Considerations on COM(2024)488 - Amendment of Implementing Decision (EU) 2015/2429 authorising Latvia to derogate from point (a) of Article 26(1) and Articles 168 and 168a of the VAT Directive

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dossier	COM(2024)488 - Amendment of Implementing Decision (EU) 2015/2429 authorising Latvia to derogate from point (a) of Article 26(1) and ...
document	COM(2024)488
date	December 10, 2024

(1) Articles 168 and 168a of Directive 2006/112/EC establish taxable persons’ right to deduct value added tax (VAT) charged on supplies of goods and services received by them for the purposes of their taxed transactions. Article 26(1), point (a), of that Directive contains a requirement to account for VAT when a business asset is put to use for private purposes of taxable persons or their staff or, more generally, for purposes other than those of their business.

(2) Council Implementing Decision (EU) 2015/2429 ², as amended by Council Implementing Decision (EU) 2021/1968 ³, authorises Latvia, until 31 December 2024, to limit to 50% the right to deduct VAT on expenditure on passenger cars not wholly used for business purposes and authorises Latvia to not treat as supplies of services for consideration the use for private purposes of a passenger car inlucded in the assets of a taxable person’s business, where that car has been subject to a limitation authorised under Article 1 of that Decision (‘the special measure’).

(3) By letter registered by the Commission on 15 May 2024, Latvia submitted a request, in accordance with Article 395(2), first subparagraph, of Directive 2006/112/EC, to the Commission to continue to apply the special measure (‘the extension request’).

(4) In accordance with Article 395(2), second subparagraph, of Directive 2006/112/EC, the Commission transmitted the extension request to the other Member States by letters of 10 September 2024. By letter of 11 September 2024, the Commission notified Latvia that it had all the information necessary to consider the extension request.

(5) In accordance with Article 6(2) of Implementing Decision (EU) 2015/2429, Latvia submitted, together with the extension request, a report including the review of the percentage set for the limitation of the right to deduct VAT referred to in Article 1 of that Implementing Decision. Based on currently available information, namely tax audit experience and statistical data relating to private use of passengers cars, Latvia claims that the limit of 50% is still justifiable and remains appropriate.

(6) Given the positive impact of the special measure on the administrative burden of the taxpayers and of tax authorities by simplifying VAT collection and preventing tax evasion through incorrect record keeping, the Commission therefore considers it appropriate to authorise Latvia to continue to apply the special measure.

(7) It is appropriate to limit the extension of the special measure in time to allow for an evaluation of its effectiveness and of the appropriate percentage. Latvia should therefore be authorised to continue to apply the special measure until 31 December 2027.

(8) The special measure is proportionate to the objectives pursued, namely, to simplify the procedure for collecting VAT and to prevent certain forms of tax evasion or avoidance, since it is limited in time and scope. In addition, the special measure does not give rise to the risk that fraud would shift to other sectors or to other Member States.

(9) In the event that Latvia considers that a further extension of the special measure is necessary beyond 2027, it should submit to the Commission a report that includes a review of the percentage applied, together with the extension request, by 31 March 2027.

(10) The special measure will only have 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's own resources accruing from VAT.

(11) Implementing Decision (EU) 2015/2429 should therefore be amended accordingly.