Proposal for a COUNCIL IMPLEMENTING DECISION authorising Spain and France to introduce a special measure derogating from Article 5 of Directive 2006/112/EC on the common system of value added tax
Date: 2011-12-08
Institutions: European Commission
Subjects: France, Spain, added value, electrical energy, energy grid, provision of services, tax avoidance, telecommunications equipment

EUROPEAN COMMISSION 

Brussels, 8.12.2011 
COM(2011) 869 final 

2011/0424 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Spain and France to introduce a special measure derogating from Article 5 
of Directive 2006/112/EC on the common system of value added tax 

 
 
  
 
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  Commission  on,  respectively,  5  September  2011  and  13 
September  2011,  Spain  and  France  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 letters dated 25 October 2011 of the 
requests  made  by  these  Member  States.  By  letters  dated  27  October  2011,  the  Commission 
notified Spain and France that it had all the information necessary to consider the request. 

General context 

Spain and France signed a cooperation agreement on 27 June 2008 for putting an electricity 
line underground between Baixas (France) and Santa Llogia (Spain). This construction will be 
approximately  60  km  long,  of  which  just  under  60%  will  be  located  in  France  and  a  little 
more than 40% will be in Spain. Included in the construction is an 8 km long tunnel through 
the Alberes mountains of which 87% will be located on French territory and 13% in Spain.  

Under  the  normal  rules,  the  principle  of  territoriality  as  laid  down  in  Article  5  of  the  VAT 
Directive would require that Spanish VAT would be charged on the construction carried out 
in  Spain.  Likewise,  construction  carried  out  on  the  French  territory  would  be  subject  to 
French 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. 

Spain and France consider that applying the normal rules would create tax complications for 
the businesses responsible for the construction work in question. To simplify the charging of 
VAT they request that the supplies of goods and services, intra-Community acquisitions and 
imports are invoiced by the suppliers as 50% being in the territory of Spain and 50% being in 
the territory of France. 

After construction of the underground electricity interconnection the normal VAT rules will 
apply. 

The Commission accepts that in these cases, an equal split between France and Spain of the 
VAT  charged  on  the  construction  work  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. 

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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 VAT in relation to the 
construction of an underground electricity interconnection between Spain and France 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  Spain  and  France  to  derogate  from  the  territorial  application  of  VAT  as 
regards  the  construction  of  an  underground  electricity  interconnection  between  their 
respective territories. 

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). 

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

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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. 

5. 

ADDITIONAL INFORMATION 

The  proposal  will  expire  on  completion  of  the  construction  of  the  underground  electricity 
interconnection between Santa Llogia in Spain and Baixas in France. 

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2011/0424 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Spain and France to introduce a special 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) 

(5) 

By  letters  registered  with  the  Commission  on  5  September  2011  and  13  September 
2011  respectively,  Spain  and  France  requested  authorisation  to  introduce  a  special 
measure  derogating  from  the  provisions  of  Directive  2006/112/EC  in  relation  to  the 
construction  of  an  underground  electricity  interconnection  between  their  respective 
electricity networks. 

The Commission informed the other Member States by letters dated 25 October 2011 
of  the  requests  made  by  Spain  and  France.  By  letters  dated  27  October  2011,  the 
Commission  informed  Spain  and  France  that  it  had  all  the  information  necessary  to 
consider the requests. 

On  27  June  2008  an  agreement  was  signed  between  Spain  and  France  for  the 
construction  of  an  underground  electricity  interconnection  between  Santa  Llogia  in 
Spain and Baixas in France.  

Through  the  measure,  the  underground  electricity  interconnection  is  to  be  treated  as 
being situated 50 % in Spain and 50 % in France for the purposes of supplies of goods 
and  services,  intra-Community  acquisition  of  goods  and  importations  of  goods 
intended for its construction. 

In the absence of such measure, it would be necessary, according to the principle of 
territoriality,  to  ascertain  for  each  supply  whether  the  place  of  taxation  was  within 
Spain or France. 

1 

OJ L 347, 11.12.2006, p. 1. 

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(6) 

(7) 

The purpose of the measure is therefore to simplify the procedure for collecting value 
added tax on the construction of the underground electricity interconnection. 

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  5  of  Directive  2006/112/EC,  Spain  and  France  are 
authorised  to  consider  the  underground  electricity  interconnection  between  Santa  Llogia  in 
Spain and Baixas in France as being situated 50 % on the territory of Spain and 50 % on the 
territory  of  France  for  the  purposes  of  supplies  of  goods  and  services,  intra-Community 
acquisitions of goods and importations of goods intended for its construction. 

Article 2 

This Decision is addressed to the Kingdom of Spain and the French Republic. 

Done at Brussels, 

For the Council 
The President 

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