Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2013/805/EU authorising the Republic of Poland to introduce measures derogating from point (a) of Article 26(1) and Article 168 of Directive 2006/112/EC on the common system of value added tax
Date: 2022-11-03
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Poland, VAT, derogation from EU law, motor vehicle, tax relief

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   EUROPEAN COMMISSION  Brussels, 3.11.2022  COM(2022) 569 final 2022/0353 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION amending Implementing Decision 2013/805/EU authorising the Republic of Poland to introduce measures derogating from point (a) of Article 26(1) and Article 168 of Directive 2006/112/EC on the common system of value added tax  
 
EXPLANATORY MEMORANDUM 

Pursuant to Article 395(1) 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  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  18  February  2022,  Poland  requested  an 
extension  of  the  derogation  from  Article  26(1),  point  (a),  and  Article  168  of  the  VAT 
Directive  in  order  to  (i)  continue  to  restrict  to  50%  the  right  to  deduct  input  VAT  on  the 
purchase,  intra-Community  acquisition,  import,  hire  and  lease  of  motor  vehicles  which  are 
not used entirely for business purposes and expenditure relating to those vehicles, and to (ii) 
not  treat  as  supplies  of  services  for  consideration  the  use,  by  a  taxable  person  or  one’s 
employees, of vehicles covered by the above limitation on the right to deduct input VAT for 
purposes other than business activity conducted by the taxable person. 

In accordance with Article 395(2) of the VAT Directive, the Commission informed the other 
Member States by letter dated 15 March 2022 of the request made by Poland. By letter dated 
16 March 2022, the Commission notified Poland that it had all the information it considered 
necessary for the appraisal of the request. 

1. 

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CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Conducting  inspections  to  determine  the  extent  to  which  vehicles  are  used  for  business 
purposes  and  for  other  purposes  (in  particular  for  private  purposes  unrelated  to  business) 
would create significant difficulties and burdens for both tax authorities and taxable persons 
and  could  lead  to  time-consuming  and  costly  disputes  for  both  parties.  In  practice,  it  is 
sometimes even impossible to verify the actual division of the use of vehicles. It may result in 
VAT  fraud  or  attempted  fraud  (such  as  unreliable  record  keeping),  and  consequently  a 
decrease  in  tax  revenue.  Because  of  the  number  of  vehicles  used  for  mixed  purposes,  tax 
evasion could be substantial. 

Moreover,  Poland  is  dominated  by  small  companies  with  low  turnover  (the  so-called 
microenterprises),  often  sole  proprietorships  or  companies  employing  only  a  few  workers. 
These  are  frequently  family  businesses.  In  such  small  enterprises,  there  is  often  no  clear 
separation of company assets from private assets of persons conducting business activity. In 
such  cases,  distinguishing  between  private  and  business  use  of  motor  vehicles  is  extremely 
difficult and would require disproportionately large outlays, including those resulting from the 
need to maintain detailed documentation. 

The  application  of  the  requested  special  measures  results  in  reduction  of  administrative 
burdens  and  costs  for  entrepreneurs.  Taxable  persons  do  not  have  to  fulfil  a  number  of 
burdensome documenting and  reporting obligations (e.g. the necessity to  keep and  report to 
the tax administration the so-called kilometric data, i.e. a detailed list of kilometres driven in 
connection  with  conducted  business  activity)  which  sometimes  could  constitute  a 
disproportionate administrative burden. 

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OJ L 347, 11.12.2006, p. 1. 

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Businesses  are  generally  in  favour  of  the  deduction  rules  resulting  from  the  requested 
derogation. The measures adopted under the implementing Decision 2013/805/EU are seen as 
a successful compromise between the accepted rules and the expensive, time-consuming and 
inefficient  keeping  of  records  proving  the  actual  use  of  vehicles  for  business  activities.  The 
acceptance of the simplifications resulting from the derogation from the general rules may be 
evidenced  by  the  fact  that  taxable  persons  have  adopted  such  rules  for  nearly  90%  of  the 
vehicles used. 

For  those  reasons  the  Republic  of  Poland  has  been  applying  a  derogation  from  Articles 
26(1)(a)  and  168  of  the  VAT  Directive  since  1  April  2014.  The  aforementioned  specific 
measures  were  extended  until  31  December  2019  and  then  until  31  December  2022  by 
Council Implementing Decision (EU) 2016/18372 and Council Implementing Decision (EU) 
2019/1594,3 respectively.  

Given  the  positive  impact  of  the  special  measure  on  the  administrative  burden  of  taxpayers 
and  tax  authorities  alike,  it  is  proposed  to  authorise  the  extension  of  the  current  derogation 
measure. The authorisation should be valid for another limited period, i.e. until 31 December 
2025,  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  on. 
Any  extension  request  should  be  accompanied  by  a  report  which  includes  a  review  of  the 
percentage applied and should be sent to the Commission by 31 March 2025. 

• 

Consistency with existing policy provisions in the policy area 

Similar derogations in relation to the right of deduction have been granted to other Member 
States.4 

Article 176 of the VAT Directive stipulates that the Council shall determine the expenditure 
on  which  the  VAT  is  not  deductible.  Until  then,  it  authorises  Member  States  to  maintain 
exclusions that were in place under national laws on 1 January 1979. On this basis, there is a 
number of ‘stand still’ provisions restricting the right to deduct VAT in relation to corporate 
motor vehicles. 

Previous initiatives to establish rules on which categories of expenditure may be subject to a 
restriction  on  the right  to  deduct  have failed.5 Until those rules are harmonised at  EU level, 
derogations such the present one are considered as appropriate. 

2 

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4 

Council  Implementing  Decision  (EU)  2016/1837  of  11  October  2016  authorising  the  Republic  of 
Poland  to  continue  to  apply  measures  derogating  from  Articles  26(1)(a)  and  168  of  Directive 
2006/112/EC on the common system of value added tax (OJ L 280, 18.10.2016, p. 28). 
Council  Implementing  Decision  (EU)  2019/1594  of  24  September  2019  amending  Implementing 
Decision 2013/805/EU authorising the Republic of Poland to introduce measures derogating from point 
(a) of Article 26(1) and Article 168 of Directive 2006/112/EC on the common system of value added 
tax (OJ L 248, 27.9.2019, p. 71–72). 
For  example:  Council  Implementing  Decision  (EU)  2021/1997  of  15  November  2021  amending 
Implementing Decision (EU) 2018/1994  authorising Croatia to introduce a special measure derogating 
from  point  (a)  of  Article  26(1)  and  Article  168  of  Directive  2006/112/EC  on  the  common  system  of 
value added tax (OJ L 408, 17.11.2021, p. 1–2); Council Implementing Decision (EU) 2018/1493 of 2 
October 2018 authorising Hungary to introduce a special measure derogating from point (a) of Article 
26(1) and Articles 168 and 168a of Directive 2006/112/EC on the common system of value added tax 
(OJ L 252, 8.10.2018, p. 44–46); Council Implementing Decision (EU) 2017/1854 of 10 October 2017 
amending Implementing Decision 2014/797/EU authorising the Republic of Estonia to apply a measure 
derogating from point (a) of Article 26(1) and Articles 168 and 168a of Directive 2006/112/EC on the 
common system of value added tax (OJ L 265, 14.10.2017, p. 17–18). 

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The proposed measures are therefore consistent with the provisions of the VAT Directive. 

• 

Consistency with other Union policies 

This  measure  is  consistent  with  the  Commission  Communication  of  15  July  2020  -  Action 
Plan for Fair and Simple Taxation in Support  of Economic Recovery,6 which highlights  the 
need to support young and innovative companies, which face more administrative complexity 
than large multinationals and where compliance costs tend to be proportionately much higher 
for  small  companies  than  for  large  ones.  It  is  also  compatible  with  the  Commission's  2017 
work programme,7 which highlights the need to simplify VAT for smaller businesses.  

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 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  tax  collection  and  to  prevent  certain  forms  of  tax  evasion  or 
avoidance. In particular, given the potential for businesses to under declare their liability and 
the burdensome check of mileage data for tax authorities, the 50% restriction would simplify 
the  VAT  collection  procedure  and  would  prevent  tax  evasion  inter  alia  through  incorrect 
record keeping. 

• 

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. 

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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). 
Communication from the Commission to the European Parliament and the Council An Action Plan for 
Fair and Simple Taxation in Support of Economic Recovery (COM(2020)312 final). 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social  Committee and the  Committee of the  Regions  -  Commission Work Programme 
2017. (COM(2016) 710 final). 

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3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

The Republic of Poland attached a report to its request to extend the above mentioned special 
measure. The report included a review of the current restriction on the right to deduct VAT, as 
provided  for  in  the  second  paragraph  of  Article  3  of  Council  Implementing  Decision 
2013/805/EU8, as amended by Article 1 of Council Implementing Decision (EU) 2019/15949. 

A  review  of  the  restriction  on  the  right  to  deduct  VAT  conducted  for  the  aforementioned 
report concluded in particular that: 

 

 

 

 

the  special  measure  has  contributed  to  simplifying  the  collection  of  VAT  and 
preventing  VAT  evasion  by  eliminating  the  difficulty  for  a  taxable  person  to 
determine  the  proportion  of  a  vehicle's  use  for  business  purposes  and  for  other 
purposes (mainly private use of business vehicles) that are conducive to avoiding and 
evading the output tax; 

the  special  measure  has  contributed  to  simplifying  tax  obligations  and  reducing 
administrative burdens on taxable persons (especially in the SME sector) and on the 
tax administration by significantly reducing the difficulties associated with verifying 
the  correctness  of  input  tax  deductions,  which  often  lead  to  costly  and  time-
consuming administrative and court disputes (for both parties); 

the 50% restriction on the right to deduct input VAT is appropriate, as it corresponds 
in general to the average private use of a vehicle by a given taxable person (the use 
of  a  lower  or  higher  ratio  would  result  in  excessive  discrepancies  between  the 
presumed and actual use of the vehicle for business and private purposes); 

the  measure  is  compatible  with  the  principle  of  neutrality  and  does  not  restrict  the 
right to full deduction of input tax on expenses related to passenger vehicles provided 
that  the  taxable  person  meets  certain  record-keeping  requirements  confirming  that 
the vehicle is 100% used for business activity. 

• 

Stakeholder consultations 

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

• 

Collection and use of expertise 

There was no need for external expertise. 

• 

Impact assessment 

The  proposal  aims  at  simplifying  the  procedure  for  charging  VAT  and  at  preventing  VAT 
evasion. It has, therefore, a potential positive impact for both businesses and administrations. 

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Council Implementing Decision 2013/805/EU of 17 December 2013 authorising the Republic of Poland 
to apply measures derogating from Articles 26(1)(a) and 168 of Directive 2006/112/EC on the common 
system of value added tax (OJ L 353, 28.12.2013, p. 5, as amended). 
Council  Implementing  Decision  (EU)  2019/1594  of  24  September  2019  amending  Implementing 
Decision 2013/805/EU authorising the Republic of Poland to apply measures derogating from Articles 
26(1)(a) and 168 of Directive 2006/112/EC on the common system of value added tax (OJ EU L 248 of 
27.9.2019, p. 71). 

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The  special  measure  has  been  identified  by  Poland  as  the  most  appropriate  solution  and  is 
comparable to other past and present derogations granted to other Member States. 

• 

Fundamental rights 

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

4. 

BUDGETARY IMPLICATIONS 

The proposal will not have a negative impact on the EU budget. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The proposal includes a sunset clause which is set at 31 December 2025. 

In  case  Poland  considers  a  further  extension  of  the  special  measure  beyond  2025,  it  should 
submit to the Commission an extension request accompanied by a report including a review 
of the percentage limit by 31 March 2025. 

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2022/0353 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Implementing Decision 2013/805/EU authorising the Republic of Poland to 
introduce measures derogating from point (a) of Article 26(1) and 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) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

1 
2 

Article 168 of Directive 2006/112/EC establishes a taxable person’s right to deduct 
value added tax (‘VAT’) charged on supplies of goods and services received by them 
for the purposes of their taxed transactions. Article 26(1), point (a), of that Directive 
lays  down  that,  when  a  business  asset  is  put  to  use  for  the  private  purposes  of  the 
taxable person or their staff or, more generally, for purposes other than those of their 
business, this is to be considered as a service for consideration which, subsequently, 
is subject to VAT. 
By virtue of Council Implementing Decision 2013/805/EU2, Poland was authorised, 
until 31 December 2022, to limit to 50% the right to deduct  VAT on the purchase, 
intra-Community acquisition, importation, hire, or leasing of certain motorised road 
vehicles  and  expenditure  related  thereto,  where  such  vehicles  are  not  entirely  used 
for business purposes, and to relieve the taxable person from accounting on VAT on 
the non-business use of vehicles covered by the restriction (the ‘special measures’). 

Council  Implementing  Decision  2013/805/EU  (as  amended)  is  to  expire  on 
31 December 2022. By letter registered with the Commission on 18 February 2022, 
Poland requested authorisation to continue to apply the special measures, derogating 
from Article 26(1), point (a) and Article 168 of Directive 2006/112/EC, for a further 
period until 31 December 2025, in order to restrict the right of deduction in relation 
to  expenditure  on  certain  motorised  road  vehicles  not  wholly  used  for  business 
purposes and to relieve taxable persons from having to treat non-business use of such 
vehicles as a supply of services for consideration (‘the request’). 

In accordance with Article 395(2), second subparagraph, of Directive 2006/112/EC, 
the Commission informed the other Member States, by letter dated 15 March 2022 of 
the request made by Poland. By letter dated 16 March 2022, the Commission notified 
Poland that it had all the information necessary to consider the request.  

OJ L 347, 11.12.2006, p. 1. 
Council Implementing Decision 2013/805/EU of 17 December 2013 authorising the Republic of Poland 
to  introduce  measures  derogating  from  point  (a)  of  Article  26(1)  and  Article  168  of  Directive 
2006/112/EC on the common system of value added tax (OJ L 353, 28.12.2013, p. 51). 

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(5) 

(6) 

(7) 

(8) 

In  accordance  with  the  second  paragraph  of  Article  3  of  Implementing  Decision 
2013/805/EU,  Poland  submitted  to  the  Commission,  together  with  the  request,  a 
report  on  the  application  of  the  special  measures,  including  a  review  of  the 
percentage limitation applied on the right to deduct VAT. Based on that information, 
Poland  maintains  that  a  rate  of  50%  is  still  justifiable.  It  also  considers  that  the 
derogation from the requirement in Article 26(1)(a) of Directive 2006/112/EC is still 
necessary to avoid double taxation. Those special measures are justified by the need 
to simplify the procedure for charging VAT and to prevent evasion through incorrect 
record keeping and false tax declarations. 

The application of the special measures beyond 31 December 2022, will only have a 
negligible effect on the overall amount of tax revenue of Poland collected at the stage 
of  final  consumption  and  will  not  adversely  affect  the  Union’s  own  resources 
accruing from VAT. 

It  is  therefore  appropriate  to  extend  the  authorisation  set  out  in  Implementing 
Decision 2013/805/EU. The extension of the authorisation should be limited in time 
to  allow  for  an  evaluation  of  its  effectiveness  and  of  the  appropriate  percentage 
restriction applied on the right to deduct VAT.  

Where Poland could consider that the special measures are necessary beyond the date 
of  expiry  of  Implementing  Decision  2013/805/EU,  and  in  order  to  ensure  timely 
examination  of  any  request  to  extend  the  authorisation  provided  for  in  that 
Implementing Decision, it is necessary to lay down requirements for such a request. 

(9) 

Implementing Decision 2013/805/EU should be therefore amended accordingly, 

HAS ADOPTED THIS DECISION:  

Article 3 of Implementing Decision 2013/805/EU is replaced by the following: 

Article 1 

This Decision shall expire on 31 December 2025. 

‘Article 3 

Any  request  for  an  extension  of  the  authorisation  provided  for  in  this  Decision  shall  be 
submitted  to  the  Commission  by  31  March  2025.  Such  request  shall  be  accompanied  by  a 
report,  which  includes  a  review  of  the  percentage  restriction  applied  on  the  right  to  deduct 
VAT on the basis of this Decision.’. 

This Decision is addressed to the Republic of Poland. 

Done at Brussels, 

Article 2 

For the Council 
The President 

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