Proposal for a COUNCIL IMPLEMENTING DECISION authorising Denmark to apply a special measure derogating from Article 75 of Council Directive 2006/112/EC on the common system of value added tax
Date: 2018-02-13
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Denmark, VAT, commercial vehicle, derogation from EU law, tax relief

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   EUROPEAN COMMISSION  Brussels, 13.2.2018 COM(2018) 68 final 2018/0027 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising Denmark to apply a special measure derogating from Article 75 of Council Directive 2006/112/EC on the common system of value added tax  
 
 
EXPLANATORY MEMORANDUM 

Pursuant  to  Article  395  of  Council  Directive  2006/112/EC  of  28  November  2006  on  the 
common  system  of  value  added  tax  (hereafter  "the  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  21  November  2017,  Denmark  requested 
authorisation to prolong Council Decision (EU) 2015/9921 and to apply 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 7 December 2017 and by letter dated 8 December 2017 France, 
Germany, Sweden and Czech Republic of the request made by Denmark. By letter dated 11 
December 2017, the Commission notified Denmark that it had all the information necessary 
to consider the request.  

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

In  order  to  simplify  VAT  collection  and  combat  tax  evasion,  Denmark  requested  in  2011  a 
derogation  which  would  allow  the  introduction  of  a  flat-rate  scheme  for  the  private  use  of 
light  goods  vehicles  with  a  maximum  authorised  weight  of  up  to  three  tonnes  which  have 
been  registered  solely  for  business  use.  The  derogation  request  was  approved  by  Council 
Implementing Decision 2012/447/EU of 24 July 20122. Denmark requested the prolongation 
of the measure which was approved by Council Implementing Decision (EU) 2015/992 of 19 
June 20153. The latter Council Implementing Decision expired on 31 December 2017.  

Without such derogating measure the Danish legislation implies that any private use of such a 
vehicle registered solely for business purposes would have as a consequence that the taxable 
person  loses  in  full  the  right  of  deduction  of  the  VAT  on  the  purchase  cost  of  the  vehicle. 
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  light  goods  vehicles 
with a maximum authorised weight of up to three tonnes. If a business registers such a light 
goods vehicle as being solely for business purposes, it will be authorised to deduct in full the 
VAT on the purchase of the vehicle as well as the running costs. However, a business which 
registers a light goods vehicle as being both for 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.  

The Danish system as described above can be complicated and costly to administer, both for 
the taxable person and for the tax administration. Denmark has therefore requested to apply a 
simplified procedure as previously granted by Council Implementing Decision 2012/447/EU 
and subsequently by Council Implementing Decision (EU) 2015/992.  

The flat-rate system used in Denmark could be used by a taxable person for up to twenty days 
per calendar year for a cost of DKK 40 per day. The amount of DKK 40 per day would cover 
only VAT and has been determined by the Danish Government on the basis of an analysis of 

1 
2 
3 

OJ L 159, 25.06.2015, p. 66. 
OJ L 202, 28.07.2012, p. 24. 
OJ L 159, 25.06.2015, p. 66.  

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national statistics. A similar payment, under separate  national legislation, would 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 during a calendar year, 
the  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 authorities have developed an electronic system whereby taxable persons can pay 
the  daily  flat-rate  online.  The  authorities  consider  the  system  to  simplify  the  accounting 
obligations for the taxable persons as well as the tax authorities' duty to collect and charge the 
tax. 

The  simplified  procedure  is  optional.  The  taxable  person  would  therefore  still  be  able  to 
register  their  light  goods  vehicle  for  both  business  and  private  use  if  that  suits  their 
circumstances.  

As  requested  by  Article  3  of  Council  Implementing  Decision  (EU)  2015/992,  Denmark 
submitted,  together  with  the  prolongation  request,  a  report  on  the  review  of  the  measure. 
According to the Danish authorities, the simplified procedure has  worked very well  the last 
years and they find good reasons to continue with such a procedure. As the adoption of the 
derogating  measure  by  the  Commission  will  take  place  after  the  expiry  of  Council 
Implementing  Decision  (EU)  2015/992  (i.e.  after  31  December  2017),  this  proposal  cannot 
prolong the previous measure.  

• 

Consistency with existing policy provisions in the policy area 

Article 176 of the VAT Directive 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 in relation to passenger cars.  

Notwithstanding previous initiatives to establish rules on which categories of expenditure may 
be  subject  to  a  restriction  on  the  right  to  deduct4,  such  derogation  is  appropriate  in  the 
awaiting of a harmonisation of these rules at EU level.  

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 395 of the VAT Directive. 

• 

Subsidiarity (for non-exclusive competence)  

Considering the provision of the VAT Directive on which the proposal is based, 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.  

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

4 

COM (2004) 728 final - Proposal for a Council Directive amending Directive 77/388/EEC with a view 
to simplifying value added tax obligations (OJ C 24, 29.1.2005, p.10) withdrawn on 21 May 2014 (OJ 
C 153 21. 05. 2014, p. 3)  

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Given  the  limited  scope  of  the  derogation,  the  special  measure  is  proportionate  to  the  aim 
pursued,  i.e.  to  simplify  VAT  obligations  and  VAT  collection,  as  well  as  combatting  tax 
evasion.  

• 

Choice of the instrument 

Proposed instrument: Council Implementing Decision. 

Under Article 395 of the VAT Directive, derogation from common VAT rules is only possible 
upon  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.  

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

This proposal is based on a Request made by Denmark and concerns only this Member State.  

• 

Collection and use of expertise 

There was no need for external expertise.  

• 

Impact assessment 

The proposal is designed to counter VAT evasion and 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 Denmark as a suitable measure. Denmark submitted the report 
on the review of  the  measure according to  which  the simplified procedure has  worked very 
well the last years and there are good reasons to continue with such a procedure.  

4. 

BUDGETARY IMPLICATIONS 

The proposal will have no negative implication for the EU budget.  

5. 

OTHER ELEMENTS 

The proposal includes a sunset clause; an automatic time limit which is set at 31 December 
2020. 

In  case  Denmark  would  consider  an  extension  of  the  derogating  measure  beyond  2020,  a 
report  including  a  review  of  the  measure  should  be  submitted  to  the  Commission  together 
with the extension request and this no later than 31 March 2020.  

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2018/0027 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Denmark to apply a special measure derogating from Article 75 of Council 
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) 

By  letter  registered  with  the  Commission  on  21  November  2017,  Denmark  has 
requested,  in  accordance  with  Article  395(2)  of  Directive  2006/112/EC,  an 
authorisation  to  apply  a  measure  derogating  from  Article  75  of  that  Directive 
governing the right to deduct input VAT. 

In  accordance  with  the  second  subparagraph  of  Article  395(2)  of  Directive 
2006/112/EC,  the  Commission,  by  letters  dated  7  December  2017  and  8  December 
2017, transmitted to the other Member States the request submitted by Denmark and 
by  letter  dated  11  December  2017,  notified  Denmark  that  it  had  all  the  information 
that it considered necessary to consider the request. 

(3)  Without a derogating measure, the legislation in Denmark implies that 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 VAT 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.  

(4) 

(5) 

To mitigate the consequences of this regime, Denmark has requested authorisation to 
apply a special measure derogating from Article 75 of Council Directive 2006/112/EC. 
The  derogation  was  granted  by  Council  Implementing  Decision  2012/447/EU2  and 
subsequently  by  Council  Implementing  Decision  (EU)  2015/992  of  19  June  20153. 
The latter Council Implementing Decision expired on 31 December 2017.  

The measure would allow taxable persons, who have registered a vehicle 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  Council  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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3 

OJ L 347, 11.12.2006, p. 1. 
OJ L 202, 28.07.2012, p. 24 
OJ L 159, 25.06.2015, p. 66.  

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(6) 

(7) 

(8) 

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

This measure, which should apply to light goods vehicles with a maximum authorised 
weight of up to three tonnes, aims to simplify the VAT obligations of taxable persons 
who make occasional non-business use of a vehicle registered for business purposes. 
However,  it  would  remain  possible  for  a  taxable  person  to  choose  to  register  a  light 
goods  vehicle  as  being  for  both  business  and  private  use.  In  doing  so,  the  taxable 
person  would  lose  the  right  to  deduct  the  VAT  on  the  purchase  of  the  vehicle  but 
would not be required to pay a daily charge for any private use. 

Allowing a measure which ensures 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  VAT on that  vehicle is consistent with  the general rules on 
deduction as laid down by Council Directive 2006/112/EC.  

(9) 

The authorisation should be valid for a limited period.  

(10) 

(11) 

In  the  event  that  Denmark  requests  a  further  extension  of  the  derogating  measure 
beyond 2020, it should submit a report to the Commission together with the extension 
request no later than by 31 March 2020. 

It is considered that the derogation would only have a negligible effect on the overall 
amount of VAT revenue collected at the stage of final consumption and will have no 
adverse impact on the Union's own resources accruing from VAT. 

HAS ADOPTED THIS DECISION:  

Article 1 

By  derogation  from  Article  75  of  Council  Directive  2006/112/EC,  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 to determine the taxable amount by reference to a flat rate for each 
day of such use. 

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

Article 2 

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

This measure shall not apply where the private use exceeds 20 days per calendar year. 

This Decision shall take effect on the day of its notification. 

This Decision shall expire on 31 December 2020. 

Article 3 

Any request for the extension of the measure provided for in this Decision shall be submitted 
to the Commission by 31 March 2020 and shall be accompanied by a report which includes a 
review of the measure.  

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This Decision is addressed to the Kingdom of Denmark. 

Article 4 

Done at Brussels, 

For the Council 
The President 

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