Proposal for a COUNCIL IMPLEMENTING DECISION amending Decisions 2009/791/EC and 2009/1013/EU authorising Germany and Austria respectively to continue to apply a measure derogating from Articles 168 and 168a of Directive 2006/112/EC on the common system of value added tax
Date: 2015-10-21
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Austria, Germany, VAT, derogation from EU law, goods and services, tax relief

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   EUROPEAN COMMISSION  Brussels, 21.10.2015  COM(2015) 517 final 2015/0242 (NLE)   Proposal for a COUNCIL IMPLEMENTING DECISION amending Decisions 2009/791/EC and 2009/1013/EU authorising Germany and Austria respectively to continue to apply a measure derogating from Articles 168 and 168a of Directive 2006/112/EC on the common system of value added tax  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons 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  tax1,  the  Council,  acting  unanimously  on  a  proposal  from  the 
Commission, may authorise any Member State to apply special measures derogating from the 
Directive in order to simplify the procedure for charging the tax or to prevent certain types of 
tax evasion or avoidance. 

By letters registered with the Commission on respectively 19 March 2015 and on 16 March 
2015,  Austria  and  Germany  requested  an  authorisation  to  continue  applying  a  measure 
derogating  from  Articles  168  and  168a  of  Directive  2006/112/EC,  in  order  to  exclude  from 
the right of deduction the VAT borne on goods and services which are used for more than 90 
% for non-business purposes. 

In  accordance  with  Article  395(2)  of  Directive  2006/112/EC,  the  Commission  informed  the 
other Member States by letters dated 15 September 2015 of the requests made by Austria and 
Germany. The Commission notified Austria and Germany by letters dated 17 September 2015 
that it had all the information necessary to consider the requests. 

Article 168 of Directive 2006/112/EC provides that a taxable person is entitled to deduct the 
VAT charged on purchases made for the purpose of his taxed transactions. Article 168a(1) of 
Directive 2006/112/EC provides that the VAT on expenditure related to immovable property 
forming part of the business assets of a taxable person and used both for business and non-
business  purposes  shall  be  deductible  only  up  to  the  proportion  of  the  property's  use  for 
purposes  of  the  taxable  person's  business.  Pursuant  to  Article  168a(2)  of  Directive 
2006/112/EC  Member  States  may  also  apply  this  rule  in  relation  to  expenditure  related  to 
other goods forming part of the business assets as they specify.  

The  measure  pursued  by  Austria  and  Germany  deviates  from  those  principles  and  entirely 
excludes from the right of deduction the VAT borne on goods and services that are used by a 
taxable  person  for  more  than  90%  for  private  or  non-business  purposes,  including  non-
economic activities. 

The  derogating  measure  for  Austria  had  initially  been  granted  by  Council  Decision 
2004/866/EC  of  13  December  20042  for  a  period  until  31  December  2009  and  was  again 
granted  by  Council  Implementing  Decision  2009/1013/EU  of  22  December  20093  until  31 
December 2012 and by Council Implementing Decision 2012/705/EU of 13 November 2012 
until 31 December 20154. 

The  derogating  measure  for  Germany  had  initially  been  granted  by  Council  Decision 
2003/354/EC of 13 May 20035 until 30 June 2004, by Council Decision 2004/817/EC of 19 
November 20046 until 31 December 2009, by Council Decision 2009/791/EC of 20 October 

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3 
4 
5 
6 

OJ L 347, 11.12.2006, p.1. 
OJ L 371, 18.12.2004, p. 47. 
OJ L 348, 29.12.2009, p. 21. 
OJ L 319, 16.11.2012, p.8. 
OJ L 123, 17.5.2003, p. 47. 
OJ L 357, 2.12.2004, p. 33. 

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20097  until  31  December  2012  and  by  Council  Implementing  Decision  2012/705/EU  of  13 
November 2012 until 31 December 2015. 

In their current requests, Austria and Germany informed the Commission that they have been 
applying this special measure until now successfully, making the experience that it was very 
useful in terms of simplifying the VAT collection and preventing tax evasion and avoidance. 

Derogations are in general granted for a limited time as to allow an assessment whether the 
special  measure  is  appropriate  and  effective.  In  this  respect,  based  on  the  information 
provided  by  Austria  and  Germany,  the  Commission  understands  that  the  90%/10% 
apportionment between business and non-business use still represents a sound basis to sort out 
transactions in respect of which the business use can be considered as negligible.  

As  a  consequence,  the  special  measure  in  question  provides  a  facilitation  to  both  tax 
administrations and businesses as there is no need for any monitoring of the subsequent use of 
the  goods  and  services  to  which  the  exclusion  from  deduction  applied  at  the  time  of  their 
acquisition,  particularly  with  respect  to  a  possible  taxation  of  a  private  use  pursuant  to 
Articles  16  or  26  of  Directive  2006/112/EC  or  adjustments  to  deduction  as  required  under 
Articles 184 – 192 of that Directive. The amount of tax due at the level of final consumption 
is  only  affected  to  a  negligible  extent.  An  extension  of  the  derogating  measure  is  therefore 
appropriate. 

However, any extension should be limited in time in order to assess whether the conditions, 
on which the derogations are based, would still be valid. Therefore, it is proposed to extend 
the derogations until the end of 2018 and to request Austria and Germany to present, together 
with  the  extension  request,  a  report  by  1  April  2018  at  the  latest  including  a  review  of  the 
applied apportionment between business  and non-business use  on which the exclusion  from 
deduction is based in case a further extension would be envisaged beyond 2018. 

• 

Consistency with existing policy provisions in the policy area 

Article  176  of  Directive  2006/112/EC  stipulates  that  the  Council  shall  determine  the 
expenditure on which the VAT is not deductible. Until such time, it authorises Member States 
to maintain exclusions, which were in place on 1 January 1979. There are therefore a number 
of "stand still" provisions restricting the right to deduct. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article  395(1)  of  Council  Directive  2006/112/EC  of  28  November  2006  on  the  common 
system of value added tax. 

• 

Subsidiarity (for non-exclusive competence)  

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

• 

Proportionality 

The proposal complies with the proportionality principle for the following reasons: 

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

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OJ L 283, 30.10.2009, p. 55. 

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Given  the  narrow  scope  of  the  derogation,  the  special  measure  is  proportionate  to  the  aim 
pursued. 

• 

Choice of the instrument 

Proposed instruments: Council Implementing Decision. 

Other means would not be adequate for the following reasons: 

Under  Article  395  of  Council  Directive  2006/112/EC,  a  derogation  from  the  common  VAT 
rules  is  only  possible  upon  authorization  of  the  Council  acting  unanimously  on  a  proposal 
from the Commission. A Council Implementing Decision is the only suitable instrument since 
it can be addressed to individual Member States. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

Not relevant. 

• 

Collection and use of expertise 

There was no need for external expertise. 

• 

Impact assessment 

The  proposal  is  designed  to  simplify  the  procedure  for  charging  tax  and  has,  therefore,  a 
potential  positive  impact  for  both  businesses  and  administrations.  The  solution  has  been 
identified by Austria and Germany as a suitable measure and is comparable to other past and 
present derogations. 

4. 

BUDGETARY IMPLICATIONS 

The proposal will not adversely affect the Union's own resources from VAT. 

5. 

OTHER ELEMENTS 

The proposal includes a review clause and a sunset clause. 

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2015/0242 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Decisions 2009/791/EC and 2009/1013/EU authorising Germany and Austria 
respectively to continue to apply a measure derogating from Articles 168 and 168a 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 tax8, and in particular Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

Germany and Austria were each granted a derogating measure by Council Decisions 
2009/791/EC9  and 2009/1013/EU10  respectively. The application of the measure was 
extended by Council Implementing Decision 2012/705/EU11 until 31 December 2015. 

The special measure derogates from Articles 168 and 168a of Directive 2006/112/EC 
which  govern  taxable  persons`  right  to  deduct  VAT  charged  on  goods  and  services 
supplied to them for the purposes of their taxed transactions. The derogating measure 
is intended to exclude VAT borne on goods and services completely from the right of 
deduction where those goods and services are used by the taxable person for more than 
90%  for  private  purposes  or  for  purposes  of  his  employees,  or  in  general  for  non-
business purposes or non-economic activities. 

In  order  to  take  into  account  the  case-law  of  the  Court  of  Justice  of  the  European 
Union,  according  to  which  input  VAT  relating  to  expenditure  incurred  by  a  taxable 
person  cannot  be  deducted  if  it  relates  to  activities  which,  in  view  of  their  non-
economic  nature,  do  not  come  within  the  scope  of  Directive  2006/112/EC,  it  is 
appropriate to clarify that the special measures also apply to goods and services used 
for activities of a non-economic nature. 

(4) 

The  objective  of  the  special  measure  is  to  simplify  the  procedure  for  charging  and 
collecting  VAT.  The  amount  of  tax  due  at  the  level  of  final  consumption  is  only 
affected to a negligible extent. 

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OJ L 347, 11.12.2006, p.1. 
Council  Decision  2009/791/EC  of  20  October  2009  authorising  the  Federal  Republic  of  Germany  to 
continue  to  apply  a  measure  derogating  from  Article  168  of  Directive  2006/112/EC  on  the  common 
system of value added tax (OJ L 283, 30.10.2009, p. 55). 
Council  Implementing  Decision  2009/1013/EU  of  22  December  2009  authorising  the  Republic  of 
Austria to continue to apply a  measure derogating from  Article 168 of Directive 2006/112/EC on the 
common system of value added tax (OJ L 348, 29.12.2009, p. 21). 
Council Implementing Decision 2012/705/EU of 13 November 2012 amending Decision 2009/791/EC 
and Implementing Decision 2009/2013/EU authorising Germany and Austria respectively to continue to 
apply  a  measure  derogating  from  Articles  168  and  168a  of  Directive  2006/112/EC  on  the  common 
system of value added tax (OJ L 319, 16.11.2012, p.8). 

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(5) 

(6) 

(7) 

By  letters  registered  with  the  Commission  on  16 March  2015  and  19 March  2015, 
Germany and Austria requested authorisation to continue to apply the special measure.  

In  accordance  with  the  second  subparagraph  of  Article  395(2)  of  Directive 
2006/112/EC,  the  Commission  informed  the  other  Member  States,  by  letters  dated 
15 September  2015,  of  the  requests  made  by  Austria  and  Germany.  By  letters  dated 
17 September 2015, the Commission notified Austria and Germany that it had all the 
information necessary to consider the request. 

According to the information provided by Austria and Germany, the legal and factual 
situation which justified the current application of the special measure concerned has 
not  changed  and  continues  to  exist.  Austria  and  Germany  should  therefore  be 
authorised  to  continue  applying  this  special  measure  during  a  further  period,  but 
limited in time until 31 December 2018 at the latest in order to allow for a review of 
the necessity and effectiveness of the derogating measure and the apportionment rate 
between business and non-business use it is based on. 

(8)  Where Austria or Germany consider a further extension beyond 2018 to be necessary, 
a  report  on  the  application  of  the  measure,  which  includes  a  review  of  the 
apportionment rate applied, should be submitted to the Commission together with the 
extension request no later than 31 March 2018 in order to reserve sufficient time for 
the Commission to examine the request. 

(9) 

The  derogations  will  only  have  a  negligible  effect  on  the  overall  amount  of  tax 
collected  at  the  stage  of  final  consumption  and  will  not  adversely  affect  the  Union's 
own resources accruing from value added tax. 

(10)  Decisions 2009/791/EC and 2009/1013/EU should therefore be amended accordingly, 

HAS ADOPTED THIS DECISION:  

Articles 1 and 2 of Decision 2009/791/EC are replaced by the following: 

'Article 1 

Article 1 

By way of derogation from Article 168 and Article 168a of Directive 2006/112/EC, Germany 
is authorised to exclude value added tax (VAT) borne on goods and services from the right to 
deduct VAT when the goods and services in question are used more than 90 % for the private 
purposes  of  a  taxable  person  or  of  his  employees,  or,  more  generally,  for  non-business 
purposes or non-economic activities. 

Article 2 

This Decision shall expire on 31 December 2018. 

Any  request  for  the  extension  of  the  special  measure  provided  for  in  this  Decision  shall  be 
submitted to the Commission by 31 March 2018 at the latest. 

Such request shall be accompanied by a report which includes a review of the apportionment 
rate applied on the right to deduct VAT on the basis of this Decision.'. 

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Articles 1 and 2 of Decision 2009/1013/EU are replaced by the following: 

'Article 1 

Article 2 

By way of derogation from Article 168 and Article 168a of Directive 2006/112/EC, Austria is 
authorised to exclude value added tax (VAT) borne on goods and services from the right to 
deduct VAT when the goods and services in question are used more than 90 % for the private 
purposes  of  a  taxable  person  or  of  his  employees,  or,  more  generally,  for  non-business 
purposes or non-economic activities. 

Article 2 

This Decision shall expire on 31 December 2018. 

Any  request  for  the  extension  of  the  special  measure  provided  for  in  this  Decision  shall  be 
submitted to the Commission by 31 March 2018 at the latest. 

Such request shall be accompanied by a report which includes a review of the apportionment 
rate applied on the right to deduct VAT on the basis of this Decision.'. 

This Decision shall apply as from 1 January 2016. 

Article 3 

Article 4 

This Decision is addressed to the Republic of Austria and the Federal Republic of Germany. 

Done at Brussels, 

For the Council 
The President 

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