Proposal for a COUNCIL DECISION authorising Denmark to introduce a special measure derogating from Article 75 of Council Directive 2006/112/EC
Date: 2012-04-25
Institutions: European Commission
Subjects: Denmark, VAT, commercial vehicle, derogation from EU law, tax relief

EUROPEAN COMMISSION 

Brussels, 25.4.2012  
COM(2012) 185 final 

2012/0093 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising Denmark to introduce a special measure derogating from Article 75 of 
Council Directive 2006/112/EC 

(only the Danish text is authentic) 

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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 derogating 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  Commission  on  5th  September  2011,  Denmark 
requested  authorisation  to  introduce  a  measure  derogating  from  Article  75  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  March  2012  of  the  request  made  by 
Denmark. By letter dated 15 March 2012, the Commission notified Denmark that it 
had all the information necessary to consider the request in the way set out below. 

Currently,  Denmark  makes  use  of  a  standstill  provision  under  Article  176  of  the 
VAT Directive regarding the deduction of VAT on the purchase and running costs of 
a light goods vehicle with a maximum authorised weight of up to three tonnes. The 
main features of this provision are as follows. A business which registers such a light 
goods vehicle as being solely for business purposes is authorised to deduct in full the 
VAT  on  the  purchase  of  the  vehicle  and  the  running  costs.  However,  a  business 
which  registers  such  a  light  goods  vehicle  as  being  for  both  business  and  personal 
use is not authorised to deduct the VAT on the purchase cost, but can deduct in full 
the VAT on the running costs of the vehicle. Where a light goods vehicle, which has 
been registered as being used solely for business purposes, is subsequently used for 
private purposes, even if this is only once, the taxable person loses in full his right of 
deduction of the VAT on the purchase cost. 

This system can be complicated and costly to administer, both for the taxable person 
and for the tax administration, and Denmark has therefore requested a derogation to 
allow for a simplified procedure. 

Under  the  terms  of  the  derogation,  Denmark  would  introduce  a  special  measure 
applying  to  light  goods  vehicles  with  a  maximum  authorised  weight  of  up  to  three 
tonnes. Under this special measure, a taxable person can register a vehicle as being 
for business purposes only, and deduct in full the VAT incurred on the purchase and 
running  costs  of  the  vehicle,  as  is  the  situation  under  the  terms  of  their  current 
standstill  provision.  However,  should  the  taxable  person  use  the  vehicle  for  private 
purposes, he would no longer lose the right of deduction on the purchase cost of the 
vehicle, but would instead be authorised to calculate the tax on the private use on a 
flat rate basis for up to twenty days each calendar year (the 'pay-per-day' system).  

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OJ L 347, 11.12.2006, p. 1  

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The  amount  of  DKK  40  per  day  has  been  assessed,  on  the  basis  of  the  full  cost 
model,  by  the  Danish  authorities  using  national  statistics,  and  covers  only  VAT.  A 
similar payment, under separate national legislation, will be required to cover income 
tax on the disposal of a company car, and a surcharge to the circulation tax. Should 
the taxable person use the vehicle for more than twenty days in a calendar year, then 
the current standstill rules would apply, and the taxable person would lose in full the 
right of deduction of the purchase costs of the vehicle.  

The  Danish  tax  authorities  will  develop  an  electronic  system  whereby  taxable 
persons are able to pay this daily amount on-line.  

The Danish authorities consider that the new measure allows for a simplified means 
for  taxable  persons  to  fulfil  their  accounting  obligations  (by  paying  on-line  via  the 
pay-per-day  scheme  rather  than  repaying  all  of  the  VAT  originally  claimed  on  the 
purchase of the light goods vehicle) and for the tax authorities to collect and charge 
the tax. The measure does not lead to any extension of the standstill provisions and 
makes the Danish system more consistent with the general VAT rules. 

The taxable person would still be able to register their light goods  vehicle for both 
business and private use, and use the current system if that suits their circumstances. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

There was no need for consultation or external expertise. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

The Decision authorises Denmark to introduce a special measure derogating from the 
VAT  Directive  as  regards  the  accounting  of  the  VAT  on  the  private  use  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  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 European Union's budget. 

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5. 

OPTIONAL ELEMENTS 

The proposal includes a sunset clause.  

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2012/0093 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising Denmark to introduce a special measure derogating from Article 75 of 
Council Directive 2006/112/EC 

(only the Danish text is authentic) 

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  Commission  on  5  September  2011,  Denmark  requested 
authorisation  to  apply  a  measure  derogating  from  the  provisions  of  Directive 
2006/112/EC governing the right to deduct input tax. 

In  accordance  with  Article 395(2)  of  Directive  2006/112/EC,  the  Commission 
informed the other Member States of the request made by Denmark in a letter dated 14 
March 2012. By a letter dated 15 March 2012, the Commission notified Denmark that 
it had all the information that it considered necessary to consider the request. 

Currently, pursuant to Article 176 of Directive 2006/112/EC, if a light goods vehicle 
with a maximum authorised weight of up to three tonnes is registered with the Danish 
authorities as being used for business purposes only, the taxable person is authorised 
to deduct in full the input tax on the purchase and running costs of the vehicle. If such 
a vehicle is subsequently used for private purposes, the taxable person loses the right 
to deduct the VAT incurred on the purchase cost of the vehicle.  

Because  this  system  places  a  heavy  burden  on  both  the  taxable  person  and  the  tax 
administration, the Danish authorities have requested authorisation to apply a special 
measure  derogating  from  Article 75  of  Directive  2006/112/EC.  This  measure  allows 
taxable persons, who have registered a vehicle as being for business purposes only, to 
use the vehicle for non-business purposes, and to calculate the taxable amount of the 
deemed  supply  pursuant  to  Article 75  of  Directive  2006/112/EC  on  a  daily  flat  rate 
basis, rather than lose their right to deduct the VAT incurred on the purchase cost of 
the vehicle. 

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OJ L 347, 11.12.2006, p. 1. 

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(5) 

(6) 

(7) 

(8) 

(9) 

This simplified calculation method is however limited to twenty days of non-business 
use  for  each  calendar  year,  and  the  flat  rate  amount  of  VAT  to  be  paid  is  fixed  at 
DKK 40  for  each  day  of  non-business  use.  This  amount  has  been  determined  by  the 
Danish Government through an analysis of national statistics. 

This  measure,  which  is  to  apply  to  light  goods  vehicles  with  a  maximum  authorised 
weight of up to three tonnes, would simplify the VAT obligations of taxable persons 
who make occasional non-business use of a vehicle registered for business purposes. 
However, a taxable person could still choose to register his vehicle as being for both 
business and personal use, and lose his right of deduction of the VAT on the purchase 
of the light goods vehicle, and pay no daily charge for any private use.  

Putting in place a measure ensuring that a taxable person who makes occasional non-
business  use  of  a  vehicle  registered  for  business  purposes  is  not  deprived  of  the  full 
right to deduct the input tax on that vehicle would be consistent with the general rules 
on deduction as laid down by Directive 2006/112/EC.  

The authorisation should be valid for a limited period and should therefore expire on 
31 December  2014.  In  light  of  the  experience  gained  up  to  that  date  an  assessment 
should be made whether or not the derogation remains justified. 

This  measure  will  have  no  effect  on  the  European  Union's  own  resources  provided 
from value added tax, 

HAS ADOPTED THIS DECISION:  

Article 1 

Where a taxable person uses for private purposes, or those of his staff, or more generally for 
purposes other than those of his business, a light goods vehicle which has been registered as 
being  solely  for  business  use,  Denmark  is  authorised,  by  derogation  from  Article 75  of 
Directive 2006/112/EC, to determine the taxable amount by reference to a flat-rate for each 
day of that use.  

The flat rate per day referred to in the first paragraph shall be DKK 40.  

Article 2 

The  measure  referred  to  in  Article 1  shall  only  be  applied  to  light  goods  vehicles  with  a 
maximum authorised total weight of three tonnes. 

This  measure  shall  not  apply  where  the  non-business  use  exceeds  twenty  days  per  calendar 
year. 

This Decision shall expire on 31 December 2014. 

Article 3 

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Article 4 

This Decision is addressed to the Kingdom of Denmark. 

Done at Brussels,  

For the Council 
The President 

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