Own Resources System

The system of EU own resources has been significantly amended over the years - from funding solely through contributions from Member States to financed wholly from own sources (initially only from traditional own resources (TOR) that included customs duties and sugar levies, and later - TOR and a VAT based resource) and to the current system. It combines revenues from TOR (only customs duties without sugar levies) with national contributions from Member States comprising a VAT based resource and the complementary GNI based resource, as well as gross reductions for Austria, Denmark, the Netherlands, Germany and Sweden. With the withdrawal of the United Kingdom from the EU the adjustment mechanism for correcting the budgetary imbalance of the UK has been removed and since 1 January 2021 a new revenue source based on the non-recycled plastic packaging waste has been introduced.

On 14 December 2020 a new Own Resources Decision was adopted - Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own resources of the European Union and repealing Decision 2014/335/EU, Euratom. This decision also contains the provisions that will authorise the European Commission until 2026 to borrow up to EUR 750 billion (in 2018 prices) on the capital markets to finance the Recovery Instrument NextGenerationEU and settles the questions on the repayment of the principal of the loan, which has to begin before the end of the 2021-2027 MFF and to end no later than 31 December 2058. As to guarantee the accurate and timely repayment of the loan to the capital markets, the own resources ceiling will be exceptionally and temporarily increased by 0.6 percentage points to cover all liabilities of the EU resulting from this borrowing.

The Council Decision (EU, Euratom) 2020/2053 entered into force (together with all the regulations governing certain aspects of the application of the own resources system) on 1 June 2021 after all Member States of the EU approved the Decision in line with their constitutional requirements and it had a retroactive application from 1 January 2021.

Categories of own resources according to Council Decision (EU, Euratom) 2020/2053:

Traditional Own Resources – the EU traditional own resources (TOR) include the defined in Article 2(1) (a) of Council Decision (EU, Euratom) 2020/2053 customs duties that the Member States collect on behalf of the EU. The customs duties due are based on the Common Customs Tariff and are considered as net revenues of the EU, stemming directly from EU legislation. According to Art. 9(1) of the Own Resources Decision, Member States are responsible for their laying down, reporting, recovering and making available to the European Commission. According to Art. 9 (2) Member States shall retain 25 % of the amounts as a means of compensation for the administrative expenditure incurred in the process of their collection.

Value added tax-based own resource – this own resource is determined through a simplified methodology which entails correcting the VAT base of each Member States only for territorial scope in the few cases foreseen in the Treaty and for infringements to the VAT directive (Council Directive 77/388/EEC) and applying a so-called “frozen” weighted average VAT rate for 2016 (in comparison to the current system where the weighted average VAT rate is calculated by the national administrations on an annual basis). The VAT bases of each Member State are then capped at 50% of its Gross National Income (GNI) base, in order to limit the regressive aspects of the VAT-based resource. Finally, a uniform call rate of 0.3% is being applied on each Member State’s VAT base.  

Gross National Income-based own resource – this resource is a „balancing” resource that provides the revenue required to cover expenditure in excess of the amount financed by the other types of revenue in any year. The GNI-based resource is defined by applying a uniform call rate, which varies from one financial year to the other (depending on the total expenditures of the general budget of the EU and the rest of the revenues and own resources for a given year) to the GNI of each Member State. In practice, there is no cap on the size of this rate, except for the ceiling which for the 2021-2027 period limits the total amount of own resources to 1.4 % of the EU GNI (the sum of all Member States’ GNI) to cover annual appropriations for payments.   

Resource based on the non-recycled plastic packaging waste – it consists of a national contribution based on the amount of non-recycled plastic packaging waste and it is expected to encourage Member States to reduce packaging waste and stimulate Europe's transition towards a circular economy. A uniform call rate of EUR 0.80 per kilogram is applied to the weight of plastic packaging waste (in kilograms) that is not recycled in every Member State for a given year. In order to avoid imposing an excessively regressive impact on certain Member States, an adjustment mechanism to decrease their annual contributions from this type of resource to the general budget of the EU will be introduced (this mechanism shall apply to Bulgaria as well, its annual contribution based on non-recycled plastic packaging waste will be almost halved compared to what is actually due according to the methodology described above).

Corrections - for the 2021-2027 period five Member States shall benefit from a gross reduction in their annual GNI-based contributions (in 2020 prices): EUR 377 million for Denmark, EUR 565 million for Austria, EUR 3 671 million for Germany, EUR 1 921 million for the Netherlands and EUR 1 069 million for Sweden. The gross reductions are financed by all Member States according to their GNI.