Proposal for a Council implementing decision authorising Poland to introduce a special measure derogating from Article 26(1)(a) and Article 168 of Directive 2006/112/EC onthe common system of value added tax
Date: 2010-06-07
Institutions: European Commission
Subjects: Poland, VAT, basis of tax assessment, delivery, distributive trades, provision of services, tax exemption, tax on consumption, tax relief

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EUROPEAN COMMISSION 

Brussels, 7.6.2010 
COM(2010)293 final 

2010/0161 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Poland to introduce a special measure derogating from Article 26(1)(a) and 
Article 168 of Directive 2006/112/EC on the common system of value added tax 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Pursuant to Article 395 of Council Directive 2006/112/EC of 28 November 2006 on 
the  common  system  of  value  added  tax1  (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 letter registered with the Secretariat-General of the Commission on 16 November 
2009,  the  Republic  of  Poland  requested  authorisation  to  introduce  a  measure 
derogating from Articles 26(1)(a) and 168 of the VAT Directive. 

In accordance with Article 395(2) of the VAT Directive, the Commission informed 
the other Member States by letter dated 14 December 2009 of the request made by 
the Republic of Poland. By letter dated 17 December 2009 the Commission notified 
the  Republic  of  Poland  that  it  had  all  the  information  necessary  to  consider  the 
request in the way set out below. 

The vast majority of businesses, over 95%, in the Republic of Poland are classified 
as micro enterprises, many of which are family run businesses, and so the cars owned 
or  leased  by  these  businesses  are  often  used  for  both  business  and  personal  use, 
whereas larger companies often remunerate their staff through non-financial benefits, 
such  as  company  cars,  which  would  also  be  used  for  both  business  and  personal 
purposes. In short, the vast majority of cars owned by businesses are used for both 
business  and  personal  purposes.  Currently,  a  business  which  uses  a  vehicle  for 
private  purposes  should  account  for  output  tax  on  the  private  use  under  Article 
26(1)(a) of the VAT Directive. 

Because the design of certain vehicles make them equally suited to both business and 
personal  use,  the  Polish  authorities  state  that  it  is  difficult  to  establish,  with  any 
degree  of  precision,  the  extent  to  which  a  taxable  person  uses  those  vehicles  for 
private  use.  This  is  the  case  not  only  for  the  taxable  persons,  but  also  for  the  tax 
authorities, who are required to check the extent of private use.  

In  order  to  overcome  these  difficulties  and  simplify  the  application  of  the  VAT 
system,  the  Republic  of  Poland  seeks  a  derogation  to  waive  the  taxation  of  private 
use  of  certain  vehicles,  but  also  to  restrict  the  input  tax  deduction  on  the  initial 
purchase or hire of these vehicles to 60%. This percentage has been assessed by the 
Polish authorities as the average proportion of time for which these types of vehicles 
are used for business purposes.  

The  deduction  would  be  up  to  a  maximum  of  6.000  PLN.  This  figure  has  been 
established  based  on  the  price  of  standard  car  (55.000  PLN),  and  is  intended  to 

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OJ L 347, 11.12.2006, p. 1  

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prevent the excessive deduction for luxury cars, which are more likely to be used for 
private purposes.  

The  vehicles  covered  by  this  measure  are  those  with  a  maximum  load  capacity  of 
over  500  kg  and  a  total  maximum  weight  of  3.5  tonnes.  An  exception  to  this  is 
vehicles which are clearly intended for use solely for a business activity, specifically 
vehicles purchased for resale or hire; vehicles intended in principle for the carriage of 
goods;  special  purpose  vehicles  (e.g.  roadside  assistance  vehicles,  loaders  and 
hearses); and vehicles designed for the carriage of at least 10 persons including the 
driver. The purpose of this distinction is to restrict the application of the measure to 
those vehicles which can be used for both business and private use. 

2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

There was no need for consultation or external expertise. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

The  Decision  authorises  Poland  to  introduce  a  special  measure  derogating  from 
Articles 26 and 168 of the VAT Directive as regards the deduction of VAT incurred 
in the purchase, acquisition, import, hiring or leasing of certain vehicles. 

This Decision is based on Article 395 of the VAT Directive. 

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

Given  the  strict  limitation  in  time  and  in  scope,  the  special  measure  appears  to  be 
proportionate to the aim pursued. 

Under Article 395 of the VAT Directive, derogation from the common VAT rules is 
only possible on the authority 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 an individual Member State. 

4. 

BUDGETARY IMPLICATION 

The proposal has no negative implications for the Union's budget. 

5. 

OPTIONAL ELEMENTS 

The proposal includes a sunset clause. 

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2010/0161 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Poland to introduce a special measure derogating from Article 26(1)(a) and 
Article 168 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 tax2, and in particular Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

By letter registered with the Secretariat-General of the Commission on 16 November 
2009, Poland requested authorisation to introduce a special measure derogating from 
the provisions of Directive 2006/112/EC governing the right to deduct input tax. 

The Commission informed the other Member States of the request made by Poland in 
a  letter  dated  14  December  2009.  By  a  letter  dated  17  December  2009,  the 
Commission notified Poland that it had all the information that it considered necessary 
to consider the request. 

Some vehicles are, by the nature of their design, equally suited to be used for private 
purposes as for business purposes. Currently, where a taxable person intends to use for 
private purposes a vehicle on which he has deducted the input tax in full or in part on 
the purchase, he is required to account for output tax on that use. However, the private 
use is difficult for the taxable person to establish with any degree of accuracy, and for 
the tax authorities to monitor. 

Therefore,  in  order  to  simplify  the  procedure  for  collecting  value  added  tax  (VAT), 
Poland seeks a derogation in order to restrict the right of deduction on the purchase of 
a vehicle used for both business and private purposes to 60 % of the VAT incurred on 
the purchase, acquisition, import, hire or lease of certain vehicles. The taxable person 
would subsequently no longer be required to account for output tax on the private use 
of the vehicle. 

(5) 

The special measure should only apply to vehicles with a maximum load capacity of 
over  500  kg  and  a  maximum  weight  of  3.5  tonnes  ,  and  for  a  VAT  deduction  not 

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OJ L 347, 11.12.2006, p. 1. 

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exceeding  6  000  PLN.  The  maximum  figure  for  the  VAT  deduction  is  intended  to 
prevent  the  excessive  deduction  of  VAT  incurred  on  the  purchase  or  hire  of  luxury 
cars,  which  are  more  likely  to  be  used  for  private  purposes.  Vehicles  intended  to 
perform a specific function such as roadside assistance vehicles, hearses, and loading 
vehicles, and vehicles for resale or hire should not fall under the derogation. 

(6) 

(7) 

The authorisation should be valid for a limited period and should therefore expire on 
31  December  2013.  In  light  of  the  experience  gained  up  to  that  date  an  assessment 
may be made whether or not the derogation remains justified. 

The  derogation  has  no  negative  impact  on  the  Union's  own  resources  accruing  from 
value added tax, 

HAS ADOPTED THIS DECISION:  

Article 1 

By  way  of  derogation  from  Article  168  of  Directive  2006/112/EC,  Poland  is  authorised  to 
restrict to 60 % the right to deduct VAT on the purchase, acquisition, import, hire or lease of 
vehicles, up to a maximum of 6 000 PLN. 

This restriction shall only apply to vehicles with a maximum authorised carrying capacity of 
over 500 kg and a maximum weight of 3.5 tonnes. 

Article 1 shall not apply to the following categories of vehicles: 

Article 2 

(1) 

(2) 

(3) 

(4) 

vehicles purchased for resale, hire or lease; 

vehicles intended for the carriage of goods; 

vehicles intended to perform a specific function;  

vehicles designed for the carriage of at least 10 persons, including the driver. 

Article 3 

By way of derogation from Article 26(1)(a) of Directive 2006/112/EC, Poland is authorised to 
not treat as a supply of services for consideration the private use by a taxable person or of his 
staff or, more generally, for purposes other than those of his business of a vehicle for which 
the restriction referred to in Article 1 of this Decision applies.  

This Decision shall expire on 31 December 2013. 

Article 4 

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Article 5 

This Decision is addressed to the Republic of Poland. 

Done at Brussels, 

For the Council 
The President 

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