Own resources are the EU's revenue. Annual expenditure must be completely covered by annual revenue.
The different types of own resources and the method for calculating them are set out in a Council Decision on own resources. It also limits the maximum annual amounts of own resources that the EU may raise during a year to 1.23 % of the EU gross national income (GNI).
Three types of own resources:
- Traditional own resources: consist mainly of customs duties on imports from outside the EU and sugar levies. EU Member States keep 25 % of the amounts as collection costs.
- Own resources based on value added tax (VAT): a uniform rate of 0.3 % is levied on the harmonised VAT base of each Member States.
- Own resources based on GNI: each Member State transfers a standard percentage of its GNI to the EU. Although designed simply to cover the balance of total expenditure not covered by the other own resources, this system has become the largest source of revenue of the EU budget.
Other sources of revenue (around 1 %) include tax and other deductions from EU staff remunerations, bank interest, contributions from non-EU countries to certain programmes, interest on late payments and fines.
Correction mechanisms are designed to correct excessive contribution by certain Member States:
- the UK rebate: the UK is reimbursed by 66 % of the difference between its contribution and what it receives back from the budget. The cost of the UK rebate is divided among EU Member States in proportion to the share they contribute to the EU's GNI. However, Germany, the Netherlands, Austria and Sweden, who considered their relative contributions to the budget to be too high, pay only 25 % of their normal financing share of the UK correction.
- lump-sum payments: the Netherlands and Sweden benefit from gross reductions in their annual GNI contribution of EUR 605 million and EUR 150 million respectively.
- reduced VAT call rates for Austria (0.225 %), Germany (0.15 %), the Netherlands and Sweden (0.1 %);
Future own resources system
In February 2013, the European Council agreed on some changes to the own resources system for the 2014-20 period.
However, the current system continues to apply until a new Council Decision on own resources is formally adopted and ratified. The following principles will apply to the 2014-20 MFF:
- collection costs for traditional own resources will be lowered to 20 %;
- the UK rebate will continue to apply;
- Denmark, the Netherlands and Sweden will benefit from gross reductions in their annual GNI contribution of EUR 130 million, EUR 695 million and EUR 185 million respectively. Austria will benefit from gross reduction in its annual GNI contribution of EUR 30 million in 2014, EUR 20 million in 2015 and EUR 10 million in 2016;
- reduced VAT call rates for Germany, the Netherlands and Sweden will be fixed at 0.15 %.
In addition, a high-level group is in charge of reviewing the own resources system. On the basis of the results of this work, the Commission will assess if a new reform of the own resources system is appropriate.
More information on the EU's high-level group on own resources