Proposal for a COUNCIL IMPLEMENTING DECISION amending Decision 2009/791/EC authorising Germany to continue to apply a measure derogating from Article 168 of Directive 2006/112/EC on the common system of value added tax
Date: 2021-07-30
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Germany, VAT, derogation from EU law, goods and services, tax relief

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   EUROPEAN COMMISSION  Brussels, 30.7.2021  COM(2021) 435 final 2021/0249 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION amending Decision 2009/791/EC authorising Germany to continue to apply a measure derogating from Article 168 of Directive 2006/112/EC on the common system of value added tax  
 
EXPLANATORY MEMORANDUM 

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

By  letter  registered  with  the  Commission  on  19  February  2021,  the  Federal  Republic  of 
Germany  (hereinafter  Germany)  requested  the  authorisation  to  continue  to  apply  a  measure 
derogating  from  Articles  168  and  168a  of  the  VAT  Directive,  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  their  private  use  or  for  that  of  their  employees,  or  in  general,  for  non-
business  purposes  or  non-economic  activities.  The  request  was  accompanied  by  a  report  on 
the application of this measure as required by Article 2 of Council Decision 2009/791/EC of 
20 October 20092  as  amended  by  Council  Implementing  Decision  (EU)  2018/2060  of  20 
December 20183. 

In accordance with Article 395(2) of the VAT Directive, the Commission informed the other 
Member States by letters dated 17 March 2021  of the request  made by  Germany.  By letter 
dated  18  March 2021,  the  Commission  notified  Germany  that  it  had  all  the  information 
necessary to consider the request. 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Article 168 of the VAT Directive provides that a taxable person is entitled to deduct the VAT 
charged on purchases made and services received for the purpose of their taxed transactions. 
Article  168a(1)  of  the  VAT  Directive  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 the 
VAT Directive Member  States may also  apply this rule in  relation  to  expenditure related to 
other goods forming part of the business assets as they specify. Article 168a was inserted in 
the  VAT  Directive  by  Council  Directive  2009/162/EU  of  22  December  20094,  in  order  to 
limit the deduction to the proportion of effective business use and apply thus more effectively 
the principle whereby the deduction arises only in so far as the goods and services concerned 
are used for the purpose of the taxable person’s business. 

Pursuant to Article 395 of the VAT Directive, Member States may apply measures derogating 
from the provisions of the VAT Directive to simplify the procedure for collecting VAT or to 
prevent certain forms of tax evasion or avoidance if they have been authorised by the Council. 

Germany requested to continue to apply a measure derogating from Articles 168 and 168a of 
the VAT Directive allowing it to entirely exclude 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. 

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4 

OJ L 347, 11.12.2006, p. 1. 
OJ L 283, 30.10.2009, p.55. 
OJ L 329, 7.12.2018, p. 20. 
Council  Directive  2009/162/EU  of  22  December  2009  amending  various  provisions  of  Directive 
2006/112/EC on the common system of value added tax, OJ L 10, 15.1.2010, p. 14–18. 

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This  derogating  measure  for  Germany  had  initially  been  granted  by  Council  Decision 
2000/186/EC  of  28 February 20005  for  a  period  until  31 December 2002  and  was  again 
granted by Council Decision 2003/354/EC of 13 May 20036 for a period until 30 June 2004, 
by  Council  Decision  2004/817/EC  of  19 November 20047 
for  a  period  until 
31 December 2009  and  by  Council  Decision  2009/791/EC  of  20 October 2009  for  a  period 
until  31 December 2012.  The  latter  has  been  prolonged  until  31 December 2015  by  Council 
Implementing  Decision  2012/705/EU  of  13 November 20128,  until  31 December 2018  by 
Council  Implementing  Decision  (EU)  2015/2428  of  10 December 20159  and  until  31 
December 2021 by Council Implementing Decision (EU) 2018/2060 of 20 December 201810. 

In  its  current  request,  Germany  informed  the  Commission  that  the  application  of  the 
derogating measure has proven to be very effective and constitutes a major simplification for 
the collection of VAT. It also helps to prevent tax evasion and avoidance. 

The requested minimal use of goods for at least 10 % for business purposes in order to allow 
to  deduct  input  VAT  is  relatively  low.  According  to  Germany,  the  prolongation  of  this 
measure will therefore only have little impact on the total amount of VAT revenue collected 
at the final stage of consumption and thus, does not affect the Union's VAT own resources in 
a negative way. 

According  to  Germany,  the  measure  reduces  administrative  burdens  for  taxpayers  and  tax 
administrations,  because  the  ratio  of  the  use  of  such  goods  for  business  and  non-business 
purposes does not have to be monitored nor adapted and therefore no records have to be kept 
on these changes. The 10 % limit also corresponds to what is foreseen in the German income 
tax  legislation,  which  provides  that  only  goods  that  are  used  for  at  least  10 %  for  business 
purposes can be regarded as business assets. 

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  Germany,  the  Commission  understands  that  the  10 %/90 %  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  the  VAT  Directive  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  2024  and  to  request  Germany  to  present,  together  with  the 
extension  request,  a report  by 31 March 2024  at  the latest  including a  review of the applied 

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OJ L 59, 4.3.2000, p.12. 
OJ L 123, 17.5.2003, p. 47. 
OJ L 357, 2.12.2004, p. 33. 
OJ L 319, 16.11.2012, p. 8. 
OJ L 334, 22.12.2015, p. 12. 
OJ L 329, 7.12.2018, p. 20. 

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apportionment  rate  between  business  and  non-business  use  on  which  the  exclusion  from 
deduction is based in case a further extension would be envisaged beyond 2024.  

Since Council Decision 2009/791/EC of 20 October 2009 was adopted prior to the adoption 
of Council Directive 2009/162/EU of 22 December 2009, which inserted Article 168a in the 
VAT  Directive,  its  title  does  not  refer  to  Article  168a.  To  eliminate  this  inconsistency 
between  the  title  and  the  content  of  Council  Decision  2009/791/EC,  the  title  of  Council 
Decision 2009/791/EC should therefore be amended by including a reference to Article 168a 
of the VAT Directive. 

• 

Consistency with existing policy provisions in the policy area 

Similar derogations in relation to the exclusion of VAT due on goods and services from the 
right to deduct VAT where the goods and services in question are used for more than 90 % for 
the private purposes of a taxable person or of that person’s employees or, in general, for non-
business  purposes  or  non-economic  activities,  have  been  granted  to  other  Member  States 
(Austria11, the Netherlands12).  

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 for taxable persons. 

Notwithstanding previous initiatives to establish rules on which categories of expenditure may 
be  subject  to  a  restriction  on  the  right  to  deduct13,  such  derogation  is  appropriate  in  the 
awaiting of a harmonisation of these rules at EU level. 

The  proposed  measure  is,  therefore,  consistent  with  the  existing  provisions  of  the  VAT 
Directive.  

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 a Member State upon its own request and 
does not constitute any obligation.  

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Council Implementing Decision (EU) 2018/1487 of 2 October 2018 amending Implementing Decision 
2009/1013/EU  authorising  the  Republic  of  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, OJ L 251, 
5.10.2018, p. 33–34. 
Council Implementing Decision (EU) 2020/2189 of 18 December 2020 authorising the Netherlands to 
introduce  a  special  measure  derogating  from  Articles  168  and  168a  of  Directive  2006/112/EC  on  the 
common system of value added tax, OJ L 434, 23.12.2020, p. 1–2. 
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 the procedure for collecting VAT and to prevent certain forms of tax 
evasion or avoidance. It does not go beyond what is required to fulfil this aim. 

• 

Choice of the instrument 

Proposed instrument: Council Implementing Decision. 

Under  Article  395  of  Council  Directive  2006/112/EC,  a  derogation  from  the  common  VAT 
provisions  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 an individual Member State. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

This proposal is based on a request made by Germany and concerns only this Member State. 

• 

Collection and use of expertise 

There was no need for external expertise. 

• 

Impact assessment 

The proposal for a Council Implementing Decision is designed to simplify the procedure for 
collecting VAT by allowing Germany to continue to apply a derogation measure allowing it 
to entirely exclude 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. This measure has proven to be a suitable and efficient tool.  

According to Germany, the extension of this measure will not have a negative impact on the 
total amount of VAT revenue collected at the final stage of consumption and thus, does not 
affect the Union's VAT own resources in a negative way. 

4. 

BUDGETARY IMPLICATIONS 

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

5. 

OTHER ELEMENTS 

The proposal is limited in time and includes a sunset clause set at 31 December 2024. 

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2021/0249 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Decision 2009/791/EC authorising Germany to continue to apply a measure 
derogating from Article 168 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), first subparagraph, thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

Articles  168  and  168a  of  Directive  2006/112/EC  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.  Germany  was  authorised  to  introduce  a 
derogating  measure  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  their  private  purposes  or  for  purposes  of  their  employees,  or  in 
general for non-business purposes or non-economic activities.  
Initially, Council Decision 2000/186/EC2 authorised Germany to introduce and apply 
measures  derogating  from  Articles  6  and  17  of  Council  Directive  77/388/EEC3  until 
31 December 2002.  Council  Decision  2003/354/EC4  authorised  Germany  to  apply  a 
measure  derogating  from  Article  17  of  Directive  77/388/EEC  until  30 June 2004. 
Council Decision 2004/817/EC5 extended that authorisation until 31 December 2009. 

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OJ L 347, 11.12.2006, p. 1. 
Council  Decision  2000/186/EC  of  28  February  2000  authorising  the  Federal  Republic  of  Germany  to 
apply  measures  derogating  from  Articles  6  and  17  of  the  Sixth  Directive  77/388/EEC  on  the 
harmonisation of the laws of the Member States relating to turnover taxes  - common system of value 
added tax: uniform basis of assessment (OJ L 59, 4.3.2000, p.12). 
Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member 
States relating to turnover taxes  — Common system of  value added tax: uniform basis  of assessment 
(OJ L 145, 13.6.1977, p. 1). 
Council  Decision  2003/354/EC  of  13  May  2003  authorising  Germany  to  apply  a  measure  derogating 
from  Article  17  of  the  Sixth  Directive  77/388/EEC  on  the  harmonisation  of  the  laws  of  the  Member 
States relating to turnover taxes (OJ L 123, 17.5.2003, p. 47). 
Council  Decision  2004/817/EC  of  19  November  2004  authorising  Germany  to  apply  a  measure 
derogating from Article 17 of the Sixth Directive 77/388/EEC on the harmonisation of the laws of the 
Member States relating to turnover taxes (OJ L 357, 2.12.2004, p. 33). 

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(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

By  Council  Decision  2009/791/EC6,  Germany  was  authorised  to  continue  to  apply  a 
measure derogating from Article 168 of Directive 2006/112/EC. Following successive 
extensions, that authorisation is due to expire on 31 December 2021. 
Council  Directive  2009/162/EU7  of  22  December  2009  inserted  Article  168a  in 
Directive  2006/112/EC  in  order  to  limit  the  deduction  to  the  proportion  of  effective 
business  use  and  apply  thus  more  effectively  the  principle  whereby  the  deduction 
arises only in so far as the goods and services concerned are used for the purpose of 
the  taxable  person’s  business.  The  title  of  Decision  2009/791/EC  therefore  needs  to 
refer to Article 168a of Directive 2006/112/EC as well.  

By letter of 19 February 2021, Germany submitted a request to the Commission that 
the  authorisation  to  continue  to  apply  a  measure  derogating  from  Articles  168  and 
168a  of  Directive  2006/112/EC  to  entirely  exclude  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,  be 
prolonged (‘the request’). The request was accompanied by a report on the application 
of the derogating measure, including a review of the apportionment rate applied on the 
right to deduct VAT as required by Article 2 of Decision 2009/791/EC.  

In  accordance  with  Article  395(2),  second  subparagraph,  of  Directive 2006/112/EC, 
the Commission informed the other Member States, by letters dated 17 March 2021, of 
the  request  made  by  Germany.  By  letter  dated  18  March 2021,  the  Commission 
notified Germany that it had all the information necessary to consider the request. 

According  to  Germany  the  measure  has  proven  very  effective  in  simplifying  the 
collection  of  VAT  and  preventing  tax  evasion  and  avoidance.  The  measure  reduces 
administrative  burden  for  businesses  and  tax  administrations,  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. Germany should therefore be 
authorised to continue to apply this special measure for a further limited period until 
31 December 2024. 

In  the  event  that  Germany  considers  an  extension  beyond  2024  to  be  necessary,  it 
should  submit  a  request  to  the  Commission  by  31 March 2024,  accompanied  by  a 
report  on  the  application  of  the  measure,  which  should  include  a  review  of  the 
apportionment rate applied.   

(9) 

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

(10)  Decision 2009/791/EC should therefore be amended accordingly, 

HAS ADOPTED THIS DECISION:  

Decision 2009/791/EC is amended as follows: 

(1) The title is replaced by the following: 

Article 1 

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Council  Decision  2009/791/EC  of  20  October  2009  authorising  the  Federal  Republic  of  Germany  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 283, 30.10.2009, p. 55). 
Council  Directive  2009/162/EU  of  22  December  2009  amending  various  provisions  of  Directive 
2006/112/EC on the common system of value added tax, OJ L 10, 15.1.2010, p. 14–18. 

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“Council  Decision  of  20  October  2009  authorising  the  Federal  Republic  of  Germany  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”; 

(2) Article 2 is replaced by the following: 

This Decision shall expire on 31 December 2024. 

“Article 2 

Any request for the extension of the derogating measure provided for in this Decision shall be 
submitted to the Commission by 31 March 2024. 

Such request shall be accompanied by a report on the application of this measure, including a 
review  of  the  apportionment  rate  applied  on  the  right  to  deduct  VAT  on  the  basis  of  this 
Decision.”. 

This Decision is addressed to the Federal Republic of Germany. 

Done at Brussels, 

Article 2 

For the Council 
The President 

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