Proposal for a Council implementing decision authorising the Federal Republic of Germany and the Grand Duchy of Luxembourg to apply a measure derogating from Article 5 of Directive 2006/112/EC on the common system of value added tax
Date: 2010-04-06
Institutions: European Commission
Subjects: Germany, Luxembourg, VAT, bridge, derogation from EU law, frontier region, maintenance, provision of services, tax system

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EUROPEAN COMMISSION 

Brussels, 6.4.2010 
COM(2010)111 final 

2010/0070 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising the Federal Republic of Germany and the Grand Duchy of Luxembourg to 
apply a measure derogating from Article 5 of Directive 2006/112/EC on the common 
system of value added tax 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Grounds for and objectives of the proposal 

Pursuant to Article 395(1) 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 to 
derogate  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,  respectively,  15 
October and 18 November 2009, the Federal Republic of Germany and the Grand Duchy of 
Luxembourg  requested  authorisation  to  apply  a  measure  derogating  from  Article  5  of  the 
VAT  Directive.  In  accordance  with  Article  395(2)  of  the  VAT  Directive,  the  Commission 
informed the other Member States by letter dated 25 February 2010 of the requests made by 
these Member States. By letter dated 2 March, the Commission notified the Federal Republic 
of Germany and the Grand Duchy of Luxembourg that it had all the information necessary to 
consider the request. 

General context 

The Federal Republic of Germany and the Grand Duchy of Luxembourg decided, in order to 
facilitate road transport between and transit through their territories, to adopt an agreement to 
link up German Bundesstrasse B 419 and the Luxembourg N1 highway between Wellen and 
Grevenmacher  and,  for  this,  to  renovate  an  existing  border  bridge  over  the  Mosel  on  the 
German and Luxembourg sides. This border bridge extends from the territory of the Federal 
Republic of Germany to the exclusive territory of the Grand Duchy of Luxembourg over the 
Mosel which flows through the jointly managed territory (condominium). 

Under the agreement, the border bridge building site and the bridge itself would be considered 
as the territory of the Grand Duchy of Luxembourg for the purposes of VAT as regards the 
supplies of goods and services and intra-Community acquisitions of goods in relation to the 
renovation and the subsequent maintenance of this border bridge. 

Under  the  normal  rules,  the  principle  of  territoriality  laid  down  in  Article  5  of  the  VAT 
Directive  would  require  that  German  VAT  would  be  charged  on  the  renovation  and 
maintenance  carried  out  in  Germany.  Likewise,  renovation  and  maintenance  carried  out  on 
the Luxembourg territory would we subject to Luxembourg 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. In addition, work carried out in relation to the 
jointly managed territory could not unilaterally be taxed. 

The  Federal  Republic  of  Germany  and  the  Grand  Duchy  of  Luxembourg  consider  that 
applying  the  normal  rules  would  create  tax  complications  for  the  businesses  responsible  for 
the  work  in  question  and  that  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 renovation and the maintenance works will represent a simplification 

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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. 

Existing provisions in the area of the proposal 

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

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties 

Not relevant. 

Collection and use of expertise 

There was no need for external expertise. 

Impact assessment 

The proposed Decision aims at simplifying the procedure for charging the VAT in relation to 
the  renovation  and  maintenance  of  a  frontier  bridge  and  has  therefore  a  potential  positive 
economic impact. 

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

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

Authorisation for the Federal Republic of Germany and the Grand Duchy of Luxembourg to 
derogate from the territorial application of VAT as regards the renovation and maintenance of 
a border bridge between the two countries. 

Legal basis 

Article 395 of the VAT Directive. 

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. 

Proportionality principle 

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

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The Decision concerns an authorisation granted to Member States 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 

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.  Moreover,  a  Council  Decision  is  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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2010/0070 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising the Federal Republic of Germany and the Grand Duchy of Luxembourg to 
apply a measure derogating from Article 5 of Directive 2006/112/EC on the common 
system of value added tax 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

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 European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

By letters registered with the Secretariat-General of the Commission on, respectively, 
15 October and 18 November 2009, the Federal Republic of Germany and the Grand 
Duchy of Luxembourg requested authorisation to apply a measure derogating from the 
provisions of the Directive 2006/112/EC in relation to the renovation and maintenance 
of a border bridge. 

In  accordance  with  Article  395(2)  of  the  Directive  2006/112/EC,  the  Commission 
informed  the  other  Member  States  by  letter  dated  25  February  2010  of  the  requests 
made by the Federal Republic of Germany and the Grand Duchy of Luxembourg. By 
letter  dated  2  March  2010,  the  Commission  informed  the  Federal  Republic  of 
Germany  and  the  Grand  Duchy  of  Luxembourg  that  it  had  all  the  information  to 
consider the requests. 

The  purpose  of  the  measure  is,  for  supplies  of  goods  and  services  and  intra-
Community  acquisitions  of  goods  intended  for  the  renovation  and  subsequent 
maintenance  of  a  cross-border  bridge  over  the  Mosel,  to  regard  the  bridge  and  its 
building  site,  as  entirely  on  the  territory  of  the  Grand  Duchy  of  Luxembourg  in 
accordance with an agreement between the two countries. 

In absence of a special measure, it would be necessary to ascertain whether the place 
of taxation was the Federal Republic of Germany or the Grand Duchy of Luxembourg. 
Work at the border bridge carried out on German territory would be subject to value 
added  tax  in  Germany  while  that  carried  out  in  the  Grand  Duchy  of  Luxembourg 
would  be  subject  to  Luxembourg  value  added  tax.  In  addition,  the  bridge  crosses  a 

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OJ L 347, 11.12.2006, p. 1. 

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jointly managed territory (condominium) and work in this area could not exclusively 
be attributed to the territory of one of the two Member States as to determine a single 
place of supply. 

The purpose of the measure is therefore to simplify the procedure for charging the tax 
on the renovation and the maintenance of the bridge in question. 

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

(5) 

(6) 

HAS ADOPTED THIS IMPLEMENTING DECISION:  

Article 1 

By  way  of  derogation  from  Article  5  of  Directive  2006/112/EC,  the  Federal  Republic  of 
Germany  and  the  Grand  Duchy  of  Luxembourg  are  hereby  authorised,  in  respect  of  the 
existing border bridge over the river Mosel linking the German B 419 and the Luxembourg 
N1  motorways  between  Wellen  and  Grevenmacher,  to  consider  this  bridge  and  its  building 
site  as  entirely  on  the  territory  of  the  Grand  Duchy  of  Luxembourg  for  the  purposes  of 
supplies  of  goods  and  services  and  intra-Community  acquisitions  of  goods  intended  for  the 
renovation or subsequent maintenance of this bridge. 

Article 2 

This implementing Decision is addressed to the Federal Republic of Germany and the Grand 
Duchy of Luxembourg. 

Done at Brussels, 

For the Council 
The President 

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