Proposal for a COUNCIL DECISION authorising Bulgaria and Romania to apply measures derogating from Article 5 of Directive 2006/112/EC on the common system of value added tax
Date: 2012-10-23
Institutions: European Commission
Subjects: Bulgaria, Romania, VAT, bridge, derogation from EU law, maintenance, tax exemption

EUROPEAN 
COMMISSION 

Brussels, 23.10.2012  
COM(2012) 611 final 

2012/0293 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising Bulgaria and Romania to apply measures derogating from Article 5 of 
Directive 2006/112/EC on the common system of value added tax 

EN 

   EN 

 
 
 
 
  
 
EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Pursuant  to  Article  395  of  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  Commission  on  25  May  2011,  Bulgaria  and  Romania 
requested  authorisation  to  derogate  from  the  provisions  of  Article  5  of  the  VAT 
Directive  governing  the  territorial  scope  of  the  VAT  in  relation  to  a  border  bridge 
(road  and  rail)  over  the  Danube.  By  letter  registered  with  the  Commission  on  7 
March 2012, this request was partly replaced by Bulgaria and Romania. 

In accordance with Article 395(2) of the VAT Directive, the Commission informed 
the  other  Member  States  by  letter  dated  17  July  2012  of  the  requests  made  by 
Bulgaria and Romania (however, Spain was informed by letter dated 18 July 2012). 
By letter dated 19 July 2012, the Commission notified Bulgaria and Romania that it 
had all the information it considered necessary for appraisal of the request. 

Bulgaria  and  Romania  decided,  in  order  to  facilitate  road  and  rail  traffic  between 
their territories, to sign an agreement on 5 June 2000 for the construction of a border 
bridge over the river Danube between Vidin (Bulgaria) and Calafat (Romania). 

In  this  context,  Bulgaria  and  Romanian  requested  to  be  authorised  to  apply 
derogating  measures  as  regards  the  VAT  rules  on  territoriality  for  the  maintenance 
and repair of that bridge and the charging of the toll for the crossing (the construction 
of the border bridge was explicitly excluded from the derogation request). 

Under  the  normal  rules,  the  principle  of  territoriality  laid  down  in  Article  5  of  the 
VAT  Directive  would,  in  combination  with  the  place  of  supply  rules,  require  that 
Bulgarian  VAT  would  be  charged  on  the  maintenance  and  repair  carried  out  in 
Bulgaria.  Likewise,  maintenance  and  repair  carried  out  on  the  Romanian  territory 
would  be  subject  to  Romanian  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.  To  that  end,  it  would  be  necessary  for 
businesses, involved in the works, to establish with certainty the territorial border in 
the river Danube for work carried out above water. Bulgaria and Romania consider 
that applying these normal rules would create tax complications for these businesses 
and  the  aim  of  this  simplification  derogation  is  therefore,  as  requested,  to  set  the 
territorial border as the middle of the bridge. 

As regards tolls, the taxable amount should, under the current rules, be related to the 
part  of  the  bridge  which  belongs  to  each  of  the  Member  States.  Apart  from  the 
above-mentioned problem of establishing the territorial border, each journey over the 

1 

OJ L 347, 11.12.2006, p. 1  

EN 

2 

   EN 

 
                                                 
bridge  should  be  invoiced  according  to  two  tolls  and  two  different  VAT  rates:  one 
for  the  Bulgarian  territory  and  one  for  the  Romanian  territory;  which  would  be 
burdensome  for  the  taxable  persons  concerned.  In  this  respect,  the  purpose  of  the 
derogation as  regards tolls  is  to  consider the bridge as being  on  the  territory  of  the 
Member State in which any transit journey starts. In practice, Bulgarian VAT will be 
charged  on  the  entire  toll  of  all  journeys  starting  from  the  Bulgarian  side  and 
crossing the border bridge into Romania. In the same way, Romanian VAT will be 
charged on the entire toll of all journeys starting in Romania. This will simplify the 
way the VAT is calculated and accounted for. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

There was no need for consultation or external expertise. 

The  Decision  proposal  aims  at  simplifying  the  VAT  collection  as  regards  certain 
services related to a border bridge. 

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

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

The  Decision  authorises  Bulgaria  and  Romania  to  apply  derogating  measures  from 
the territorial application of the VAT Directive as regards a border bridge. 

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

The  proposal  falls  under  the  exclusive  competence  of  the  EU.  The  subsidiarity 
principle therefore does not apply. 

This  Decision  concerns  an  authorisation  granted  to  individual  Member  States  upon 
their own request and does not constitute any obligation. 

Given the strict limitation 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 implications for the Union budget. 

EN 

3 

   EN 

 
2012/0293 (NLE) 

Proposal for a 

COUNCIL DECISION 

authorising Bulgaria and Romania to apply measures 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 tax2, and in particular Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

By  letters  registered  at  the  Commission  on  25  May  2011,  Bulgaria  and  Romania 
requested  authorisation  to  derogate  from  the  provisions  of  Article  5  of  Directive 
2006/112/EC governing the territorial scope of the VAT in relation to a border bridge 
over  the  Danube.  Bulgaria  and  Romania  partly  replaced  this  request  by  letter 
registered at the Commission on 7 March 2012. 

In accordance with Article 395(2) of Directive 2006/12/EC, the Commission informed 
the other Member States by letter dated 17 July 2012 of the requests made by Bulgaria 
and Romania; with the exception of Spain which was informed by letter dated 18 July 
2012.  By  letter  dated  19  July  2012,  the  Commission  notified  Bulgaria  and  Romania 
that it had all the information it considered necessary for appraisal of the request. 

(3)  With  regard  to  the  maintenance  and  repair  of  the  bridge,  the  derogation  sought  by 
Bulgaria  and  Romania  consists  in  considering  the  territorial  border  between  the  two 
Member States as being in the middle of the bridge. 

(4)  With regard to the charging of tolls to cross the border bridge, the two Member States 
wish to consider the entire length of the bridge as part of the territory of the State in 
which  any  transit  journey  starts.  Thus  only  Bulgarian  VAT  will  be  charged  on  the 
entire  toll  for  all  journeys  starting  from  the  Bulgarian  side.  In  the  same  way,  only 
Romanian VAT will be charged on journeys starting from the Romanian side. 

(5) 

In the absence of derogating measures, the determination of the place of supply for the 
maintenance, repair and charging of the toll would in the first place be dependent on 
the  precise  establishment  of  the  territorial  border  above  water  which,  in  practice, 
would be very difficult for the taxable persons involved. Secondly, both Bulgarian and 

2 

OJ L 347, 11.12.2006, p. 1. 

EN 

4 

   EN 

 
                                                 
Romanian VAT would have to be applied on the toll charged for a one-way journey 
over  the  border  bridge  from  the  one  Member  State  to  the  other.  The  derogation 
measures are therefore intended to simplify the collection of VAT on these services. 

As  the  matter  involved  is  the  definition  of  the  territory  for  VAT  purposes  to  which 
there  should  be  no  changes,  the  requested  derogation  should  be  granted  for  an 
indefinite period. 

The measures will not adversely affect the Union's own resources provided from VAT, 
nor  will  they  have  any  effect  on  the  amount  of  the  tax  due  at  the  final  stage  of 
consumption, 

(6) 

(7) 

HAS ADOPTED THIS DECISION:  

Article 1 

By  way  of  derogation  from  Article  5  of  Directive  2006/112/EC,  Bulgaria  and  Romania  are 
authorised,  under  the  conditions  of  Articles  2  and  3  of  this  Decision,  to  apply  measures 
derogating  from  Directive  2006/112/EC  in  relation  to  the  maintenance,  repair  and  the 
charging of tolls in relation to the border bridge across the Danube between Vidin (Bulgaria) 
and Calafat (Romania). 

Article 2 

As to determine the place of taxable transactions regarding the maintenance or the repair of 
the  border  bridge,  the  territorial  boundary  will  be  considered  as  being  the  middle  of  that 
bridge  for  the  supply  of  goods  and  services,  intra-Community  acquisitions  and  imports  of 
goods intended for that maintenance or repair. 

Article 3 

As  to  determine  the  place  of  the  taxable  transactions  regarding  the  charging  of  the  toll,  the 
border  bridge  will,  for  its  entire  length,  be  considered  as  being  part  of  the  territory  of  the 
Member State from which any journey using the bridge begins. 

Article 4 

This Decision is addressed to the Republic of Bulgaria and to Romania. 

Done at Brussels,  

For the Council 
The President 

EN 

5 

   EN