Answer to Parliamentary Question: Vehicle Registration Tax in Ireland

Publication date: 11 June 2009

WRITTEN QUESTION by Kathy Sinnott (IND/DEM) to the Commission

Subject: Vehicle Registration Tax in Ireland — Article 25 of the Treaty of Rome

1. Further to the answer E-0222/08 provided by the Commission on 25.2.2008, can the Commission clarify how the imposition of VRT is compatible with Article 25 of the Treaty of Rome?

The Irish Drivers Association strongly feels that Irish citizens are being deprived of their Treaty rights in relation to the free movement of goods. Many persons are stating that VRT is ‘illegal’ and ‘unlawful’.

2. Does the Commission agree that the effect of using national legislation to impose a charge which has been abolished under EC law must be construed as circumventing Treaty rights by inferior legislation?

3. How can the movement of goods be ‘FREE’ when the Irish Government is imposing unlawful and illegal, punitive taxes of over 50 %?

4. How can a car be valued twice, once with VRT and again by VAT?

5. Finally, why are taxes imposed ‘cumulatively’ rather than ‘separately’?

E-3260/09EN

Answer given by Mr Kovács on behalf of the Commission

The Commission would like to inform the Honourable Member that some features of the Vehicle Registration Tax (VRT) are examined by the Commission to establish whether the tax as such is in conformity with Community law.

Taxes such as the VRT exist in several Member States. According to the Court of Justice, such taxes do not constitute customs duties as prohibited by Article 25 of the EC Treaty, but need to be examined in the light of Article 90 of the EC Treaty (Case C-383/01 De Danske Bilimportører, paragraph 34):

"In the present case, since a charge on the registration of new motor vehicles, such as the Danish registration duty at issue in the main proceedings, is manifestly of a fiscal nature and is not charged by reason of the vehicle crossing the frontier of the Member State which introduced the charge, but upon first registration of the vehicle in the territory of that State, the charge must be regarded as part of the general system of internal dues on goods and thus examined in the light of Article 90 EC (Case C-383/01 De Danske Bilimportører)."

Registration taxes, such as the VRT, are permissible when applied to vehicles originating from other Member States than the one in which they are applied, provided they meet the conditions contained in Article 90, as interpreted by the European Court of Justice. In this respect, the ECJ has repeatedly stated that taxes may be levied by Member States on the first registration in their national territory of cars produced or purchased in other Member States,

- irrespective of the rate applied and

- irrespective of the fact whether this tax has already previously been levied in another Member State,
provided those taxes do not discriminate against vehicles originating from other Member States.

In several judgements, the Court has also held that the charging by a Member State of a tax on second hand cars from another Member State is contrary to the first paragraph of Article 90 of the EC Treaty where the amount of the tax exceeds the residual tax incorporated in the value of similar used vehicles already registered in national territory.

With respect to the last question posed by the Honourable Member, the Commission would like to refer to the conclusion of the Court of Justice in case C-98/05, De Danske Bilimportører[1]:

"In the context of a contract of sale providing that, in accordance with the buyer's intended use of the vehicle, the dealer will supply it registered and for a price which includes the registration duty on new motor vehicles he paid before supplying the vehicle, that duty, for which the occurrence triggering liability is not the supply of the vehicle but its first registration in national territory, is not covered by the concept of taxes, duties, levies and charges within the meaning of Article 11(A)(2)(a) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment. Such a duty corresponds to an amount received by the taxable person from the purchaser of the vehicle as repayment for expenses paid out in the name and for the account of the latter within the meaning of Article 11(A)(3)(c)".

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[1] Judgment of the EC Court of 1 June 2006 in Case C-98/05, "The Danske Bilimportører".

Source: European Parliament