Budget Contributions

EU countries’ contributions to the EU’s budget

The European Union has adopted rules on methods and procedures to be followed by EU countries in regard to their contributions to the EU’s budget, which are known as the EU’s own resources.

Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements (Recast)

SUMMARY

It lays down the rules setting the methods and procedures by which EU countries make available to the European Commission the EU’s own resources. Own resources constitute the vast majority of income that finances the EU’s budget and comprise:

duties charged on imports from outside the EU and taxes on sugar production within the EU,
revenue based on a share of the value-added tax (VAT) collected by EU countries,
revenue based on each EU country’s gross national income* (GNI).

It also defines the measures to meet, where appropriate, cash requirements (i.e. cash flow needs).

KEY POINTS

The own resources need to be available to the European Commission so that it can make the necessary payments agreed in the budget.

EU countries have to keep accounts and documentation regarding the own resources that they collect and to be able to produce these for the Commission at all times.

Each EU country must credit own resources to the account opened in the name of the Commission with its Treasury or the body it has appointed.

EU countries have to keep separate accounts for entitlements which have not been recovered. They must provide details about these accounts and submit quarterly statements to the Commission. This enables the Commission to monitor the action taken by EU countries to collect own resources, particularly those compromised by fraud or irregularities.

To ensure that the EU’s budget can be financed in all circumstances, EU countries must make available to the EU, in the form of constant monthly twelfths, the own resources entered in the budget. They may subsequently adjust the amounts made available in accordance with the actual base of the VAT-based own resource and the relevant changes to GNI as soon as they are fully known.

The impact of modifications in the GNI data made after the end of each financial year on the financing of gross reductions (the reductions in certain EU countries’ GNI-related contributions) should be clarified.

BACKGROUND

Regulation (EU, Euratom) No 609/2014 is one of 3 legal acts making up what is known as the ‘own resources’ package linked to the EU’s multiannual financial framework – the EU’s budget for the 2014-2020 period. The 2 other acts in the package are:

Council Decision 2014/335/EU, Euratom on the system of own resources of the European Union,
Council Regulation (EU, Euratom) No 608/2014 of 26 May 2014 laying down implementing measures for the system of own resources of the European Union.
For more information, see ‘The EU’s own resources’on the European Commission’s website.

Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union (OJ L 168, 7.6.2014, pp. 105-111).

Council Regulation (EU, Euratom) No 608/2014 of 26 May 2014 laying down implementing measures for the system of own resources of the European Union (OJ L 168, 7.6.2014, pp. 29-38).

Own Resources

The European Union has adopted rules on the allocation of what are known as its ‘own resources’ , i.e. its revenue. The EU operates on the basis of a balanced budget. EU expenditure must therefore be funded entirely from its own resources.

Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union

SUMMARY

The European Union has adopted rules on the allocation of what are known as its ‘own resources’ , i.e. its revenue. The EU operates on the basis of a balanced budget. EU expenditure must therefore be funded entirely from its own resources.

It defines ‘own resources’ . These comprise

duties charged on imports from outside the EU and taxes on sugar production within the EU (known as ‘traditional’ own resources),
revenue based on a share of the value-added tax (VAT), a tax on consumption collected by EU countries,
revenue based on each EU country’s gross national income* (GNI).

KEY POINTS

There is an overall ceiling of own resources assigned to cover the EU’s annual appropriations for payments (i.e. allocations of payments to be made from the EU’s budget) which may not exceed 1.23 % of the sum of the GNI of all the EU countries. This is to ensure strict budgetary discipline.

For traditional own resources, EU countries can retain 20 % of the amounts that they collect, by way of collection costs (i.e. the costs of collecting duties or taxes).

For VAT, a standard rate is levied on the harmonised VAT base of each EU country. The assessment base to be taken into account for this purpose cannot exceed 50 % of a country’s GNI. As consumption (and thus VAT) in less prosperous countries amounts to a higher share of GNI than in rich countries, this ensures that the former do not pay a disproportionately high amount.

As regards the GNI-based own resource, a uniform percentage is levied on each EU country’s GNI. This own resource is the largest source of revenue for the EU budget and serves to fund that part of the budget that is not covered by the other sources of income.

A correction mechanism is applied in the case of certain countries which are considered to paying more towards the EU budget than they should be, taking into account their relative prosperity. Germany, the Netherlands, Austria, Sweden and the United Kingdom (1) fall into this category and pay reduced contributions.

BACKGROUND

Council Decision 2014/335/EU, Euratom is one of 3 legal acts making up what is known as the ‘own resources’ package linked to the EU’s multiannual financial framework – the EU’s spending plan for the 2014-2020 period. The 2 other acts in the package are:

Regulation (EU, Euratom) No 609/2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements,
Council Regulation (EU, Euratom) No 608/2014 of 26 May 2014 laying down implementing measures for the system of own resources of the European Union.

RELATED ACTS

Council Regulation (EU, Euratom) No 608/2014 of 26 May 2014 laying down implementing measures for the system of own resources of the European Union (OJ L 168, 7.6.2014, pp. 29-38)

Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements (Recast) (OJ L 168, 7.6.2014, pp. 39-52)

Regulation (EU, Euratom) No 608/2014 on implementing the EU own resources system

It establishes certain rules for implementing the EU’s own resources system set out in Council Decision 2014/335/EU, Euratom — EU’s own resources.

It contains rules for:
the calculation and budgeting of the balances*,
their control and supervision, and
reporting requirements for national authorities.
It is complemented by Regulation (EU, Euratom) No 609/2014 which sets out the methods and procedures for making own resources available to the European Commission.

KEY POINTS

The EU’s own resources provide its main revenue. EU annual expenditure must be completely covered by its annual revenue.

There are 3 types of own resources:

1.Traditional own resources consisting mainly of customs duties on imports from outside the EU and sugar levies. EU countries keep 25% of the amounts as collection costs.

2.Own resources based on value added tax (VAT) — a uniform rate of 0.3% is levied on the EU-wide standard VAT base of each EU country.

3.Own resources based on gross national income (GNI) — each EU country transfers a standard percentage of its GNI to the EU.

Control and supervision

Concerning traditional own resources, EU countries must:

conduct checks and enquiries regarding the establishment and the making available of those own resources
carry out additional inspection measures at the Commission’s request

The Commission may involve itself in these inspections and may also carry out its own spot checks.

Concerning own resources based on GNI, the Commission must:

inspect certain estimates, calculations and statistical bases used by individual EU countries
have access to certain statistical procedures and basic statistics.

Commission inspections

The regulation authorises the Commission to appoint officials to carry out its inspections.
Information obtained is subject to professional secrecy and personal data is protected by the national law of the country being inspected as well as relevant EU data protection laws.
Results of inspections carried out by the Commission’s agents must be given to the EU country in question within 3 months.

Reports

EU countries are required to:

send the Commission a description of cases of fraud or irregularities concerning traditional own resources involving entitlements exceeding €10,000
submit detailed annual reports to the Commission on their inspections relating to traditional own resources including the results and the overall data.

The Commission produces:

a summary report for the EU countries based on the annual reports they provide
a report to the Council and the European Parliament every 3 years on the functioning of the inspection arrangements for traditional own resources.

MAIN DOCUMENT

Council Regulation (EU, Euratom) No 608/2014 of 26 May 2014 laying down implementing measures for the system of own resources of the European Union (OJ L 168, 7.6.2014, pp. 29-38)

RELATED DOCUMENTS

Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union (OJ L 168, 7.6.2014, pp. 105-111)

Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements (Recast) (OJ L 168, 7.6.2014, pp. 39-52)

Successive amendments to Regulation (EU, Euratom) No 609/2014 have been incorporated in the original text. This consolidated version is of documentary value only.