The European Commission has made a proposal for a Council decision to allow Italy to apply a derogation to VAT on cars. The purpose of the derogation is the prevention of certain types of tax evasion or avoidance.

The Italian derogation will involve the restriction of the right of a taxable person to deduct VAT on expenditure related to motorised road vehicles when the vehicle is not used exclusively for business purposes.

Further information is available at http://ec.europa.eu/prelex/detail_dossier_real.cfm?CL=en&DosId=195696.

The Commission has authorised Italy to apply a reduced rate of VAT to the supply of electricity for the operation of facilities used for the irrigation, lifting and drainage of waters.

The key issue in allowing Italy to apply the reduced rate is that the irrigation consortia providing the services are considered as public law entities in charge, in accordance with national law, of the maintenance and other auxiliary work related to the drainage of waters; and it appears that no other similar, actual or potential entities carry out similar activities in Italy.

A copy of the decision is available at http://eur-lex.europa.eu/LexUriServ/site/en/oj/2007/l_118/l_1182007 0508en00180018.pdf.