Proposal for a COUNCIL IMPLEMENTING DECISION authorising Romania to apply special measures derogating from Article 26(1), point (a), and Article 168 of Directive 2006/112/EC on the common system of value added tax
Date: 2024-04-08
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Romania, VAT, derogation from EU law, motor vehicle, tax relief

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   EUROPEAN COMMISSION  Brussels, 8.4.2024  COM(2024) 154 final 2024/0085 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising Romania to apply special measures derogating from Article 26(1), point (a), and 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  14  September  2023,  Romania  requested  an 
extension  of  the  derogation  from  Article  168  and  Article  26(1)(a)  of  the  VAT  Directive  in 
order to continue to restrict the right to deduct the input VAT on expenditure related to motor 
vehicles  not  used  exclusively  for  business  purposes,  and  to  relieve  taxable  persons  from 
having  to  treat  the private use of such vehicles  as a supply of services for consideration.  In 
accordance  with  Article  395(2)  of  the  VAT  Directive,  the  Commission  informed  the  other 
Member States by letter dated 9 November 2023 of the request made by Romania. By letter 
dated 10 November 2023, the Commission notified Romania that it had all the information it 
considered necessary for appraisal of the request. 

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• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Articles 168 VAT Directive provides that a taxable person is entitled to deduct VAT charged 
on  purchases  made  for  the  purposes  of  taxed  transactions.  Article  26(1)(a)  of  the  same 
Directive  requires  the  use  of  goods  forming  part  of  the  assets  of  a  business  for  private 
purposes to be a supply of services for consideration if the VAT on the goods was eligible for 
deduction.  This  system  allows  for  the  recovery  of  initially  deducted  VAT  in  relation  to  the 
private use.  

In  the  case  of  passenger  cars,  this  system  is  difficult  to  apply,  in  particular  because  it  is 
difficult to identify the split between private and business use. Where records are kept, they 
add  an  additional  burden  to  both  the  business  and  the  administration  in  maintaining  and 
checking them.  
Romania  was  authorised  on  the  basis  of  Council  Implementing  Decision  2012/232/EU2  to 
apply  a  special  measure  limiting  to  50  %  the  right  to  deduct  VAT  on  the  purchase,  intra-
Community acquisition, importation, hire or leasing of motorised road vehicles as well as on 
expenditure related thereto, including the purchase of fuel, where such vehicles are not used 
exclusively  for  business  purposes.  The  special  measure  did  not  apply  to  motorised  road 
vehicles  with  a  maximum  permissible  laden  mass  of  more  than  3 500 kg  or  with  more  than 
nine  seats  including  the  driver’s  seat.  In  addition,  some  categories  of  vehicles  were 
specifically  excluded  from  this  restriction  on  the  right  of  deduction,  such  as  vehicles  used 
exclusively for emergency, security, protection or courier services, vehicles used by sales and 
purchasing  agents, vehicles used for the transport  of passengers  and taxis,  vehicles used for 
instruction  by  driving  schools,  vehicles  used  for  hire  or  leasing  or  vehicles  used  as 
commodities  for  trading  purposes.  At  the  same  time,  taxable  persons  were  relieved  from 
accounting for tax on the private use of a motorised road vehicle where it has been subject to 
this  restriction.  The  period  of  validity  of  these  special  measures  was  extended  by  Council 

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OJ L 347, 11.12.2006, p. 1. 
Council Implementing Decision 2012/232/EU of 26 April 2012 authorising Romania to apply measures 
derogating from Article 26(1)(a) and Article 168 of Directive 2006/112/EC on the common system of 
value added tax (OJ L 117, 1.05.2012, p. 7).   

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Implementing  Decision  (EU)  2015/156  of  27  January  20153  until  31  December  2017,  by 
Council  Implementing  Decision  (EU)  2017/2012  of  7  November  20174  until  31  December 
2020 and by Council Implementing Decision (EU) 2020/1262 of 4 September 20205 until 31 
December 2023. 

Romania  has  requested  to  prolong  the  authorisation  to  limit  the  initial  deduction  to  a  set 
percentage  and  in  turn  to  relieve  the  business  from  accounting  for  tax  on  the  private  use. 
Romania  informed  the  Commission  that  the  grounds  for  the  prolongation  of  the  special 
measures are largely the same as described in the initial request.  In accordance with Article 
4(2) of Council Implementing Decision 2012/232/EU Romania has presented a report on the 
deduction limit applied by Romania. Romania submits that the special measures have fulfilled 
their role. The derogation is a simplification which removes the need for the taxable person to 
keep  records  of  mileage  relating  to  business  use  and  mileage  relating  to  private  use  of  the 
vehicle.  This  special  measure  limiting  the  right  to  deduct  VAT  creates  the  conditions  for 
preventing tax evasion, which could be generated by recording less than actual personal use. 

According  to  the  report  submitted  by  Romania  as  required  by  the  Council  Implementing 
Decision  2012/232/EU,  the  share  of  small  enterprises  with  less  than  nine  employees  in 
Romania is high: 99.7% of all the active enterprises in the industrial sector, the construction 
sector  or  the  services  sector  in  2021  were  small  or  medium-sized  enterprises;  and  active 
enterprises with up to nine employees accounted for 91.1% of all active economic and social 
operators in those sectors. Romania argues that, in practice, a car owned by such enterprises is 
often used both for business activities and for personal purposes. 

Based on the above, Romania states that the limitation of 50% of the right to deduct VAT still 
reflects  the  overall  business  and  private  use  of  vehicles  by  taxable  persons  in  Romania  and 
that this limit therefore should still be regarded as appropriate. 

Given the positive impact of the special measures on the administrative burden of taxpayers 
and  tax  authorities  alike  and  on  prevention  of  tax  evasion,  it  is  proposed  to  authorise  the 
special measures. 

The special measures should be limited in time to 31 December 2026, in order to allow for a 
review  of  the  necessity  and  effectiveness  of  the  special  measures  and  whether  the  50% 
restriction  is  still  a  correct  reflection  of  the  overall  apportionment  between  business  and 
private  use.  Any  extension  request  should  be  accompanied  by  a  report  which  includes  a 
review of the percentage applied and should be sent to the Commission with that request by 
31 March 2026.  

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Council Implementing Decision (EU) 2015/156 of 27 January 2015 extending the period of validity of 
Implementing Decision 2012/232/EU  authorising Romania to apply measures derogating from Article 
26(1)(a) and Article 168 of Directive 2006/112/EC on the common system of value added tax (OJ L 26, 
31.1.2015, p. 27). 
Council  Implementing  Decision  (EU)  2017/2012  of  7  November  2017  amending  Implementing 
Decision  2012/232/EU  authorising  Romania  to  apply  measures  derogating  from  Article  26(1)(a)  and 
Article  168  of  Directive  2006/112/EC  on  the  common  system  of  value  added  tax  (OJ  L  292, 
10.11.2017, p. 57–58). 
Council  Implementing  Decision  (EU)  2020/1262  of  4  September  2020  amending  Implementing 
Decision  2012/232/EU  authorising  Romania  to  apply  measures  derogating  from  Article  26(1)(a)  and 
Article 168 of Directive 2006/112/EC on the common system of value added tax (OJ L 296, 10.9.2020, 
p. 6) 

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• 

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.  

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 VAT 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 deduct VAT6, 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.  

• 

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. 

Given the limited scope of the derogation, the special measures are 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  in  specific  sectors  and  would  prevent  tax  evasion  inter  alia 
through incorrect record keeping. 

The derogation is also limited in time and a report on the functioning and the effectiveness of 
the measures is to be prepared in case Romania wishes to prolong the special measures. 

• 

Choice of the instrument 

Proposed instrument: Council Implementing Decision. 

Under  Article  395  of  Council  Directive  2006/112/EC,  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 most suitable instrument since 
it can be addressed to an individual Member State. 

6 

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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3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

This proposal is based on a request made by Romania and concerns only this 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 Romania as a suitable measure and is comparable to other past 
and present derogations. 

4. 

BUDGETARY IMPLICATIONS 

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

5. 

OTHER ELEMENTS 

The proposal includes a sunset clause;  an automatic time limit which is set at 31 December 
2026. 

In  case  Romania  would  consider  another  extension  of  the  special  measures  beyond  2026,  a 
report  including  a  review  of  the  percentage  limit  should  be  submitted  to  the  Commission 
together with the extension request no later than 31 March 2026. 

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2024/0085 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Romania to apply special measures derogating from Article 26(1), point (a), 
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) 

Article 168 of Directive 2006/112/EC establishes a right for taxable persons to deduct 
from the value added tax (VAT) due or paid in the relevant Member State  the VAT 
charged on supplies to them of goods and services that are used  for the purposes of 
their taxed transactions. Pursuant to Article 26(1), point (a), of that Directive, the use  
of goods forming part of the assets of a business for the private use of taxable persons 
or their staff or, more generally, for purposes other than those of their business, where 
the VAT on such goods was wholly or partly deductible, is to be treated as a supply of 
services for consideration. 
Council Implementing  Decision 2012/232/EU2,  authorised Romania to  limit to  50  % 
the  right  to  deduct  the  VAT  on  the  purchase,  intra-Community  acquisition, 
importation,  hire  or  leasing  of  certain  motorised  road  vehicles  as  well  as  the  VAT 
charged  on  expenditure  related  to  those  vehicles,  where  such  vehicles  are  not  used 
exclusively for business purposes, and to relieve taxable persons from having to treat 
the use of such vehicles for purposes other than those of their business as a supply of 
services  for  consideration  pursuant  to  Article  26(1),  point  (a),  of  Directive 
2006/112/EC.  

By letter registered with the Commission on 14 September 2023, Romania requested 
an  authorisation,  in  accordance  with  Article  395(2),  first  subparagraph,  of  Directive 
2006/112/EC, to continue to apply the special measures derogating from Article 26(1), 
point  (a),  and  Article  168  of  Directive  2006/112/EC  in  order  to  restrict  the  right  of 
deduction  in  relation  to  expenditure  on  certain  motorised  road  vehicles  not  used 
exclusively for business  purposes and to relieve taxable persons from having to treat 
the use of such vehicles for purposes other than those of their business as a supply of 
services for consideration ('special measures’). 

(4) 

In  accordance  with  Article  395(2),  second  subparagraph,  of  Directive  2006/112/EC, 
the  Commission  transmitted  the  request  submitted  by  Romania  to  the  other  Member 

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OJ L 347, 11.12.2006, p. 1, ELI: http://data.europa.eu/eli/dir/2006/112/oj.  
Council Implementing Decision 2012/232/EU of 26 April 2012 authorising Romania to apply measures 
derogating from Article 26(1)(a) and Article 168 of Directive 2006/112/EC on the common system of 
value added tax (OJ L 117, 1.5.2012, p. 7, ELI: http://data.europa.eu/eli/dec_impl/2012/232/oj).  

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(5) 

(6) 

(7) 

(8) 

(9) 

States  by  letter  dated  9  November  2023.  By  letter  dated  10  November  2023,  the 
Commission  notified Romania that it had all the information it considered necessary 
for appraisal of the request. 

Pursuant to Article 4(2) of Implementing Decision 2012/232/EU, Romania submitted, 
together with the extension request, a report to the Commission on the application of 
that Implementing Decision. Based on currently available information, Romania states 
that the limit of 50 % is still justifiable and remains appropriate.  

The  special  measures  authorised  by  Implementing  Decision  2012/232/EU  have 
expired  on  31  December  2023.  Given  the  positive  impact  for  both  businesses  and 
administrations, it is appropriate to grant the special measures. 

The  special  measures  should  be  limited  to  the  time  needed  to  evaluate  the 
effectiveness  of  those  special  measures  and  the  appropriateness  of  the  percentage 
limitation. Romania should therefore be authorised to apply the special measures until 
31 December 2026. 

The special measures are proportionate to  the objectives  pursued, i.e. to  simplify the 
procedure  for  collecting  VAT  and  to  prevent  certain  forms  of  tax  evasion  or 
avoidance, since they are limited in time and scope. In addition, the special measures 
do not give rise to the risk that fraud would shift to other sectors or to other Member 
States. 

In the event that Romania considers that an extension of the special measures beyond 
2026 is necessary, it should submit a request for an extension to the Commission by 31 
March  2026,  together  with  a  report  which  includes  a  review  of  the  percentage 
restriction applied on the right to deduct VAT. 

(10)  According to information provided by Romania, the special measures will only have a 
negligible  effect  on  the  overall  amount  of  tax  revenue  that  Romania  collects  at  the 
stage  of  final  consumption  and  will  have  no  adverse  impact  on  the  Union’s  own 
resources accruing from VAT, 

HAS ADOPTED THIS DECISION:  

Article 1 

By way of derogation from Article 168 of Directive 2006/112/EC, Romania is authorised to 
limit  to  50  %  the  right  to  deduct  the  VAT  on  the  purchase,  intra-Community  acquisition, 
importation,  hire  or  leasing  of  motorised  road  vehicles  as  well  as  the  VAT  charged  on 
expenditure related to  those vehicles, where the vehicle is  not  used exclusively  for business 
purposes. 

Article 2 

1. 

2. 

(a) 

Article  1  shall  not  apply  to  motorised  road  vehicles  with  a  maximum  permissible 
laden mass of more than 3 500 kg or with more than nine seats including the driver’s 
seat. 

Article 1 shall not apply to the following categories of motorised road vehicles: 

vehicles used exclusively for emergency services, for security, protection and courier 
services; 

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(b) 

(c) 

(d) 

(e) 

(f) 

vehicles used by sales agents and by purchasing agents; 

vehicles  used  for  the  transport  of  passengers  for  consideration,  including  taxi 
services; 

vehicles  used for the supply  of services  for consideration, including  hire or driving 
lessons provided by driving schools; 

vehicles used for hire or leasing; 

vehicles used as commodities for trading purposes. 

Article 3 

By  way  of  derogation  from  Article  26(1),  point  (a),  of  Directive  2006/112/EC,  Romania  is 
authorised not  to  treat  as a supply of services  for consideration the private use by a taxable 
person  or  his  staff  or,  more  generally,  for  purposes  other  than  those  of  his  business,  of  a 
vehicle to which the restriction referred to in Article 1 of this Decision applies. 

Romania  shall  notify  the  national  measures  implementing  the  special  measures  for  the 
derogations referred to in Articles 1 and 3 to the Commission. 

Article 4 

1.   This Decision shall take effect on the date of its notification. 

2.   This Decision shall apply until 31 December 2026. 

Article 5 

3.   If Romania considers that an extension of the special measures laid down in Articles 1 and 
3 is necessary, it shall submit a request for extension to the Commission by 31 March 2026, 
together  with  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 Romania. 

Done at Brussels, 

Article 6  

             For the Council 
The President 

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