Proposal for a COUNCIL IMPLEMENTING DECISION authorising Croatia to apply tax exemption to gas oil used to operate machinery in humanitarian demining in accordance with Article 19 of Directive 2003/96/EC
Date: 2014-10-29
Institutions: European Commission
Subjects: Croatia, diesel fuel, mine action, tax exemption













EUR-Lex - 52014PC0673 - EN











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52014PC0673

Proposal for a COUNCIL IMPLEMENTING DECISION authorising Croatia to apply tax exemption to gas oil used to operate machinery in humanitarian demining in accordance with Article 19 of Directive 2003/96/EC /* COM/2014/0673 final - 2014/0312 (NLE) */









EXPLANATORY MEMORANDUM
1.           CONTEXT OF THE PROPOSAL
Taxation of energy products and electricity
in the Union is governed by Council Directive 2003/96/EC ([1]) (hereafter referred to
as the ‘Energy Taxation Directive’ or the ‘Directive’).
Pursuant to Article 19(1) of the Directive,
in addition to the provisions foreseen in particular in its Articles 5, 15 and
17, the Council, acting unanimously on a proposal from the Commission, may
authorise any Member State to introduce further exemptions or reductions in the
level of taxation for specific policy considerations.
The objective of this proposal is to allow Croatia to apply tax exemption to gas oil used to operate specialised machinery in
humanitarian demining. This exemption is meant to reduce the costs for legal
persons registered to conduct demining activities and thus speed up these
activities and contribute to the implementation of humanitarian demining policy
in Croatia. 
The tax reduction will expedite the
demining activities which are taking place in accordance with the international
Convention on the Prohibition of the Use, Stockpiling, Production and Transfer
of Anti-Personnel Mines and on Their Destruction (the Ottawa Treaty, 1998), the
international Convention on Cluster Munitions signed in Oslo in 2008, which
prohibits the use, transfer, stockpiling and destruction of stockpiled cluster
munitions within a period of eight years, and the 2005 Humanitarian Demining
Act of the Republic of Croatia.
The aim of the measure to be applied by Croatia is to give an incentive for quicker clearance of suspected minefields, freeing-up
of agricultural land and forests thus making them accessible again for economic
activities. The measure is also expected to have immediate positive effects on
human life and health in the areas contaminated by mines and unexploded
ordnance. 
Without the application of the measure
operators of demining equipment authorised to perform demining operations on
the territory of Croatia will have to pay the national excise duty rate on gas
oil used as motor fuel which stands at HRK 2 860 (app.
EUR 375.54) ([2])
and which applies to propellant use as well as uses in stationary motors, heavy
machinery and in vehicles intended for use off the public roadway (Article
8(2)(b), (c) and (d) of the Energy Taxation Directive). The time-limited tax
exemption would allow operators to reduce their costs for the demining
activities and increase their profit margins for a limited period of time, thus
creating an incentive for intensifying their work for the period of application
of the measure. This will speed up the process of demining.
The request and its general context 
By letter dated 8 April 2014, the Croatian
authorities requested an authorisation decision which will allow Croatia to apply a tax exemption to gas oil used to operate machinery in humanitarian
demining in accordance with Article 19 of Directive 2003/96/EC. Additional
information and clarifications were provided by the Croatian authorities on 15 July
2014.
The intention of the Croatian authorities
is to apply a tax exemption to gas oil used to operate machinery in
humanitarian demining. The measure will be implemented by applying a system of
refund of excise duties paid, in order to speed up the demining of the
remaining contaminated areas. Machines that will use gas oil exempted from
payment of excise duties will be classified according to their purpose, their
working tools and their method of operation.
According to the information provided by the
Croatian authorities as at 1 January 2014, the total
suspected mined areas and areas contaminated solely by unexploded ordnance in
Croatia covered 613.6 km2. Croatia estimates that the unused
production potential of the mine-contaminated forest areas represents an annual
loss of some EUR 30 million. 55 % of the contaminated agricultural
areas constitute arable land while the rest are meadows and pastures. It is
estimated that 900 000 people (approximately 20 % of the population)
still live in immediate proximity to suspected mined areas. Between 1991 and
2013, there were 1 353 mine-related incidents and accidents in
mine-contaminated areas, affecting 1 976 people and causing 510 deaths.
Croatia has
requested for the exemption to be granted for a period of six years, which is
the maximum period indicated in Article 19(2) of the Directive.
Scope
The beneficiaries of the measure will be
legal persons who will be authorised by the Croatian Mine Action Centre and who
will be registered to engage in humanitarian demining in accordance with the
Humanitarian Demining Act ([3]),
the Rules on the conduct of humanitarian demining ([4]) and the Rules on the
technical requirements for determining the conformity of machinery used in
humanitarian demining ([5]).
The beneficiaries will carry out demining and land clearance using demining
machinery and create the conditions for pyrotechnicians to deactivate
unexploded mines. The accredited machines will be defined according to their
type, purpose and fuel consumption, which will depend in turn on the depth of
clearance, the speed of the machine, the density of clearance and the effect of
the machine on tracks with compacted local soil. The measure will be granted by
refunding the excise duty paid, by collecting invoices paid for such use. These
records will contain purchasers’ details, machine serial numbers, the number of
machine operating hours, the quantity of gas oil purchased and the date of
purchase.
According to the figures provided by the
Croatian authorities, in Croatia there are 36 registered legal persons with 47
machines used in humanitarian demining. However, the measure is not meant to be
restricted only to these accredited operators but will apply to any new
accredited operator and demining machinery that may be used for this purpose,
in the future. The Croatian Mine Action Centre accredits and keeps a record of
all new mine clearance machines intended to be used for humanitarian demining.
According to
the Croatian Authorities the amount of the advantage per beneficiary brought by
the measure will depend on the size of the area to be demined by the demining
machinery and on the total consumption of gas oil used to operate the machinery
when demining such area. Croatia estimates that the amount of the benefit resulting
from the tax reduction calculated on the basis of average fuel consumption figures
for all operators involved in demining in 2013 is approximately
HRK 2 907 038 (app. EUR 381 736.50), which means that
the average amount per machine is estimated at HRK 61 859.15 or EUR 8 123.01
per annum. The Croatian authorities anticipate that for the six years that the
measure will apply, the annual budgetary expenditure based on the estimated
average consumption will increase and they will be: HRK 2 965 179
(app. EUR 389 371.23) for 2015, HRK 3 024 482 (app. EUR 397 158.66)
for 2016, HRK 3 084 971 (app. EUR 405 101.83) for
2017, HRK 3 146 671 (app. EUR 413 203.87) for 2018, HRK 3 209 604
(app. EUR 421 467.94)
for 2019, HRK 3 273 796 (app. EUR 429 897.30) for 2020
and the total amount will be: HRK 18 704 706 (app. EUR 2 456 200.83).
Operation of the measure
The competent Croatian Mine Action Centre
(HCR) departments will oversee and keep records of the operation of the
machinery. Records will be kept per project (site). There will be a special
form for each machine in which hours of operation, performance and fuel
consumption will be recorded for each day.
When a project has ended, the demining
operator will submit an excise tax return form for its machinery employed on
the site, accompanied by a log form for each machine. The forms will be
approved by the site manager and verified by a HCR official responsible for monitoring
the project, who will be present at the demining site at all times for the
purpose of carrying out on-the-spot checks.
In line with its general responsibility to
monitor the implementation of excise legislation, the Tax Administration of the
Ministry of Finance will perform, on the basis of information about the site
where demining activity is taking place, systematic checks of fuel used in
demining machinery in addition to carrying out its other monitoring duties. The
tax exemption will be granted by refunding the excise duty paid.
Arguments of the Croatian authorities concerning the impact of the
measure on the internal market
The measure
will not favour certain enterprises over others since it will apply to all
enterprises involved in humanitarian demining, thus no economic advantage will
be given to any particular enterprise involved. Similarly Croatia assumes that the measure will not affect intra-EU trade given its specific nature and that
it is limited to mine-contaminated areas of the Republic of Croatia. 
Existing provisions in the area of the
proposal
Council Directive 2003/96/EC of 27 October
2003 restructuring the Community framework for the taxation of energy products
and electricity, in particular Articles 8(1), 8(2)(c) and (d).
Assessment of the measure under
Article 19 of Directive 2003/96/EC
Specific policy considerations
Article 19(1), first subparagraph, of the
Directive reads as follows: 
‘In addition to
the provisions set out in the previous Articles, in particular in Articles 5,
15 and 17, the Council, acting unanimously on a proposal from the Commission,
may authorise any Member State to introduce further exemptions or reductions
for specific policy considerations.’
By means of the tax exemption in question
the Croatian authorities pursue the objective to speed up the demining of the
remaining contaminated areas in various regions of Croatia. Without the measure
gas oil used to propel machinery in humanitarian demining would be taxed at HRK 2 860
(app. EUR 375.54) per 1 000 l. To be noted that Croatia applies the same rate of taxation to gas oil used as
propellant and for the purposes laid down in Article 8(2)(c) and (d) of Directive 2003/96/EC. Also the
time-limited application of the requested tax exemption would create an incentive for
the economic operators involved in humanitarian demining activities to finalise
their work before the expiration of the six year period of the measure and
therefore to contribute to the stated policy objective, which is to speed up the
demining of the remaining contaminated areas. In Croatia, except of the measure
envisaged there are no other subsidies that apply to economic operators
involved in humanitarian demining of mine-contaminated areas.
Croatia has pointed
out that the application of the measure would have immediate positive effects
on human life and health in the areas contaminated by mines and unexploded
ordnance. In accordance to the above, the Commission notes that according to
the information provided by the Croatian authorities in the period between 1991
and 2013, 1 976 people sustained mine-related injuries in Croatia, where 510 of those died. It also notes that the loss of revenues from the failure
to cultivate mine-contaminated agricultural land could reach the amount of EUR 50
million.
It can be concluded that the wish to apply a
tax exemption to gas oil used to operate machinery in
humanitarian demining in various regions of Croatia is
based on specific policy considerations in particular as regards social,
safety, health and regional policy.
Consistency with the other policies
and objectives of the Union
The requested measure concerns mainly the
EU's health regional and environment policy to the extent that it will partly
help for the quicker reduction of the mine-contaminated areas of the Republic of   Croatia which present a threat to the life and health of humans, domesticated
animals and wildlife. It should be noted that it is
estimated that 900 000 people in Croatia still live in proximity to
suspected mined areas putting their health and safety in danger.
The Commission notes that the measure is
limited to gas oil used in accredited special-purpose machines designed and
built specifically for clearing mined areas and that it is also limited to mine-contaminated areas of the Republic of Croatia. It should also be mentioned that these machines
cannot be used for any kind of transportation on public roads.
It can thus be concluded that the measure
is compatible with the health, environment, energy and transport policies of
the Union.
Under the circumstances described, it also
appears acceptable in view of the proper functioning of the internal market and
the need to ensure fair competition. In particular, due to the fact will not
favour certain enterprises over others since it will apply to all enterprises
involved in humanitarian demining in Croatia. Similarly, the measure will not
affect intra-EU trade given its specific nature and that it is limited to
mine-contaminated areas of the Republic of Croatia.
Period of application of the measure
The Commission suggests that the period of
application is set to the maximum allowed by Directive 2003/96/EC, i.e. six
years. This period seems appropriate in order to allow
the Croatian authorities to gather information to assess the results of the
measure and provide economic operators benefiting from the measure with a sufficient
degree of certainty and enough time to conclude the process of dimining of the
contaminated areas.
State aid rules
The Croatian authorities envisaged to apply
tax exemption to gas oil used to operate machinery in
humanitarian demining by refunding all the excise duty. The measure constitutes state aid and should be notified to the
Commission pursuant to Article 108(3) of the TFEU. 
2.           RESULTS OF CONSULTATIONS
WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS
Consultation
of interested parties
This proposal is based on a request made by
 Croatia and concerns only this Member State.
Collection
and use of expertise
There was no need for external expertise.
Impact
assessment
This proposal concerns an authorisation for
an individual Member State upon its own request.
3.           LEGAL ELEMENTS OF THE
PROPOSAL
Subsidiarity principle
The field of indirect taxation covered by
Article 113 TFEU is not in itself within the exclusive competence of the
European Union within the meaning of Article 3 TFEU.
However, the exercise by Member States of
their competences in this field is strictly circumscribed and limited by
existing EU law. Pursuant to Article 19 of Directive 2003/96/EC, only the
Council is empowered to authorise a Member State to introduce further
exemptions or reductions within the meaning of that provision. Member States
cannot substitute themselves for the Council.
The proposal therefore respects the
principle of subsidiarity.
Proportionality
principle
The proposal respects the principle of
proportionality. The tax exemption does not exceed what is necessary to attain
the objective in question (cf. the considerations on the Internal market and
fair competition aspects, above).
Choice of
instruments
Instrument(s) proposed: Council decision.
Article 19 of Directive 2003/96 makes
provision for this type of measure only.
4.           BUDGETARY IMPLICATION 
The measure does not impose any financial
or administrative burden on the Union. The proposal therefore has no impact on
the budget of the Union.
2014/0312 (NLE)
Proposal for a
COUNCIL IMPLEMENTING DECISION
authorising Croatia to apply tax exemption
to gas oil used to operate machinery in humanitarian demining in accordance
with Article 19 of Directive 2003/96/EC
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, 
Having regard to Council Directive 2003/96/EC
of 27 October 2003 restructuring the Community framework for the taxation of
energy products and electricity ([6]),
and in particular Article 19 thereof,
Having regard to the proposal from the
European Commission,
Whereas:
(1)       By letter dated 8 April 2014,
the Croatian authorities requested an authorisation decision which will allow Croatia to apply tax exemption to gas oil used to operate machinery in humanitarian
demining in accordance with Article 19 of Directive 2003/96/EC.
(2)       With the tax exemption it
intends to apply, Croatia aims at speeding up the demining of the remaining mine
contaminated areas in various regions. The measure will thus have immediate
positive effects on human life and health in these regions.
(3)       The measure is limited to accredited
special-purpose machines designed and built specifically for clearing mined
areas.
(4)       The
measure is limited to mine-contaminated areas on the territory of Croatia.
(5)       The measure will apply to
all operators involved in humanitarian demining in Croatia, thus no economic
advantage will be given to any particular operator involved.
(6)       Consequently, the measure
is acceptable from the point of view of the proper functioning of the internal
market and of the need to ensure fair competition and it is compatible with the
European Union’s health, environment, energy and transport policies.
(7)       It follows from Article
19(2) of Directive 2003/96/EC that each authorisation granted under this
Article must be strictly limited in time. In order to provide economic
operators concerned with a sufficient degree of certainty and enough time to
conclude the process of dimining of the contaminated areas, the authorisation
is granted for a period of six years.
(8)       This decision is without
prejudice to the application of the Union rules regarding State aid,
HAS ADOPTED THIS DECISION: 
Article 1
Croatia is hereby
authorised to exempt from taxation gas oil used to operate specialised
machinery used in humanitarian demining on its territory. The measure is limited to accredited special-purpose machines
designed and built specifically for clearing mined areas.
Article 2
This Decision shall take effect on the day
of its notification. It shall expire six years
thereafter.
Article 3
This Decision
is addressed to the Republic of Croatia.
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
([1])            Council
Directive 2003/96/EC of 27 October 2003 restructuring the Community framework
for the taxation of energy products and electricity (OJ L 283, 31.10.2003, p.
51).
([2])            All
calculations are based on the exchange rate on 1 October 2013, i.e. HRK 7.6153
for EUR 1. Cf. OJ C 286, 2.10.2013.
([3])            Official
Gazette of the Republic of Croatia-NN Nos 153/2005, 63/2007 and 152/2008.
([4])            Official
Gazette of the Republic of Croatia-NN Nos 53/2007, 111/2007 and 141/2011.
([5])            Official
Gazette of the Republic of Croatia-NN Nos 53/2007, 39/2011 and 57/2013.
([6])            OJ L 283, 31.10.2003, p. 51.