Proposal for a COUNCIL IMPLEMENTING DECISION amending Decision 2009/791/EC 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
Date: 2024-09-09
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, 9.9.2024  COM(2024) 399 final 2024/0222 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION amending Decision 2009/791/EC 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  
 
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 
derogating  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  2024,  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 his private use or for that of his 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/EC2  as 
amended  by  Council  Implementing  Decision  (EU)  2021/17763.  An  email  was  sent  to 
Germany asking for further explanations on 26 March 2024 and a reply was received on 27 
March 2024. 

In accordance with Article 395(2) of the VAT Directive, the Commission informed the other 
Member  States  by  letters  dated  27  May 2024  of  the  request  made  by  Germany.  By  letter 
dated  28  May 2024,  the  Commission  notified  Germany  that  it  had  all  the  information 
necessary to consider the request. 

1. 

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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  his  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.  

Pursuant  to  Article  395  of  the  VAT  Directive,  Member  States  may  apply  special  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 special 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. 

initially  granted  by  Council  Decision  2000/186/EC  of 
This  special  measure  was 
28 February 20004  for  a  period  until  31 December 2002  and  was  again  granted  by  Council 

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OJ L 347, 11.12.2006, p. 1. 
OJ L 283, 30.10.2009, p.55. 
OJ L 360, 11.10.2021, p. 112. 
OJ L 59, 4.3.2000, p.12. 

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Decision 2003/354/EC of 13 May 20035 for a period until 30 June 2004, by Council Decision 
2004/817/EC  of  19 November 20046  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 20127,  until  31 December 2018  by  Council  Implementing  Decision  (EU) 
2015/2428  of  10 December 20158,  until  31  December  2021  by  Council  Implementing 
Decision  (EU)  2018/2060  of  20  December  20189  and  until  31  December  2024  by  Council 
Implementing Decision (EU) 2021/1776 of 5 October 2021. 

In its current request, Germany informed the Commission that the application of the  special 
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.  Since  its 
implementation,  the  special  measure  has  only  been  applied  to  goods.  In  its  reply  dated  27 
March 2024, Germany indicates that an extension of the special measure to services is in the 
process of being proposed to the German legislator. 

The requested minimal use of goods  and services for at least 10 % for business purposes in 
order  to  allow  the  deduction  of  input  VAT  is  relatively  low.  According  to  Germany,  the 
prolongation of this special 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 special measure reduces administrative burdens for taxpayers and 
tax administrations, because the ratio of the use of such goods and services 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. 

Special measures derogating from the VAT Directive are in general granted for a limited time 
as to allow an assessment of 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  special  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 2027 and, in case a further extension would be envisaged beyond 

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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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2027,  to  request  Germany  to  present,  together  with  the  extension  request,  a  report  by 
31 March 2027  at  the  latest  including  a  review  of  the  applied  apportionment  rate  between 
business and non-business use on which the exclusion from deduction is based .  

• 

Consistency with existing policy provisions in the policy area 

Similar special measures 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 
(Austria10, the Netherlands11).  

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 deduct12, such special measure is appropriate in the 
awaiting of a harmonisation of these rules at EU level. 

The proposed special 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.  

Given  the  limited  scope  of  the  derogation  and  its  limitation  in  time,  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. 

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Council Implementing Decision (EU) 2021/1779 of 5 October 2021 amending Implementing Decision 
2009/1013/EU  authorising  the  Republic  of  Austria  to  continue  to  apply  a  measure  derogating  from 
Articles  168  of  Directive  2006/112/EC  on  the  common  system  of  value  added  tax,  OJ  L  360, 
11.10.2021, p. 120-121. 
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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• 

Choice of the instrument 

Proposed instrument: Council Implementing Decision. 

Under Article 395 of the VAT Directive, 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  special  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 special measure has proven to be a suitable and efficient tool.  

According to Germany, the extension of this special 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 2027. 

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2024/0222 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

amending Decision 2009/791/EC 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 

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) 

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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  has  been  authorised  to  introduce  a 
special 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 his private purposes or for purposes of his employees, or in general for 
non-business purposes or non-economic activities.  
Initially, Council Decision 2000/186/EC2 authorised Germany to introduce and apply 
special 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  special  measure  derogating  from  Article  17  of  Directive  77/388/EEC  until 
30 June 2004.  Council  Decision  2004/817/EC5  extended  the  authorisation  until 
31 December 2009. 

OJ L 347, 11.12.2006, p.1, ELI: http://data.europa.eu/eli/dir/2006/112/oj. 
Council Decision 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, ELI: http://data.europa.eu/eli/dec/2000/186/oj). 
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, ELI: http://data.europa.eu/eli/dir/1977/388/oj). 
Council Decision 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  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, ELI: http://data.europa.eu/eli/dec/2004/817/oj). 

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(3) 

(4) 

(5) 

(6) 

(7) 

Council  Decision  2009/791/EC6  authorised  Germany  to  continue  to  apply  a  special 
from  Article  168  of  Directive  2006/112/EC  until 
measure  derogating 
31 December 2021.  The  authorisation  to  apply  the  special  measure  under  Council 
Decision  2009/791/EC,  as  amended  by  Council  Implementing  Decision  (EU) 
2021/17767, is due to expire on 31 December 2024. 

By letter registered by the Commission on 19 February 2024, Germany requested the 
authorisation to continue to apply a special 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.  That 
request  was  accompanied  by  a  report  on  the  application  of  the  special  measure 
including  a  review  of  the  apportionment  rate  applied  on  the  right  to  deduct  VAT  as 
required  by  Article  2  of  Council  Decision  2009/791/EC.  The  Commission  requested 
further explanations from Germany on 26 March 2024 and a reply was received on 27 
March 2024. 

In  accordance  with  Article  395(2),  second  subparagraph,  of  Directive 2006/112/EC, 
the Commission informed the other Member States, by letters dated  27 May 2024 of 
the request made by Germany. By letter dated 28 May 2024, the Commission notified 
Germany that it had all the information necessary to consider the request. 

According to Germany the special measure has proven very effective to  simplify the 
collection  of  VAT  and  to  avoid  tax  evasion  and  avoidance.  The  special  measure 
reduces  administrative  burdens  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 2027. 

In  the  event  that  Germany  considers  an  extension  beyond  2027  to  be  necessary,  it 
should  submit  a  request  for  an  extension  to  the  Commission  by  31 March 2027 
accompanied  by  a  report  on  the  application  of  the  measure  which  should  include  a 
review of the apportionment rate applied. 

(8) 

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

(9) 

Decision 2009/791/EC should therefore be amended accordingly, 

HAS ADOPTED THIS DECISION:  

Article 2 of Decision 2009/791/EC is replaced by the following: 

Article 1 

‘Article 2 

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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 Implementing Decision (EU) 2021/1776 of  5 October 2021 amending Decision 2009/791/EC 
authorising  Germany  to  continue  to  apply  a  measure  derogating  from  Articles  168  of  Directive 
2006/112/EC  on  the  common  system  of  value  added  tax  (OJ  L  360,  11.10.2021,  p.  112,  ELI: 
http://data.europa.eu/eli/dec_impl/2021/1776/oj). 

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This Decision shall expire on 31 December 2027. 

Any  request  for  the  extension  of  the  special  measure  provided  for  in  this  Decision  shall  be 
submitted to the Commission by 31 March 2027. 

Such  request  shall  be  accompanied  by  a  report  on  the  application  of  this  measure  which 
includes 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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