was carried out. 

The  Czech  Republic  and  the  Federal  Republic  of  Germany  consider  that  applying 
these rules would involve major tax complications for the businesses responsible for 
the work in question. They consider the tax provisions in the agreement are justified 
in order to simplify the business' tax responsibilities. The Commission accepts that in 
these  cases,  uniform  taxation  of  the  construction  and  maintenance  works  will 
represent a simplification which will make it easier for the businesses concerned to 
apply the tax rules than would be the case if the normal tax rules were applied. 

1.3. 

Existing provisions in the area of the proposal 

The Council has on several previous occasions authorised Member States to derogate 
from the territoriality principle with regard to projects in frontier areas. 

1.4. 

Consistency with other policies and objectives of the Union 

Not applicable. 

2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

2.1. 

Consultation of interested parties 

Not relevant. 

2.2. 

Collection and use of expertise 

There was no need for external expertise. 

2.3. 

Impact assessment 

The  Decision  proposal  aims  at  simplifying  the  procedure  for  charging  the  tax  in 
relation to the construction and maintenance of frontier bridges and has therefore a 
potential positive economic impact. 

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

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

3.1. 

Summary of the proposed action 

Authorisation  for  the  Czech  Republic  and  the  Federal  Republic  of  Germany  to 
derogate  from  the  territorial  application  of  VAT  as  regards  the  construction  and 
maintenance of border bridges between the two countries. 

3.2. 

Legal basis 

Article  395  of  the  VAT  Directive  2006/112/EC  of  28  November  2006  on  the 
common system of value added tax. 

3.3. 

Subsidiarity principle 

In  accordance  with  Article  395  of  the  VAT  Directive,  a  Member  State  wishing  to 
introduce measures derogating from the said Directive must obtain an authorisation 
from  the  Council,  which  will  take  the  form  of  a  Council  Decision.  Therefore,  the 
proposal complies with the subsidiarity principle. 

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3.4. 

Proportionality principle 

The proposal complies with the proportionality principle for the following reasons: 

– 

– 

The Decision concerns an authorisation granted to  Member States  upon 
their 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. 

3.5. 

Choice of intruments 

Other means would not be adequate for the following reason : 

Under Article 395 of the VAT Directive, derogation from the common VAT rules is 
only possible with the authorisation of the Council acting unanimously on a proposal 
from the Commission. A Council Decision is therefore the most suitable instrument 
since it can be addressed to individual Member States. 

4. 

BUDGETARY IMPLICATION 

The proposal has no implication for the Community budget. 

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Proposal for a 

COUNCIL DECISION 

Authorising the Czech Republic and the Federal Republic of Germany to apply 
measures derogating from Article 5 of Council Directive 2006/112/EC on the common 
system of value added tax 

(only the Czech and the German versions are authentic) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having  regard  to  Council  Directive  2006/112/EC  of  28  November  2006  on  the  common 
system of value added tax1, and in particular Article 395(1) thereof, 
Having regard to the proposal from the Commission2, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

By letters registered with the Secretariat-General of the Commission on 19 May 2008, 
the Czech Republic and the Federal Republic of  Germany requested  authorisation to 
apply special tax measures in relation to the construction and maintenance of certain 
border bridges between the two countries. 

In  accordance  with  Article  395(2)  of  Directive  2006/112/EC,  the  Commission 
informed the other Member States by letter dated 2 October 2008 of the requests made 
by  the  Czech  Republic  and  the  Federal  Republic  of  Germany.  By  letter  dated  7 
October 2008, the Commission notified the Czech Republic and the Federal Republic 
of Germany that it had all the information necessary to consider the requests. 

The  purpose  of  the  special  measure  is,  for  supplies  of  goods  and  services  and  intra-
Community  acquisitions  of  goods  intended  for  the  construction  and  maintenance  of 
the cross-border bridges, and which according to the VAT rules are to be located in the 
Member  State  where  the  bridge  stands,  to  apply  the  value  added  tax  of  the  Member 
State  that  is  responsible  for  its  construction  or  maintenance  in  accordance  with  an 
agreement concluded between them on the division of responsibility. 

In the absence of a special measure it would be necessary, according to the principle of 
territoriality, for each supply of goods and services and intra-Community acquisition 
of  goods,  to  ascertain  whether  the  place  of  taxation  was  the  Czech  Republic  or  the 
Federal Republic of Germany. Work at a border bridge carried out on Czech territory 
would be subject to value added tax in the Czech Republic while that carried out on 
German territory would be subject to German value added tax.  

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OJ L 347, 11.12.2006, p. 1. Directive last amended by Directive 2008/8/EC (OJ L 44, 20.2.2008, p. 11) 
OJ C , , p. . 

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(5) 

The purpose of the derogation is therefore to simplify the procedure for charging the 
tax on the construction and maintenance of the bridges in question by considering the 
bridge as being solely on the territory of the Member State that is responsible for the 
construction or maintenance. 

(6) 

The  derogation  will  have  no  negative  impact  on  the  Community's  own  resources 
provided from value added tax. 

HAS ADOPTED THIS DECISION:  

Article 1 

The  Czech  Republic  and  the  Federal  Republic  of  Germany  are  authorised,  under  the 
conditions of Article 2  and 3, to apply measures derogating  from  Directive  2006/112/EC in 
relation  to  the  construction  and  subsequent  maintenance  of  one  border  bridge,  and  the 
maintenance of twenty-two existing border bridges, all of which are partly on the territory of 
the  Czech  Republic  and  partly  on  the  territory  of  the  Federal  Republic  of  Germany.  The 
details of the bridges in question are listed in the Annex to this decision. 

Article 2 

By  way  of  derogation  from  Article  5  of  Directive  2006/112/EC,  with  regard  to  the  border 
bridges  for  which  the  Czech  Republic  is  solely  responsible  for  maintenance,  these  bridges 
shall  be  deemed  to  be  part  of  the  Czech  territory  for  the  purposes  of  supplies  of  goods  and 
services  and  intra-Community  acquisitions  of  goods  intended  for  the  maintenance  of  these 
bridges. 

Article 3 

By  way  of  derogation  from  Article  5  of  Directive  2006/112/EC,  with  regard  to  the  border 
bridge  for  which  the  Federal  Republic  of  Germany  is  responsible  for  the  construction  and 
maintenance  and  with  regard  to  the  border  bridges  for  which  the  Federal  Republic  of 
Germany  is  solely  responsible  for  maintenance, these  bridges  shall  be  deemed  to  be  part  of 
the German territory for the purposes of supplies of goods and services and intra-Community 
acquisitions of goods intended for the construction or maintenance of these bridges. 

This Decision is addressed to the Czech Republic and the Federal Republic of Germany. 

Done at Brussels,  

Article 4 

For the Council 
The President 

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Bridges referred to in Article 1: 

ANNEX  

1.  The  Federal  Republic  of  Germany  shall  be  responsible  for  the  construction  and 
maintenance of the following border bridge: 

(a) the border bridge over the Načetínský potok/Natzschung between Brandov and Olbernhau 
in border section XIII between boundary stones 10/5 and 10/6. 

2. The Federal Republic of Germany shall be responsible for maintaining the following border 
bridges: 

(a) the border bridge over the Zlatý potok/Goldbach between Český Mlýn and Rittersgrün in 
border section XVII between boundary stones 10 and 10/1; 

(b) the border bridge over the Polava/Pöhlbach between Loučná and Oberwiesenthal in border 
section XVI between boundary stones 9 und 10; 

the  border  bridge  over 

(c) 
Hammerunterwiesenthal in border section XVI between boundary stones 5 und 6; 

the  Polava/Pöhlbach  between  České  Hamry  and 

(d)  the  frontier  bridge  over  the  Načetinský  potok/Natzschung  between  Brandov  and 
Olbernhau/Grünthal in border section XIII between boundary stones 9 und 10; 

(e)  the  frontier  bridge  over  the  Svídnice/Schweinitz  between  Hora  sv.  Kateřiny  and 
Deutschkatharinenberg in border section XIII between boundary stones 2/8 und 3; 

(f)  the  frontier  bridge  over  the  Svídnice/Schweinitz  between  Nová  Ves  v  Horách  and 
Deutschneudorf in border section XII between boundary stones 17 und 18; 

the  frontier  bridge  over 

(g) 
Deutschgeorgenthal in border section XII between boundary stones 1 und 1/1; 

the  Flájský  potok/Flöha  between  Český  Jiřetín  and 

(h) the frontier bridge over the Mohelnice/Weiße Müglitz between Fojtovice and Fürstenau in 
border section X between boundary stones 5/29 and 6; 

(i)  the  frontier  bridge  over  the  Křinice/Kirnitzsch  between  Zadní  Jetřichovice  and 
Hinterhermsdorf/Raabensteine in border section VII between border stones 1 and 2; 

the  frontier  bridge  over 

(j) 
Hinterhermsdorf in border section VI between border stones 23/21 and 24; 

the  Křinice/Kirnitzsch  between  Zadní  Doubice  and 

(k)  the  frontier  bridge  over  the  Čertova  voda/Teufelsbach  between  Bučina  and  Finsterau  in 
border section XI between boundary stones 9 and 10; 

(l) the frontier bridge over the Údolský potok/Ruthenbächle between Stožec-Nové Údolí and 
Haidmühle in border section XII between boundary stones 9/1 and 9/2; 

(m) the frontier bridge over the Černice/Bayerischer Schwarzbach between Rybník-Švarcava 
and Stadlern in border section VII between border stones 11 and 12; 

(n) the frontier bridge over the Lomnička/Helmbach between Zadní Chalupy and Helmhof in 
border section IX at border stone 17/2. 

3. The Czech Republic shall be responsible for maintaining the following border bridges: 

(a)  the  frontier  bridge  over  the  Komáří  potok/Mückenbach  between  Český  Mlýn  and 
Rittersgrün (Zollstraße) in border section XVII between boundary stones 11 and 12; 

(b)  the  frontier  bridge  over  the  Polava/Pöhlbach  between  Vejprty  and  Bärenstein  in  border 
section XVI between boundary stones 1 and 2; 

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(c) the frontier bridge over the Schweinitz/Svídnice between Mníšek and Deutscheinsiedel in 
border section XII between boundary stones 13 and 14; 

(d) the frontier bridge carrying road II/267 and road S 154 over the Vilémovský potok/Sebnitz 
between Dolní Poustevna and Sebnitz between boundary stones 19 (in border section V) and 
1 (in border section VI); 

(e) the frontier bridge carrying footpaths over the Vilémovský potok/Sebnitz between Dolní 
Poustevna  and  Sebnitz  between  boundary  stone  19  (in  border  section  V)  and  1  (in  border 
section VI); 

(f) the frontier bridge over the Hraniční potok/Rehlingbach between Rozvadov and Waidhaus 
in border section VI between boundary stones 1 and 2; 

(g) the frontier bridge over the Prášilský potok/Marchbach between Prášily and Scheuereck in 
border section X between boundary stones 11/26 and 12; 

(h)  the  frontier  bridge  over  the  Mechový  potok/Harlandbach  between  České  Žleby  and 
Bischofsreut/Marchhäuser in border section XII between boundary stones 5/4 and 5/5. 

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