EU's 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.

ACT

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.

WHAT DOES THIS DECISION DO?

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.

WHEN DOES THE DECISION APPLY?

From 1 January 2014.

For more information, see ‘Where does the money come from?’on the European Commission's website.

KEY TERMS

* Gross national income (GNI) - the sum of incomes of residents of an economy in a given period.

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)

last update 23.08.2015

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(1) The United Kingdom withdraws from the European Union and becomes a third country (non-EU country) as of 1 February 2020.