Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2009/1013/EU, authorising Austria 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: 2018-07-18
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Austria, VAT, derogation from EU law, goods and services, tax relief

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   EUROPEAN COMMISSION  Brussels, 18.7.2018  COM(2018) 539 final 2018/0288 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2009/1013/EU, authorising Austria 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 

Pursuant to Article 395(1) of Directive 2006/112/EC of 28 November 2006 on the common 
system  of  value  added  tax  ("the  VAT  Directive1"),  the  Council,  acting  unanimously  on  a 
proposal from the Commission,  may authorise any Member State to apply  special measures 
derogating  from  the  provisions  of  this  Directive,  in  order  to  simplify  the  procedure  for 
charging VAT or to prevent certain forms of tax evasion or avoidance. 

By  letter  registered  with  the  Commission  on  23  March  2018,  Austria  requested  an 
authorisation  to  continue  to  apply  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 % by the taxable person for his private 
use  or  for  that  of  his  employees,  or  in  general,  for  non-business  purposes  or  non-economic 
activities. By letter registered with the Commission on 4 April 2018, Austria sent a report on 
the  application  of  this  measure  including  a  review  of  the  apportionment  rate  applied  on  the 
right  to  deduct  VAT  as  required  by  Article  2  of  Implementing  Decision  2009/1013/EU2  as 
amended by Council Implementing Decision (EU) 2015/24283. 

In  accordance  with  Article  395(2)  of  Directive  2006/112/EC,  the  Commission  informed  the 
other  Member  States  by  letters  dated  11  April  2018  of  the  request  made  by  Austria.  The 
Commission  notified  Austria  by  letter  dated  12  April  2018  that  it  had  all  the  information 
necessary to consider the request. 

General context 

Article 168 of Directive 2006/112/EC provides that a taxable person is entitled to deduct the 
VAT  charged  on  purchases  made  and  services  received  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 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  20044  for  a  period  until  31  December  2009  and  was  again 
granted  by  Council  Implementing  Decision  2009/1013/EU  of  22  December  20095  until  31 
December 2012 and by Council Implementing Decision 2012/705/EU of 13 November 2012 
until  31  December  20156  and  by  Council  Implementing  Decision  (EU)  2015/2428  of  10 
December 2015 until 31 December 20187. 

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OJ 347, 11.12.2006, p.1. 
OJ L 348, 29.12.2009, p. 21. 
OJ L 334, 22.12.2015, p.12. 
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 334, 22.12.2015, p.12. 

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In its current request, Austria informed the Commission that it has been applying this special 
measure  successfully  until  now,  indicating  that  the  measure  is  very  useful  in  terms  of 
simplifying VAT collection and preventing tax evasion  and avoidance as  well as enhancing 
fairness  in  taxation  thus  resulting  in  an  increase  of  tax  compliance.  The  abolition  of  the 
derogation  would  lead  to  an  unjustified  cash  flow  benefit  for  a  taxable  person  who  uses  a 
good or service only marginally for business purposes and who is allowed to deduct VAT for 
this  minor  business  use  compared  to  a  taxable  person  who  uses  the  good  or  service  for 
business purposes only. A subsequent minimal change in the ratio of private and business use 
of a good or service only marginally used for business purposes would lead to an adjustment 
of  the  VAT  deducted.  This  minor  adjustment  would  be  disproportionate  both  from  the 
taxpayer's and tax administration's perspective.  

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, 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  for  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 private use pursuant to Articles 
16 or 26 of Directive 2006/112/EC or adjustments to the deduction as required under Articles 
184 – 192 of that Directive. 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 derogation is based, would still be valid. Therefore, it is proposed to extend the 
derogation until the end of 2021 and to request Austria to present, together with the extension 
request,  a  report  by  31  March  2021  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 2021.  

Existing provisions in the area of the proposal 

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 for taxable persons. 

Notwithstanding previous initiatives to establish rules on which categories of expenditure may 
be  subject  to  a  restriction  on  the  right  to  deduct8,  such  derogation  is  appropriate  in  the 
awaiting of a harmonisation of these rules at EU level. 

2. 

RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND 
IMPACT ASSESSMENTS 

Consultation of interested parties 

Not relevant. 

Collection and use of expertise 

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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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There was no need for external expertise. 

Impact assessment 

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

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Summary of the proposed action 

The  proposal  aims  to  authorise  Austria  to  continue  to  apply  a  measure  derogating  from 
Articles 168 and 168a of Directive 2006/112/EC so as to completely exclude from the right of 
deduction  the  VAT  borne  on  goods  and  services  which  are  used  by  the  taxable  person  for 
more than 90 % for his private use or for that of his employees, or in general, for non-business 
purposes or non-economic activities. 

The apportionment rate and the necessity for the derogating measure are to be reviewed and 
reported on by Austria upon any request for an extension.  

Legal basis 

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

Subsidiarity principle 

Considering the provision of Council Directive 2006/112/EC on which the proposal is based, 
the subsidiarity principle does not apply. 

Proportionality principle 

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

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

Given  the  narrow  scope  of  the  derogation,  the  special  measure  is  proportionate  to  the  aim 
pursued.  It  will  reduce  administrative  burden  and  only  slightly  increase  the  tax  burden  for 
those taxable persons using the goods or services for up to 10% for business purposes. 

Choice of instruments 

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  authorisation  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. 

4. 

BUDGETARY IMPLICATION  

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

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5. 

OPTIONAL ELEMENTS 

The proposal is limited in time and includes a review clause. 

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2018/0288 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Implementing Decision 2009/1013/EU, authorising Austria 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 tax1, and in particular the first subparagraph of Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

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Austria  has  been  granted  a  derogating  measure  by  Council  Implementing  Decision 
2009/1013/EU2. The application of the derogating measure was subsequently extended 
by  Council  Implementing  Decision  2012/705/EU3  until  31  December  2015  and  by 
Council Implementing Decision (EU) 2015/24284 until 31 December 2018. 

The special measure derogates from Articles 168 and 168a of Directive 2006/112/EC 
which  govern  taxable  persons'  right  to  deduct  value  added  tax  (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 from the 
right of deduction where those goods and services are used by the taxable person for 
more than 90% for his private purposes or for purposes of his employees, or in general 
for non-business purposes or non-economic activities.  

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. 

By letter registered with the Commission on 23 March 2018, Austria requested to be 
authorised to continue to apply this special measure.  

By letter registered with the Commission on 4 April 2018, Austria sent a report on the 
application  of  the  special  measure  including  a  review  of  the  apportionment  rate 

OJ 347, 11.12.2006, p. 1. 
Council Implementing Decision 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  of  13 November  2012  amending  Decision  2009/791/EC  and 
Implementing  Decision  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 (OJ L 319, 16.11.2012, p. 8). 
Council  Implementing  Decision  (EU)  2015/2428  of  10  December  2015  amending  Decision 
2009/791/EC and Implementing Decision 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 (OJ L 334, 22.12.2015, p. 12). 

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(6) 

(7) 

applied on the right to deduct VAT as required by Article 2 of Implementing Decision 
2009/1013/EU. 

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 11 
April  2018,  of  the  request  made  by  Austria.  By  letter  dated  12  April  2018,  the 
Commission notified Austria that it had all the information necessary to consider the 
request. 

According  to  the  information  provided  by  Austria,  the  legal  and  factual  situation 
which  justified  the  current  application  of  the  special  measure  concerned  has  not 
changed,  but  continues  to  exist.  Austria  should,  therefore,  be  authorised  to  continue 
applying  this  special  measure  during  a  further  period,  but  limited  in  time  until  31 
December 2021 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 upon. 

(8)  Where  Austria    considers  that  a  further  extension  beyond  2021  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  by  no  later  than  31  March  2021  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) 

Implementing Decision 2009/1013/EU should therefore be amended accordingly, 

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HAS ADOPTED THIS DECISION:  

Article 1 

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

'Article 1 

By way of derogation from Article 168 and Article 168a of Directive 2006/112/EC, Austria is 
authorised to completely 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 for 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 2021. 

Any request for the extension of the derogating measure provided for in this Decision shall be 
submitted to the Commission by 31 March 2021 at the latest. 

Such  request  shall  be  accompanied  by  a  report  on  the  application  of  this  measure  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 from 1 January 2019. 

Article 2 

This Decision is addressed to the Republic of Austria. 

Done at Brussels, 

Article 3 

For the Council 
The President 

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