Pursuant to Article 395 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax 1 (‘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 March 2023, 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) 2018/485 2 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, except Ireland and Poland, by letter dated 3 May 2023 of the request made by Denmark. Ireland and Poland were informed of Denmark’s request by letter dated 4 May 2023. The Commission notified Denmark by letter dated 5 May 2023 that it had all the information necessary to consider the request.
In order to simplify VAT collection and combat tax evasion, Denmark requested in 2011 a special measure 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 request was approved by Council Implementing Decision 2012/447/EU of 24 July 2012 3 . Denmark requested an extension of the special measure three times, which were approved by Council Implementing Decision (EU) 2015/992 of 19 June 2015 4 , by Council Implementing Decision (EU) 2018/485 of 19 March 2018 and by Council Implementing Decision 2020/1088 of 22 July 2020 amending Implementing Decision (EU) 2018/485 5 . The Implementing Decision (EU) 2018/445 is set to expire on 31 December 2023.
Without such special 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 continue to apply a simplified procedure as previously granted by Council Implementing Decision (EU) 2018/485, whose validity was extended by Council Implementing Decision 2020/1088.
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 charge and collect 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 extension 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 special measure until 31 December 2026.
•Consistency with existing policy provisions in the policy area
Article 176 of the VAT Directive stipulates that the Council shall determine the expenditure in respect of which VAT is not deductible. Until then, it authorises Member States to maintain the exclusions provided for under their national laws at 1 January 1979. There are therefore a number of standstill 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 deduct 6 , such special measure is appropriate in the awaiting of a harmonisation of these rules at EU level.
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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 special measure, it 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.
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3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
•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 2020, 2021 and 2022 respectively, 33 100, 40 000 and 43 500 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 by an increasing number of taxable persons.
•Fundamental rights
The proposal does not have any consequences for the protection of fundamental rights.
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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
•Implementation plans and monitoring, evaluation and reporting arrangements
The proposal includes a sunset clause; an automatic time limit which is set at 31 December 2026.
In case Denmark would consider an extension of the special measure beyond 31 December 2026, 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 2026.
