Proposal for a COUNCIL IMPLEMENTING DECISION authorising Germany and Poland to introduce a special measure derogating from Article 5 of Council Directive 2006/112/EC on the common system of value added tax
Date: 2018-05-15
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Germany, Poland, VAT, bridge, derogation from EU law, frontier, provision of services, road building

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   EUROPEAN COMMISSION  Brussels, 15.5.2018 COM(2018) 287 final 2018/0141 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising Germany and Poland to introduce a special measure derogating from Article 5 of Council Directive 2006/112/EC on the common system of value added tax  
 
 
EXPLANATORY MEMORANDUM 

Pursuant  to  Article  395  of  Directive  2006/112/EC  of  28  November  2006  on  the  common 
system of value added tax1 (hereafter 'the VAT Directive'), the Council, acting unanimously 
on a proposal from the Commission, may authorise Member States to apply special measures 
for derogation from that 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  respectively  on  9  January  2018  and  22  January 
2018, Germany and Poland requested an authorisation to derogate from Article 5 of the VAT 
Directive. In accordance with Article 395(2) of the VAT Directive, the Commission informed 
the  other  Member  States  of  the  request  made  by  Germany  and  Poland  by  letters  dated  5 
March 2018. By letters dated 6 March 2018, the Commission notified Germany and Poland 
that it had all the information it considered necessary for the appraisal of the request. 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

In  order  to  improve  traffic  between  Germany  and  Poland,  these  Member  States  have  the 
intention  to  conclude  an  agreement  concerning  the  construction  of  a  new  bridge  between 
Küstrin-Kietz and Kostrzyn nad Odrą (hereafter the agreement).  

According  to  this  agreement,  Germany  and  Poland  will  carry  out  a  common  investment 
consisting of demolishing the existing border bridge and constructing a new bridge between 
Küstrin-Kietz and Kostrzyn nad Odrą. Article 9 of the agreement foresees that with respect to 
VAT the territory of the investment should be considered as the territory of Poland, as far as 
supplies  of  goods  and  services,  intra-Community  acquisitions  and  imports  of  goods  are 
destined for the execution of the foreseen investment.  

In  accordance  with  the  principle  of  territorial  application  laid  down  by  the  VAT  Directive, 
with  regards  to  supplies  of  goods  and  services  it  is  necessary  to  establish  where  they  are 
carried out. That is why for every supply of goods or services,  intra-Community acquisition 
and  import  of  goods  related  to  the  execution  of  the  investment,  it  would  normally  be 
necessary to establish if they are carried out in Poland or in Germany. Poland and Germany 
are of the opinion that the application of this rule can appear complicated to taxable persons 
and tax authorities. They take the view that the tax provisions of the agreement will simplify 
tax obligations and tax collection. 

In light of the above, Germany and Poland request an authorisation based on Article 395 of 
the VAT Directive  to derogate from  Article 5 of the VAT Directive and to  provide that  for 
VAT purposes all supplies of goods and services, intra-Community acquisitions and imports 
of goods destined for the execution of the foreseen investment are carried out in the territory 
of Poland and thus would be subject to Polish VAT.  

What  concerns  the  maintenance  of  border  bridges  between  Germany  and  Poland,  it  is 
governed by an agreement signed between Germany and Poland on 20 March 1995.  

The Council has on previous occasions authorised derogations from the territoriality principle, 
inter  alia, between Germany and Poland2, the Czech Republic3, and Switzerland4  as  well as 
between Poland and Ukraine5.  

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OJ L 347, 11.12.2006, p. 1. 

Council Decision 95/115/EC of 30 March 1995 (OJ L 80, 8.4.1995, p. 47); Council Decision 96/402/EC 
of 25 June 1996 (OJ L 165, 4.7.1996, p. 35); Council Decision 95/435/EC of 23 October 1995 (OJ L 

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As all supplies relating to the given investment will be subject to Polish VAT, the derogating 
measure will not have any negative impact on the taxation of the final consumption and thus 
on the Union's own resources accruing from VAT.  

In light of the above, it is proposed to grant the requested derogating measure.  

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 
subsidiarity principle does not apply. 

• 

Proportionality 

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

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

• 

Choice of the instrument 

Proposed instrument: Council Implementing Decision. 

Under  Article  395  of  the  VAT  Directive,  derogation  from  the  common  VAT  rules  is  only 
possible  upon  authorisation  of  the  Council  acting  unanimously  on  a  proposal  from  the 
Commission. A Council Implementing 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  requests  made  by  Germany  and  Poland  and  concerns  only  these 
Member States. 

• 

Collection and use of expertise 

There was no need for external expertise. 

257, 27.10.1995, p. 34) and Council Decision 2001/741/EC of 16 October 2001 (OJ L 278, 23.10.2001, 
p. 28). 

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4 

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Council Decision 97/188/EC of 17 March 1997 (OJ L 80, 21.3.1997, 21 of March 1997 p. 18); Council 
Decision 97/511/EC of 24 July 1997 (OJ L 214, 6.8.1997, p. 39) and Council Decision 2001/742/EC of 
16 October 2001 (OJ L 278, 23.10.2001, p. 30). 
Council  Decision  2003/544/EC  of  15  July  2003  (OJ  L  186,  25.7.2003,  p.  36)  and  Council  Decision 
2005/911/EC of 12 December 2005 (OJ L 331, 17.12.2005, p. 30). 
Council Implementing Decision (EU) 2017/1769 of 25 September 2017 (OJ L250, 28.9.2017, p.73).  

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• 

Impact assessment 

The  proposal  for  a  Council  Implementing  Decision  allows  Germany  and  Poland  to  treat  all 
supplies of goods and services, intra-Community acquisitions and imports of goods destined 
for the demolition and construction of the border bridge between Küstrin-Kietz and Kostrzyn 
nad Odrą as carried out in Poland and thus subject to Polish VAT. The measure is expected to 
simplify the tax obligations of enterprises and the tax collection by tax authorities. Given the 
limited scope of this derogation, the impact will in any case be limited. 

4. 

BUDGETARY IMPLICATIONS 

The  proposal  has  no  impact  on  the  Union's  own  resources  accruing  from  VAT  since  all 
supplies of goods and services, intra-Community acquisitions and imports of goods relating to 
the envisaged investment will be subject to Polish VAT. 

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2018/0141 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Germany and Poland to introduce a special measure derogating from 
Article 5 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) 

(3) 

(4) 

(5) 

By letters registered, respectively, on 9 January 2018 and 22 January 2018, Germany 
and Poland submitted to the Commission a request for an authorisation to introduce a 
special measure derogating from Article 5 of Directive 2006/112/EC. 

In  accordance  with  the  second  subparagraph  of  Article  395(2)  of  Directive 
2006/112/EC, the Commission, by letters dated 5 March 2018, transmitted to the other 
Member  States  the  request  made  by  Germany  and  Poland.  By  letters  dated  6  March 
2018,  the  Commission  notified  Germany  and  Poland  that  it  had  all  the  information 
necessary to consider the request. 

Pursuant  to  agreement  that  Germany  and  Poland  intends  to  conclude  regarding  the 
demolition  of  the  existing  border  bridge  and  construction  of  a  new  bridge  between 
Küstrin-Kietz and Kostrzyn nad Odrą, with respect to value added tax ('VAT') the area 
of those works should be considered as the territory of Poland, insofar as the supplies 
of  goods  and  services,  the  intra-Community  acquisitions  and  imports  of  goods  are 
destined for the execution of the works envisaged under the agreement.  

Germany  and  Poland  take  the  view  that  the  tax  provisions  of  the  agreement  are 
justified  in  order  to  simplify  the  procedure  for  complying  with  VAT  obligations. 
Without  these  provisions,  it  would  be  necessary  to  break  down  transactions  on  the 
basis  of  the  territory  on  which  they  are  carried  out,  which  would  involve  tax 
complications for contracting companies responsible for the works.  

Considering that the special measure being the subject of the authorisation request will 
not, except to a negligible extent, affect the overall amount of the tax revenue of the 
Member States collected at the stage of final consumption, it is appropriate to derogate 
from  Article  5  of  Directive  2006/112/EC  and  to  provide  that  for  VAT  purposes  all 
supplies  of  goods  and  services,  intra-Community  acquisitions  and  imports  of  goods 
destined  for  the  demolition  of  an  existing  border  bridge  and  construction  of  a  new 
border  bridge  between  Küstrin-Kietz  and  Kostrzyn  nad  Odrą  are  carried  out  in  the 
territory of Poland and thus would be subject to Polish VAT.  

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OJ L 347, 11.12.2006, p. 1. 

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(6) 

The derogation will have no impact on the Union's own resources accruing from VAT, 

HAS ADOPTED THIS DECISION:  

Article 1 

By  way  of  derogation  from  Article  5  of  Directive  2006/112/EC,  Germany  and  Poland  are 
authorised to treat the area of the construction site of the border bridge between Küstrin-Kietz 
and Kostrzyn nad Odrą, as forming part of the territory of Poland for the purposes of supplies 
of  goods  and  services,  intra-Community  acquisitions  and  imports  of  goods  intended  for  the 
demolition of an existing border bridge and the construction of a new border bridge.  

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

Done at Brussels, 

Article 2 

For the Council 
The President 

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