25.4.2013

EN

Official Journal of the European Union

L 113/11

(1)

By letters registered at the Commission on 17 June 2011 and 27 August 2012, Latvia requested authorisation to derogate from the provisions of Directive 2006/112/EC governing the right to deduct input tax in relation to passenger cars.

(2)

The Commission informed the other Member States by letter dated 26 November 2012 of the request made by Latvia. By letter dated 30 November 2012, the Commission notified Latvia that it had all the information it considered necessary to examine the request.

(3)

Articles 168 and 168a of Directive 2006/112/EC establish a taxable person‘檚 right to deduct value added tax (VAT) charged on supplies of goods and services received by him and used for the purposes of his taxed transactions. Point (a) of Article 26(1) of that Directive requires taxable persons to account for VAT when a business asset is put to non-business use.

(4)

Non-business use is often very difficult to identify accurately and even where that is possible, the mechanism for doing so is often burdensome. Under the requested authorisation, the amount of VAT on expenditure eligible for deduction in respect of passenger cars which are not used entirely for business purposes should, with some exceptions, be set at a flat percentage rate. Based on information provided by Latvia, a rate of 80 % is justifiable. At the same time, in order to avoid double taxation, the requirement to account for VAT on the non-business use of passenger cars should be suspended where those cars are subject to limitation authorised by this Decision. That simplification measure removes the need to keep records on the non-business use of business cars and prevents tax evasion through incorrect record keeping.

(5)

The limitation of the right of deduction under the authorisation should apply to VAT paid on the purchase, leasing, intra-Community acquisition and importation of specified passenger cars and on related expenditure, including the purchase of fuel.

(6)

The authorisation should only apply to passenger cars with a maximum authorised weight not exceeding 3 500 kilograms and having not more than eight seats in addition to the driver‘檚 seat. Any non-business use of passenger cars exceeding 3 500 kilograms or having more than eight seats in addition to the driver‘檚 seat is negligible due to the characteristics of those cars or the type of business for which they are used. A detailed list of categories of passenger cars excluded from the authorisation should also be provided, based on the particular purposes for which they are used.

(7)

In its proposal of 29 October 2004 for a directive amending Directive 77/388/EEC, now Directive 2006/112/EC, with a view to simplifying valued added tax obligations, the Commission included provisions aimed at the harmonisation of the categories of expenses for which exclusions to the right of deduction may apply. Under that proposal, exclusions to the right to deduct may be applied to motorised road vehicles. It is therefore appropriate to restrict the application period of this Decision until the proposed directive becomes applicable. However, it is necessary to provide for a specific expiry date for the authorisation, which will apply in the event that the proposed directive has not become applicable by that date, as it will be necessary to review the authorisation and the percentage of overall apportionment between business and non-business use.

(8)

In the event that Latvia considers an extension of the authorisation beyond 2015 to be necessary, it should submit to the Commission, no later than 30 March 2015, a report which includes a review of the percentage applied together with the request for the extension.

(9)

The derogation will have only a negligible effect on the overall amount of tax revenue collected at the stage of final consumption and will have no adverse impact on the Union‘檚 own resources accruing from VAT,

(a)

cars purchased for resale, hire or lease;

(b)

cars used for transportation of passengers for a fee, including taxi services;

(c)

cars used for the provision of transportation of goods;

(d)

cars used for the provision of driving lessons;

(e)

cars used for the provision of guard services;

(f)

cars used as emergency vehicles;

(g)

cars used as car sales demonstration vehicles.

(a)

submitted to the Commission by 30 March 2015; and

(b)

accompanied by a report which includes a review of the percentage set out in Article 1.