Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision (EU) 2018/485 authorising Denmark to apply a special measure derogating from Article 75 of Directive 2006/112/EC on the common system of value added tax
Date: 2020-06-22
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Denmark, VAT, derogation from EU law, light-duty vehicle, tax relief

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   EUROPEAN COMMISSION  Brussels, 22.6.2020  COM(2020) 256 final 2020/0124 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision (EU) 2018/485 authorising Denmark to apply a special measure derogating from Article 75 of 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 tax1 (‘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  February  2020,  Denmark  requested  the 
authorisation to continue to apply a flat-rate scheme for the private use of light goods vehicles 
with  a  maximum  authorised  total  weight  of  three  tonnes,  which  have  been  registered  solely 
for  business  use,  extending  the  application  of  the  special  measure  granted  by  Council 
Implementing  Decision  (EU)  2018/4852  which  derogates  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 2 April 2020 of the request made by Denmark. By letter dated 
3 April 2020, 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 total weight of 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  20123.  Denmark  requested  twice  the 
prolongation  of  the  measure  which  were  approved  by  Council  Implementing  Decision 
2015/992/EU of 19 June 20154 and by Council Implementing Decision  (EU) 2018/485. The 
latter Council Implementing Decision is set to expire on 31 December 2020.  

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 

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OJ L 347, 11.12.2006, p. 1. 
OJ L 81, 23.3.2018, p. 13-14. 
OJ L 202, 28.7.2012, p. 24-25. 
OJ L 159, 25.6.2015, p. 66-67.  

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and  subsequently  by  Council 
Implementing Decision (EU) 2018/485.  

Implementing  Decision  2015/992/EU  and  Council 

According to  Article 75  of the  VAT  Directive, where  goods forming part of the assets  of a 
business are used for private purposes, the taxable amount to determine the VAT due shall be 
the  full  cost  to  the  taxable  person  of  providing  the  services.  The  flat-rate  system  used  in 
Denmark could be used by a taxable person for up to twenty days per calendar year. Pursuant 
to this system, the taxable person pays a charge per day for the private use of the vehicle. The 
flat-rate amount to be paid per day for the use of the vehicle for private purposes is DKK 40, 
and covers only VAT. This  amount has been determined by the Danish  Government  on the 
basis  of  an  analysis  of  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 private purposes 
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 either online or via a mobile app. At the time of payment, the taxable person 
receives a ‘day voucher’ by way of documentary evidence that the VAT has been paid. 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)  2018/485,  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. 

It is therefore appropriate to authorise Denmark to continue to apply the derogating measure 
until 31 December 2023. 

• 

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  deduct5,  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. 

5 

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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• 

Subsidiarity (for non-exclusive competence)  

Considering the provision of the VAT Directive on which it is based, the proposal falls under 
the exclusive competence of the European Union. Hence, the subsidiarity principle does not 
apply. 

• 

Proportionality 

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

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 

The instrument proposed is a Council Implementing Decision. 

Under Article 395 of the VAT Directive, a derogation from the common VAT rules is only 
possible upon authorisation by the Council, which is acting unanimously on a proposal from 
the  Commission.  A  Council  Implementing  Decision  is  the  most  suitable  instrument  since  it 
can be addressed to an individual Member State. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

No stakeholder consultation has been conducted. The present proposal is based on a request 
made by Denmark and concerns only this particular 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. 

According to the data submitted by Denmark, in 2017, 2018 and 2019 respectively, 22 383, 
25 755 and 28 854 day vouchers were sold at DKK 225, of which VAT made up DKK 40 per 
day voucher sold. This means that the measure has been taken up to the extent expected when 
it was introduced. 

• 

Fundamental rights 

The proposal does not have any consequences for the protection of fundamental rights. 

4. 

BUDGETARY IMPLICATIONS 

The measure will have no adverse impact on the Union's own resources accruing from VAT. 

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5. 

OTHER ELEMENTS 

The proposal includes a sunset clause;  an automatic time  limit which is set at 31 December 
2023. 

In  case  Denmark  would  consider  an  extension  of  the  derogating  measure  beyond  2023,  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 2023. 

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2020/0124 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Implementing Decision (EU) 2018/485 authorising Denmark to apply a special 
measure derogating from Article 75 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 Article 395(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

By letter registered with the Commission on 21 February 2020, Denmark requested, in 
accordance with the first subparagraph of Article 395(2) of Directive 2006/112/EC, an 
authorisation to apply a special measure derogating from Article 75 of that Directive 
governing the right to deduct input value added tax (VAT). 

By  letter  dated  2  April  2020,  the  Commission  informed  the  other  Member  States, 
pursuant  to  the  second  subparagraph  of  Article  395(2)  of  Directive  2006/112/EC,  of 
the  request  submitted  by  Denmark.  By  letter  dated  3  April  2020,  the  Commission 
notified Denmark that it had all the information necessary to consider the request. 

(3)  Without  a  derogating  measure,  the  legislation  in  Denmark  provides  that  if  a  light 
goods  vehicle  with  a  maximum  authorised  total  weight  of  three  tonnes  is  registered 
with  the  Danish  authorities  as  being  used  for  business  purposes  only,  the  taxable 
person is allowed to deduct the full 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) 

To  mitigate  the  consequences  of  that  regime,  Denmark  requested  authorisation  to 
introduce a special measure derogating from Article 75 of Directive 2006/112/EC. By 
Council  Implementing Decision 2012/447/EU2  Denmark was authorised to  introduce 
the  special  measure  and  the  authorisation  was  subsequently  extended  by  Council 
Implementing  Decision  (EU)  2015/992  until  31  December  20173.  By  Council 
Implementing Decision (EU) 2018/4854 Denmark was authorised to apply the special 
measure from 1 January 2018 to 31 December 2020. 

(5) 

The  measure  would  allow  taxable  persons  who  have  registered  a  vehicle  only  for 
business purposes to use the vehicle for private purposes, and to calculate the taxable 
amount  of  the  deemed  supply  of  services  pursuant  to  Article  75  of  Directive 

1 
2 
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4 

OJ L 347, 11.12.2006, p. 1. 
OJ L 202, 28.7.2012, p. 24-25. 
OJ L 159, 25.6.2015, p. 66-67.  
OJ L 81, 23.3.2018, p. 13-14. 

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(6) 

(7) 

(8) 

(9) 

(10) 

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. 

This simplified calculation method should, however, be limited to twenty days of use 
for private purposes for each calendar year, and the flat-rate amount of VAT to be paid 
should be fixed at DKK 40 for each day of use for private purposes. This amount has 
been set 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 
total weight of three tonnes, aims to simplify the VAT obligations of taxable persons 
who make occasional use for private purposes of a vehicle that was registered only for 
business  purposes,  thus  simplifying  the  procedure  for  collecting  VAT.  However,  it 
would remain possible for a taxable person to choose to register a light goods vehicle 
as being used for both business and private purposes. In doing so, the taxable person 
would lose the right  to  deduct  the VAT incurred on the purchase cost  of the vehicle 
but would not be required to pay a daily charge for any use for private purposes. 

Authorising a measure which ensures that a taxable person who makes occasional use 
for private purposes of a vehicle registered only 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 Directive 2006/112/EC. 

The authorisation should be valid for a limited period and should therefore expire on 
31 December 2023. 

In the event that Denmark requests a further extension of the special measure beyond 
31  December  2023,  it  should  submit  a  report  to  the  Commission  together  with  the 
extension request by 31 March 2023. 

(11)  The  derogation  will  only  have  a  negligible  effect  on  the  overall  amount  of  VAT 
revenue collected at the stage of final consumption and has no adverse impact on the 
Union's own resources accruing from VAT. 

(12) 

Implementing Decision (EU) 2018/485 should therefore be amended accordingly, 

HAS ADOPTED THIS DECISION:  

Article 1 

In Article 3 of Implementing Decision (EU) 2018/485, the second and the third paragraphs are 
replaced by the following: 

‘It shall apply from 1 January 2018 to 31 December 2023. 

Any request for the extension of the measure provided for in this Decision shall be submitted 
to the Commission by 31 March 2023 and shall be accompanied by a report which includes a 
review of the measure.’. 

This Decision is addressed to the Kingdom of Denmark. 

Done at Brussels, 

Article 2 

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For the Council 
The President 

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