BETA


2019/0096(CNS) Defence effort within the Union framework: common system of value added tax and general arrangements for excise duty

Progress: Awaiting final decision

RoleCommitteeRapporteurShadows
Lead ECON TANG Paul (icon: S&D S&D) DOLESCHAL Christian (icon: EPP EPP), KOVAŘÍK Ondřej (icon: Renew Renew), SCOTT CATO Molly (icon: Verts/ALE Verts/ALE), GANCIA Gianna (icon: ID ID), JURZYCA Eugen (icon: ECR ECR), SCHIRDEWAN Martin (icon: GUE/NGL GUE/NGL)
Former Responsible Committee ECON
Lead committee dossier:
Legal Basis:
TFEU 113

Events

2019/12/30
   Final act published in Official Journal
2019/11/26
   EP - Decision by Parliament, 1st reading/single reading
Details

The European Parliament adopted by 528 votes to 78, with 61 abstentions, under a special legislative procedure (consultation), a legislative resolution on the proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax and Directive 2008/118/EC on the general arrangements for excise duty as regards the defence effort within the Union framework.

As a reminder, the objective of this proposal is to align the VAT treatment of defence efforts in the EU and NATO frameworks as far as is feasible. Similarly, the arrangements for exemptions from excise duties, as provided for in the Excise Directive, should be aligned in the same way.

The European Parliament approved the Commission's proposal subject to amendments.

Defence effort

Members suggested that the definition of defence effort should be amended to ensure that all actions, military formations or structures carried out under Article 42 TEU which defines the scope of the common security and defence policy (CSDP) are covered.

It is thus specified that the defence effort carried out with a view to the implementation of a Union activity within the framework of the CSDP covers:

- military missions,

- the activities of battlegroups and other multinational formations or structures established by Member States and operating within the framework of the CSDP,

- mutual assistance,

- permanent structured cooperation (PESCO) projects,

- activities of the European Defence Agency (EDA) and

- activities aimed at the progressive framing of a common Union defence policy.

Exemptions from VAT and excise duty

The Commission should keep a record of any defence effort carried out for the implementation of a Union activity under the CSDP in respect of which exemptions apply.

The exemptions should apply only to situations where armed forces carry out tasks directly linked to a defence effort under the CSDP. They should not cover civilian missions under the CSDP. Goods or services supplied for the use of civilian staff could therefore only be covered by the exemptions when the civilian staff is accompanying armed forces carrying out tasks directly linked to a defence effort under the CSDP outside their Member State.

The resolution stressed that tasks performed exclusively by civilian staff or performed exclusively by using civilian capabilities should not be considered to be a defence effort. Nor should the exemptions in any circumstance cover goods or services that the armed forces acquire for the use of the forces or the civilian staff accompanying them within their own Member State.

Documents
2019/11/19
   EP - Vote in committee, 1st reading/single reading
2019/11/19
   EP - Committee report tabled for plenary, 1st reading/single reading
Details

The Committee on Economic and Monetary Affairs adopted, following a special legislative procedure (consultation), the report by Paul TANG (S&D, NL) on the proposal for a Council directive amending Directive 2006/112/EC on the common system of value added tax and Directive 2008/118/EC concerning the general arrangements for excise duty as regards defence effort within the Union framework.

The committee responsible recommended that the European Parliament approve the Commission proposal as amended.

As a reminder, the objective of this proposal is to align the VAT treatment of defence efforts in the EU and NATO frameworks as far as is feasible. Similarly, the arrangements for exemptions from excise duties, as provided for in the Excise Directive, should be aligned in the same way.

Defence effort

Members suggested that the definition of defence effort should be amended to ensure that all actions, military formations or structures carried out under Article 42 TEU which defines the scope of the common security and defence policy (CSDP) are covered.

Exemptions

The Commission should keep a record of any defence effort carried out for the implementation of a Union activity under the CSDP in respect of which exemptions apply. The exemptions should apply only to situations where armed forces carry out tasks directly linked to a defence effort under the CSDP. They should not cover civilian missions under the CSDP. Goods or services supplied for the use of civilian staff could therefore only be covered by the exemptions when the civilian staff is accompanying armed forces carrying out tasks directly linked to a defence effort under the CSDP outside their Member State.

The report stressed that tasks performed exclusively by civilian staff or performed exclusively by using civilian capabilities should not be considered to be a defence effort. Nor should the exemptions in any circumstance cover goods or services that the armed forces acquire for the use of the forces or the civilian staff accompanying them within their own Member State.

Documents
2019/10/03
   EP - Committee draft report
Documents
2019/07/18
   EP - TANG Paul (S&D) appointed as rapporteur in ECON
2019/07/15
   EP - Committee referral announced in Parliament, 1st reading/single reading
2019/04/24
   EC - Legislative proposal published
Details

PURPOSE: to align VAT and excise duty as regards defence effort within the Union and NATO.

PROPOSED ACT: Council Directive.

ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts the act after consulting the European Parliament but without being obliged to follow its opinion.

CONTENT: Council Directive 2006/112/EC provides, under certain conditions, an exemption from value added tax (VAT) for goods and services supplied to and goods imported by the armed forces of any State party to the North Atlantic Treaty when such forces are taking part in the common defence effort outside their own State.

Council Directive 2008/118/EC (Excise Directive) provides an exemption from excise duty for excise goods intended to be used by the armed forces of any State party to the North Atlantic Treaty (NATO).

These exemptions are not possible when the armed forces of a Member State are involved in activities under the Common Security and Defence Policy (CSDP) because there is as yet no common EU defence policy. However, the CSDP - created as the European Security and Defence Policy (ESDP) in 2000 - is a key instrument for external action and includes the progressive definition of a common defence policy for the Union.

In their joint communication of 28 March 2018 on the Action Plan on Military Mobility, the High Representative of the Union for Foreign Affairs and Security Policy and the Commission recognised the overall need for harmonisation of the VAT treatment of defence efforts within the Union and under the aegis of the North Atlantic Treaty Organisation (NATO).

On 19 November 2018, the Council concluded on Security and Defence in the context of the EUGS. In particular, the Council welcomed the progress in the implementation of the Permanent Structured Cooperation (PESCO) and the ongoing implementation of efforts to improve the mobility of military personnel, materiel and equipment for routine activities and during crisis and conflict, within and beyond the EU.

IMPACT ASSESSMENT: the CSDP activities that shall be covered by the exemptions are as follows: military missions and operations; battlegroups; mutual assistance; PESCO; European Defence Agency (EDA) activities.

In 2014, expenditure on outsourced operations and maintenance in all Member States (except Denmark) amounted to EUR 5.3 billion.

The Commission considers that a maximum of 10 % of the overall amount (EUR 530 million) could either become VAT-exempt under the new rules or would already be covered by the exemption for NATO activities. This concerns supplies of goods (e.g. food, fuel, special liquids, equipment, pharmaceutical provisions, electricity, water, gas) and services (e.g. catering, communication, maintenance, repair, transportation, road charges).

CONTENT: in line with the Commission's commitment in the Action Plan on Military Mobility, this proposal to amend the VAT and Excise Directives aims to harmonise, as far as possible, the VAT and excise-duty treatment of defence efforts within the EU and under NATO frameworks. The arrangements for exemptions from excise duties, as provided for in the Excise Directive, should be aligned in a similar way.

In concrete terms, the proposal:

ensures that the use of goods by Member States’ armed forces taking part in the defence effort carried out for the implementation of a Union activity under the CSDP will be treated as an intra-EU acquisition for consideration where those goods, which have not been purchased under the local VAT rules of the Member State in which the forces are stationed, are brought back and used by those forces for their needs or for their accompanying civilian staff in their own Member State; introduces a VAT exemption for the importation of goods into Member States by the armed forces of other Member States taking part in a defence effort carried out for the implementation of a Union activity under the CSDP, where the goods are for the use of those forces or accompanying civilian staff or for supplying their messes or canteens; introduces an excise-duty exemption for defence effort carried out for the implementation of a Union activity under the CSDP. The exemption will cover supplies of excise goods to the armed forces of any Member State other than that in which the excise duty is chargeable, for the use of those forces or accompanying civilian staff, or for supplying their messes or canteens where such forces are taking part in a defence effort carried out for the implementation of a Union activity under the CSDP.

Only expenses incurred in respect of tasks directly linked to a defence effort should be eligible for exemption. Tasks performed exclusively by civilian staff or performed exclusively by using civilian capabilities should not be covered by the exemption.

Nor should the exemption cover items such as spare parts to military equipment or transport services that the armed forces of a Member State acquire for use within that Member State or extend to the construction of transport or communication and information systems infrastructures.

BUDGETARY IMPLICATIONS: by extending the scope of VAT exemptions, the proposal could reduce VAT revenue collected by Member States and therefore the VAT own resource. As the own resource based on gross national income (GNI) compensates for any expenditure not covered by traditional own resources and the VAT own resource, the non-collected VAT own resources from certain Member States would have to be compensated by all Member States through the GNI own resource. Excise duty is not an own resource. Therefore, there are no implications for the Union budget.

Documents

History

(these mark the time of scraping, not the official date of the change)

events/5
date
2019-12-30T00:00:00
type
Final act published in Official Journal
committees/0
type
Responsible Committee
body
EP
committee_full
Economic and Monetary Affairs
committee
ECON
associated
False
rapporteur
name: TANG Paul date: 2019-07-18T00:00:00 group: Group of Progressive Alliance of Socialists and Democrats abbr: S&D
shadows
committees/0
type
Responsible Committee
body
EP
committee_full
Economic and Monetary Affairs
committee
ECON
associated
False
rapporteur
name: TANG Paul date: 2019-07-18T00:00:00 group: Group of Progressive Alliance of Socialists and Democrats abbr: S&D
shadows
docs/0/docs/0/url
http://www.europarl.europa.eu/sides/getDoc.do?type=COMPARL&mode=XML&language=EN&reference=PE641.258
events/2
date
2019-11-19T00:00:00
type
Vote in committee, 1st reading/single reading
body
EP
events/3
date
2019-11-19T00:00:00
type
Committee report tabled for plenary, 1st reading/single reading
body
EP
docs
url: http://www.europarl.europa.eu/doceo/document/A-9-2019-0034_EN.html title: A9-0034/2019
summary
events/4
date
2019-11-26T00:00:00
type
Decision by Parliament, 1st reading/single reading
body
EP
docs
url: http://www.europarl.europa.eu/doceo/document/TA-9-2019-0060_EN.html title: T9-0060/2019
summary
procedure/Modified legal basis
Rules of Procedure EP 159
procedure/stage_reached
Old
Awaiting committee decision
New
Awaiting final decision
committees/0/shadows/3
name
GANCIA Gianna
group
Identity and Democracy
abbr
ID
committees/0/shadows/2
name
SCOTT CATO Molly
group
Group of the Greens/European Free Alliance
abbr
Verts/ALE
committees/0/shadows/3
name
SCHIRDEWAN Martin
group
Confederal Group of the European United Left - Nordic Green Left
abbr
GUE/NGL
docs
  • date: 2019-10-03T00:00:00 docs: title: PE641.258 type: Committee draft report body: EP
committees/0/shadows/2
name
EPPINK Derk Jan
group
European Conservatives and Reformists Group
abbr
ECR
committees/0/shadows/0
name
DOLESCHAL Christian
group
Group of European People's Party
abbr
EPP
committees/0/rapporteur
  • name: TANG Paul date: 2019-07-18T00:00:00 group: Group of Progressive Alliance of Socialists and Democrats abbr: S&D
committees/0/date
    committees/1/date
      committees/0/shadows
      • name: KOVAŘÍK Ondřej group: Renew Europe group abbr: Renew
      events/1
      date
      2019-07-15T00:00:00
      type
      Committee referral announced in Parliament, 1st reading/single reading
      body
      EP
      procedure/dossier_of_the_committee
      • ECON/9/00466
      procedure/stage_reached
      Old
      Preparatory phase in Parliament
      New
      Awaiting committee decision
      commission
      • body: EC dg: Taxation and Customs Union commissioner: MOSCOVICI Pierre
      committees
      • type: Responsible Committee body: EP committee_full: Economic and Monetary Affairs committee: ECON associated: False date:
      • type: Former Responsible Committee body: EP committee_full: Economic and Monetary Affairs committee: ECON associated: False date:
      events
      • date: 2019-04-24T00:00:00 type: Legislative proposal published body: EC docs: url: http://www.europarl.europa.eu/RegData/docs_autres_institutions/commission_europeenne/com/2019/0192/COM_COM(2019)0192_EN.pdf title: COM(2019)0192 url: https://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=EN&type_doc=COMfinal&an_doc=2019&nu_doc=0192 title: EUR-Lex summary: PURPOSE: to align VAT and excise duty as regards defence effort within the Union and NATO. PROPOSED ACT: Council Directive. ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts the act after consulting the European Parliament but without being obliged to follow its opinion. CONTENT: Council Directive 2006/112/EC provides, under certain conditions, an exemption from value added tax (VAT) for goods and services supplied to and goods imported by the armed forces of any State party to the North Atlantic Treaty when such forces are taking part in the common defence effort outside their own State. Council Directive 2008/118/EC (Excise Directive) provides an exemption from excise duty for excise goods intended to be used by the armed forces of any State party to the North Atlantic Treaty (NATO). These exemptions are not possible when the armed forces of a Member State are involved in activities under the Common Security and Defence Policy (CSDP) because there is as yet no common EU defence policy. However, the CSDP - created as the European Security and Defence Policy (ESDP) in 2000 - is a key instrument for external action and includes the progressive definition of a common defence policy for the Union. In their joint communication of 28 March 2018 on the Action Plan on Military Mobility, the High Representative of the Union for Foreign Affairs and Security Policy and the Commission recognised the overall need for harmonisation of the VAT treatment of defence efforts within the Union and under the aegis of the North Atlantic Treaty Organisation (NATO). On 19 November 2018, the Council concluded on Security and Defence in the context of the EUGS. In particular, the Council welcomed the progress in the implementation of the Permanent Structured Cooperation (PESCO) and the ongoing implementation of efforts to improve the mobility of military personnel, materiel and equipment for routine activities and during crisis and conflict, within and beyond the EU. IMPACT ASSESSMENT: the CSDP activities that shall be covered by the exemptions are as follows: military missions and operations; battlegroups; mutual assistance; PESCO; European Defence Agency (EDA) activities. In 2014, expenditure on outsourced operations and maintenance in all Member States (except Denmark) amounted to EUR 5.3 billion. The Commission considers that a maximum of 10 % of the overall amount (EUR 530 million) could either become VAT-exempt under the new rules or would already be covered by the exemption for NATO activities. This concerns supplies of goods (e.g. food, fuel, special liquids, equipment, pharmaceutical provisions, electricity, water, gas) and services (e.g. catering, communication, maintenance, repair, transportation, road charges). CONTENT: in line with the Commission's commitment in the Action Plan on Military Mobility, this proposal to amend the VAT and Excise Directives aims to harmonise, as far as possible, the VAT and excise-duty treatment of defence efforts within the EU and under NATO frameworks. The arrangements for exemptions from excise duties, as provided for in the Excise Directive, should be aligned in a similar way. In concrete terms, the proposal: ensures that the use of goods by Member States’ armed forces taking part in the defence effort carried out for the implementation of a Union activity under the CSDP will be treated as an intra-EU acquisition for consideration where those goods, which have not been purchased under the local VAT rules of the Member State in which the forces are stationed, are brought back and used by those forces for their needs or for their accompanying civilian staff in their own Member State; introduces a VAT exemption for the importation of goods into Member States by the armed forces of other Member States taking part in a defence effort carried out for the implementation of a Union activity under the CSDP, where the goods are for the use of those forces or accompanying civilian staff or for supplying their messes or canteens; introduces an excise-duty exemption for defence effort carried out for the implementation of a Union activity under the CSDP. The exemption will cover supplies of excise goods to the armed forces of any Member State other than that in which the excise duty is chargeable, for the use of those forces or accompanying civilian staff, or for supplying their messes or canteens where such forces are taking part in a defence effort carried out for the implementation of a Union activity under the CSDP. Only expenses incurred in respect of tasks directly linked to a defence effort should be eligible for exemption. Tasks performed exclusively by civilian staff or performed exclusively by using civilian capabilities should not be covered by the exemption. Nor should the exemption cover items such as spare parts to military equipment or transport services that the armed forces of a Member State acquire for use within that Member State or extend to the construction of transport or communication and information systems infrastructures. BUDGETARY IMPLICATIONS: by extending the scope of VAT exemptions, the proposal could reduce VAT revenue collected by Member States and therefore the VAT own resource. As the own resource based on gross national income (GNI) compensates for any expenditure not covered by traditional own resources and the VAT own resource, the non-collected VAT own resources from certain Member States would have to be compensated by all Member States through the GNI own resource. Excise duty is not an own resource. Therefore, there are no implications for the Union budget.
      procedure
      reference
      2019/0096(CNS)
      title
      Defence effort within the Union framework: common system of value added tax and general arrangements for excise duty
      subject
      type
      CNS - Consultation procedure
      subtype
      Legislation
      instrument
      Directive
      legal_basis
      Treaty on the Functioning of the EU TFEU 113
      stage_reached
      Preparatory phase in Parliament