Proposal for a COUNCIL IMPLEMENTING DECISION authorising Italy to apply, in determined geographical areas, reduced rates of taxation on gas oil and liquid petroleum gas used for heating purposes in accordance with Article 19 of Directive 2003/96/EC
Date: 2019-03-18
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Italy, derogation from EU law, diesel fuel, fuel tax, heating, less-favoured region, tax relief

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   EUROPEAN COMMISSION  Brussels, 18.3.2019  COM(2019) 138 final 2019/0079 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising Italy to apply, in determined geographical areas, reduced rates of taxation on gas oil and liquid petroleum gas used for heating purposes in accordance with Article 19 of Directive 2003/96/EC  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Taxation  of  energy  products  and  electricity  in  the  EU  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  the  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 excise duties for specific policy considerations. 

The objective of this proposal is to allow Italy to apply, in certain particularly disadvantaged 
areas, reduced rates of taxation to gas oil and liquefied petroleum gas (LPG) used for heating 
purposes to partially offset the high heating costs of residents in such geographical areas. The 
high  heating  costs  are  either  due  to  very  severe  climate  conditions  or  due  to  severe  climate 
condition or insularity of such zones combined with difficult fuel procurement. 

The tax reduction is applicable in geographical areas fulfilling the following criteria: 

Under Article 8(10) of Italian Law No 448/1998, the advantage applies to supplies of the fuels 
in question (gas oil and LPG) used in municipalities: 

 

 

 

• 

classified  in  climate  zone  F  (most  severe  climate  conditions  within  the  Italian 
territory), as referred to in Presidential Decree No 412 of 26 August 1993; 

which  do  not  have  a  gas  supply  network  and  are  classified  in  climate  zone  E,  as 
referred  to  in  the  abovementioned  Presidential  Decree  412/1993.  In  this  case,  as 
provided for in Article 8(10)(c) point 4) of Law No 448/1998, the advantage will be 
withdrawn as soon as the municipality becomes connected to the gas supply network.  

in the region of Sardinia and the smaller islands, as long as the natural gas network 
has  not  been  made  available  in  the  concerned  communes.  This  part  of  the  regimes 
covers all Italian islands apart from Sicily.  

General context 

By  letter  dated  31  October  2018,  the  Italian  authorities  requested  authorisation  to  apply,  in 
certain particularly disadvantaged geographical areas, reduced rates of taxation to gas oil and 
LPG  used  for  heating  purposes  by  way  of  a  renewal  of  Council  Implementing  Decision 
2014/695/EU  of  24  September  2014  authorising  Italy  to  apply,  in  the  geographical  area 
defined in article 8(10) of the Italian Law No 448/1998, reduced rates of taxation on gas oil 
and LPG used for heating purposes in accordance with Article 19 of Directive 2003/96/EC (2). 
This Decision authorised Italy to apply, until 31 December 2018, in those disadvantages areas 
reduced rates of excise duty on domestic fuel and LPG used for heating. In justification of its 
request  for  derogation,  Italy  points  to  its  diversified  territory  with  variable  climate  and 
geographical  conditions.  The  national  levels  of  excise  duty  on  gas  oil  and  LPG  used  for 
heating in Italy are relatively high.  In order to avoid excessive burden on certain consumers 
particularly  dependent  on  heating,  Italy  has  introduced  reduced  rates  of  taxation  in  certain 

(1) 

(2) 

Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for taxation 
of energy products and electricity (OJ L 283, 31.10.2003 p. 51; Directive last amended by  Directives 
2004/74/EC and 2004/75/EC (OJ L 157,30.4.2004, p. 87 and p. 100). 
OJ L 109, 19.4.2008, p. 27–29. 

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parts  of  its  territory  and  would  like  to  continue  to  apply  reductions  for  the  area  covered  by 
Article 8(10) of  Italian  Law No 448/1998. The  number of municipalities  lacking  a methane 
network,  which  benefit  from  the  tax  scheme  in  question  insofar  as  they  fall  within  climate 
zone E, has been progressively and considerably reduced due to the completion of the process 
of creation of the methane network. They decreased from the original 608 to the current 260.  

The proposed reductions are lower than the reductions provided for in the previous Decision. 
The tax reduction granted by Council Implementing Decision 2014/695/EU set the reduction 
at EUR 129.11 per 1 000 litres in case of gas oil (driving the applicable tax rate down to EUR 
274.10 per 1 000 litres) and to EUR 159.07 per 1 000 kg of LPG (driving the applicable tax 
rate down to EUR 30.87 per 1 000 kg). 

A reduction of 5.07% of the advantage was applied as from 11 December 2015 (in accordance 
with  Article  2  of  the  Decree  of  the  President  of  the  Council  of  Ministers  –  DPCM  -  of  29 
September 2015 in application of Article 1, paragraph 242, of Law No. 190 of 23 December 
2014) and the tax reductions currently amount to EUR 122.56 per 1 000 litters for gas oil used 
as heating fuel (driving the applicable tax rate down to EUR 280.65 per 1 000 litres) and to 
EUR 151.01 per 1 000 kilograms for LPG used as heating fuel (driving the applicable tax rate 
down to EUR 38.93 per 1 000 kg).  

By the requested authorisation Italy aims at further maintaining these current tax reductions in 
the designated geographical areas. 

Thus, the tax reduction currently amounts, on average, to 9-10% of the price of gas oil used as 
heating fuel and to about 6% of the price of LPG used for the same purpose. In particular, at 
present,  in  climate  zones  E  and  F  the  tax  reduction  accounts  for  about  10%  of  the  price  of 
LPG and gas oil used as heating fuel. 

The applicable tax rates are above the minimum levels of taxation prescribed by the Directive. 

The tax advantage cannot be combined with other excise duty reductions. 

According to  the  Italian authorities, the tax differentiation is  based on objective criteria and 
intends  to  ensure  geographical  continuity  with  the  rest  of  the  Italian  territory,  i.e.  it  aims  at 
putting the population  of the eligible  areas on more comparable  footing  with  the rest  of the 
Italian  population  by  means  of  reducing  their  disproportionately  high  heating  costs.  The 
amount of the tax reduction is the same for all users; it only aims at partially alleviating the 
additional heating costs of the population of the eligible areas, which are due to cold climate 
or difficulties with fuel procurement. 

According to the Italian Authorities, the additional transport costs in the mountainous regions 
are 140% higher for gas oil and LPG than in the rest of the country. 

 As far as the cost of road haulage is concerned, the type of vehicle makes the difference. In 
the case of mountain areas and for the smaller islands (where there are no storage facilities for 
oil  products),  LPG  and  gas  oil  for  heating  purposes  are  transported  by  lorries  with  trailer 
which,  compared  to  road  tractors  with  semi-trailer,  involves  an  additional  cost  of  70-80%. 
The need to use such small trucks results from the characteristic of the roads that are not easy 
and from the reduced quantities of fuel supplies. 

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 In addition, in the case of the islands, the cost of the ferry should be added. Such entry can 
affect dramatically the cost of transport, up to 4 times. 

The specificity of the islands consists in the fact that due to their geographical particularities, 
the fuel supply is restricted in scope and as a result, it is more expensive than on the Italian 
mainland  due  to  additional  transport  costs.  The  tax  reduction  does  not  result  in 
overcompensation  and  does  not  drive  the  prices  of  LPG  and  gas  oil  below  the  price  on  the 
mainland. With regard to the application of the subsidy in the smaller islands, in the locations 
in  question the logistics chain  is  inevitably more expensive than that in mainland  Italy. The 
higher costs are the result of a lack of primary logistics, which gives rise to higher distribution 
costs. Higher costs are also due to often problematic road access, higher motor fuel costs than 
those on the mainland  and the transportation  costs for accessing the smaller islands and the 
limited  quantities  of  individual  supplies.  The  Italian  authorities  have  estimated  these  higher 
costs as being approximately 10 –15 % higher than the corresponding costs in mainland Italy. 

The  Italian  authorities  explain  that  during  the  last  years  the  measure  has  reduced  the  end 
purchase price of LPG and gas oil used for heating by approximately 10 %. 

With  regard  to  the  progress  of  the  national  natural  gas  distribution  network,  the  Italian 
authorities note that the  process  for the  creation  of a methane  gas distribution’s network on 
the  Italian  territory  can  be  considered  generally  concluded.  However,  on  account  of  the 
diversity  of 
is  characterized  by  a  particularly  varied 
physical geography,  this  process  remains  particularly  problematic,  or  even  in  some  cases 
unfeasible  in  some  parts  of  the  territory,  also  in  relation  to  the  costs  related  thereto.  In  this 
respect  the  Sardinia  region,  the  small  islands  and  a  number  of  municipalities  located  in 
typically mountainous areas still have no access to methane, and in some cases never will. 

territory,  which 

the  Italian 

The annual budgetary expenditure of the measure is around EUR 230 million.  

• 

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 and  Council Decision 2014/695/EU)of 29 
September 2014 authorising Italy to apply, in determined geographical areas, reduced rates of 
taxation  on  gas  oil  and  LPG  used  for  heating  purposes  in  accordance  with  Article  19  of 
Directive 2003/96/EC. 

• 

Consistency with the other policies and objectives of the Union 

Each  request  for  derogation  under  Article  19  of  the  Energy  Taxation  Directive  must  be 
examined  by  the  Commission  taking  into  account  the  proper  functioning  of  the  internal 
market, the need to ensure fair competition and EU health, environment, energy and transport 
policies. 

The tax differentiation partially alleviates the additional heating costs incurred by citizens in 
certain geographical areas of Italy that are particularly disadvantaged compared to the rest of 
the  territory  and  for  which,  therefore,  the  standard  tax  rate  applicable  to  LPG  and  gas  oils 
used  for  heating  purposes  would  result  in  an  excessive  tax  burden.  The  geographical 
disadvantage  translates  into  additional  heating  costs  which  are  due  to  severe  climate 
conditions  or  insularity  of  such  zones,  combined  with  unavailability  of  alternative  heating 
resources, in particular unavailability of access to the natural gas network. 

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The reduced rate of taxation both for gas oil and LPG remains higher than the EU minimum 
levels of taxation set out in the Energy Taxation Directive and it only partially alleviates the 
additional heating costs incurred in the geographical areas in question. 

It  can  be  thus  considered  that  the  reduction  is  compatible  with  the  goal  of  providing  a  tax 
incentive  for  the  purpose  of  energy  efficiency.  The  measure  has  not  been  found  to  be 
incompatible with the relevant EU policies on the environment and energy.  

Furthermore, the measure is acceptable from the point of view of the proper functioning of the 
internal market and the need to ensure fair competition. It merely seeks to partially offset the 
additional heating costs associated with the objective conditions of the areas in question. The 
tax reduction is not cumulative with any other sorts of tax reduction and it does not apply to 
other use of the heating fuels then space heating. 

Article 19(2) of Directive 2003/96/EC lays down, for this type of measure, a maximum period 
of six years, with the possibility of renewal. Taking into account the absence of any negative 
impact  of the current  arrangement on intra-EU trade and on the  general  level  of taxation of 
fuels  in  Italy, in  order to ensure legal certainty  for the regions,  the Commission suggests at 
this stage to grant the authorisation for six years, i.e. from 1 January 2019 until 31 December 
2024. 

However,  in  order  not  to  undermine  future  general  developments  of  the  existing  legal 
framework, it is appropriate to provide that, should the Council, acting on the basis of Article 
113 of the Treaty, introduce a modified general system for the taxation of energy products to 
which the present authorisation would not be adapted, this Decision shall expire on the day on 
which those modified rules become applicable. 

Should  the  Council  adopt  such  a  new  system  and  should  the  Commission  consider  that  the 
authorisation  proposed  herewith  is  still  warranted,  it  would  examine,  positively  and  in  a 
timely manner, any request from Italy for a similar authorisation adapted to that new system, 
so as to provide for the continuity of the present proposal. 

• 

State aid rules 

The measure may constitute State aid in accordance with Article 107(1) of the TFEU. Since 
the reduced rates are above the EU minima, the measure would be covered by Article 44 of 
Regulation  651/2014/EU  (the  General  Block  Exemption  Regulation)  and  would  thus  be 
considered compatible with the internal market. Upon expiry of the period of validity of the 
General Block Exemption Regulation on 31 December 2020 the aid remains exempted during 
an  adjustment  period  of  six  months  (see  Article  58(4)  of  the  General  Block  Exemption 
Regulation).  The  decision  is  without  prejudice  to  the  applicable  State  aid  rules  during  the 
period covered by the derogation. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 19 of Council Directive 2003/96/EC. 

• 

Principle of subsidiarity 

The field of indirect taxation covered by Article 113 of the TFEU is not in itself within the 
exclusive competence of the EU within the meaning of Article 3 of the Treaty. 

However,  pursuant  to  Article  19  of  Directive  2003/96/EC,  the  Council  has  been  granted  an 
exclusive competence, as a matter of secondary law, to authorise a Member State to introduce 
further exemptions or reductions within the meaning of that provision. Member States cannot 

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therefore substitute themselves for the Council. As a result, the principle of subsidiarity is not 
applicable  to  the  present  implementing  decision.  In  any  event,  since  this  act  is  not  a  draft 
legislative act, it should not be transmitted to national Parliaments pursuant to Protocol No 2 
to the Treaties for review of compliance with the subsidiarity principle. 

• 

Principle of proportionality 

The proposal respects the principle of proportionality. The tax reduction does not exceed what 
is  necessary  to  attain  the  objectives  in  question.  The  tax  reductions  are  applicable  in 
determined  geographical  areas.  The  authorised  tax  rates  are  above  the  minimum  levels  of 
taxation prescribed by Directive.  

• 

Choice of instrument 

Instrument proposed: Council implementing decision. 

Article 19 of Directive 2003/96/EC makes provision for this type of measure only. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

The measure does not require the evaluation of existing legislation. 

• 

Consultation of interested parties 

The proposal consists of a tax reduction which concerns only Italy. 

• 

Obtaining and using expertise 

No external expertise has been used. 

• 

Impact assessment 

No impact assessment has been carried out. 

• 

Fundamental rights  

The measure has no bearing on fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

The  measure  does  not  impose  any  financial  and  administrative  burden  on  the  Union,  The 
proposal therefore has no impact on the Union budget. 

5. 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements.  

An  implementation  plan  is  not  necessary.  This  proposal  concerns  an  authorisation  for  a  tax 
reduction  for  an  individual  Member  State  upon  its  own  request.  It  is  provided  for  a  limited 
period  of  six  years.  The  tax  rate  that  will  apply  will  be  higher  than  the  minimum  level  of 
taxation  set  by  the  Energy  Taxation  Directive.  The  measure  can  be  evaluated  in  case  of  a 
request for a renewal after the six-year period has expired. 

• 

Summary of the measure proposed 

The Commission proposes to authorise the tax reduction amounting to EUR 122.56 per 1 000 
litres in the case of gas oil and to EUR 151.01 per 1 000 kg of LPG. The applicable taxable 

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rates are- EUR 280.65 per 1 000 litres for gas oil used as heating fuel respectively EUR 38.93 
per 1 000 kg for LPG used as heating fuel. The applicable tax rates are above the minimum 
levels of taxation prescribed by Directive 2003/96/EC. 

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2019/0079 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Italy to apply, in determined geographical areas, reduced rates of taxation 
on gas oil and liquid petroleum gas used for heating purposes 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 electricity3 and in  particular 
Article 19(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

(3) 
(4) 

Pursuant  to  Article  19(1)  of  Directive  2003/96/EC,  Italy  was  authorised  to  apply  in 
certain  particularly  disadvantages  areas  reduced  rates  of  excise  duty  on  gas  oil  and 
liquid petroleum gas (LPG) used for heating. The latest authorisation was granted until 
31 December 2018 by Council Implementing Decision 2014/695/EU4. 

By letter dated 31 October 2018 the Italian authorities requested authorisation to apply 
in certain particularly disadvantaged geographical areas, reduced rates of taxation on 
gas oil and LPG used for heating purposes by way of extension of a practice followed 
under  the  Decision  2014/695/EU  in  some  areas,  and  this  before  it  has  expired. 
Additional  information  and  clarifications  were  provided  by  the  Italian  authorities  on 
14  December  2018.  The  Italian  authorities  requested  the  authorisation  for  the  period 
from 1 January 2019 to 31 December 2024.   

Italy has very diversified territory with variable climate and geographical conditions. 
Taking  into  account  the  particularities  of  its  territory,  Italy  has  introduced  reduced 
rates  of  taxation  on  gas  oil  and  LPG  with  the  purpose  of  partially  offsetting  the 
disproportionately high heating costs for residents in certain geographical areas. 

The tax differentiation is based on objective criteria and aims at putting the population 
of  the  eligible  areas  on  more  comparable  footing  with  the  rest  of  the  population  of 
Italy by means of reducing their disproportionately high heating costs, which are due 
to severe climate conditions or difficulties with fuel procurement in comparison with 
the rest of the Italian territory. 

The reduced rates of taxation are applicable in geographical areas fulfilling one of the 
following  criteria:  (a)  most  severe  climate  conditions  within  the  Italian  territory 
(communes  falling  into  zone  F  as  defined  in  the  Presidential  decree  No  412  of  26 

OJ L 283, 31.10.2003, p. 51. 
Council  Implementing  Decision  2014/695/EU  of  29  September  2014  authorising  Italy  to  apply,  in 
determined geographical areas, reduced rates of taxation on gas oil and LPG used for heating purposes 
in accordance with Article 19 of Directive 2003/96/EC (OJ L 291, 7.10.2014, p. 16).  

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August  1993 5),  (b)  severe  climate  conditions  combined  with  difficulties  with  fuel 
procurement, (communes falling into zone E as defined in the Presidential decree No 
412 of 26 August 1993 as long as the natural gas network has not been made available 
in  the  concerned  communes);  and  (c)  geographical  isolation  combined  with  difficult 
and  costly  fuel  procurement:  Sardinia  and  small  islands  as  long  as  the  natural  gas 
network has not been made available in the concerned communes. The application of 
the reduced rates of taxation should only be applied until the completion of the natural 
gas network in the communes concerned. 

The requested measure has been reviewed by the Commission and been found not to 
distort  competition  or  hinder  the  operation  of  the  internal  market  and  it  is  not 
considered  incompatible  with  EU's  policy  on  the  environment,  energy  and  transport. 
The reduced rate of taxation both for gas oil and LPG would remain higher than the 
EU  minimum  levels  of  taxation  set  out  in  Directive  2003/96/EC  and  would  only 
partially  alleviate  the  additional  heating  costs  incurred  in  the  geographical  areas  in 
question. 

Italy  should  therefore  be  authorised,  pursuant  to  Article  19(2)  of  Directive 
2003/96/EC,  to  apply,  in  determined  geographical  areas  reduced  rates  of  taxation  of 
gas oil and LPG used for heating purposes until 31 December 2024. 

It follows from Article 19(2) of Directive 2003/96/EC that each authorisation granted 
under that Article must be strictly limited in time. 

In  order  to  provide  the  regions  concerned  with  a  sufficient  degree  of  certainty,  the 
authorisation  should  be  granted  for  a  period  of  six  years.  However,  in  order  not  to 
undermine  future  general  developments  of  the  existing  legal  framework,  it  is 
appropriate to provide that, should the Council, acting on the basis of Article 113 of 
the Treaty, introduce a modified general system for the taxation of energy products to 
which  this  authorisation  would  not  be  adapted,  this  Decision  expires  on  the  day  on 
which the rules on that modified system become applicable. 

(6) 

(7) 

(8) 

(9) 

(10) 

In order to ensure that the measure would apply without interruption in respect of the 
to  apply  reduced  rates  of  excise  duties  granted  by  Decision 
authorisation 
2014/695/EU, which expired on 31 December 2018, it would be appropriate that this 
Decision applies from 1 January 2019. 

(11)  This Decision is without prejudice to the application of the Union rules regarding State 

aid, 

HAS ADOPTED THIS DECISION:  

1. Italy is authorised to  apply  reduced rates of taxation to gas oil and LPG used for heating 
purposes in the following disadvantaged geographical areas:   

Article 1 

(a) 

(b) 

(5) 

communes falling in the climate zone F as established by the Presidential Decree of 
26 August 1993 No 412; 

communes  falling  in  the  climate  zone  E  as  established  by  the  Presidential  Decree 
of 26 August 1993 No 412; 

The Presidential decree No 412 of 26 August 1993 divides the Italian territory into six climate zones (A 
to F). The classification is based on the unit ‘degree per day’ which represents the amount of days per 
year in which the outside temperature differs from the optimum 20 C° and thus heating is needed. 

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(c) 

communes of Sardinia and small islands, that is all Italian islands, except Sicily.  

2. In order to avoid  any overcompensation, the reduction shall not go beyond the additional 
costs of heating in the areas in question. In the particular case of Sardinia and small islands, as 
a consequence, the tax reduction must not drive the price below the price of the same fuel on 
the Italian mainland. 

3. The reduced rate shall comply with the requirements set out in Directive 2003/96/EC, and 
in particular with the minimum levels of taxation laid down in Article 9 of that Directive. 

The eligibility of the geographical areas referred to in points (b) and (c) of Article 1(1) shall 
be subject to the non-availability of the natural gas network in the concerned commune.  

Article 2 

Article 3 

This Decision shall apply from 1 January 2019 until 31 December 2024. 

However,  should  the  Council,  acting  on  the  basis  of  Article  113  of  the  Treaty,  introduce  a 
modified  general  system  for  the  taxation  of  energy  products  to  which  the  authorisation 
granted in Article 1 of this Decision would not be adapted, this Decision shall expire on the 
day on which the rules on that modified system become applicable.  

This Decision is addressed to the Italian Republic. 

Done at Brussels, 

Article 4 

For the Council 
The President 

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