On June 1, 2006, the ECJ issued its decision in the case C-98/05 (De Danske Bilimportører)
Context: Sixth VAT Directive – Article 11(A)(2)(a) and (3)(c) – Taxable amount – Registration duty on new motor vehicles
Article in the EU VAT Directive
Article 11(A)(2)(a) and 11(A)(3)(c) of the Sixth VAT Directive (Article 78(a) and 79(c) of the EU VAT Directive 2006/112/EC)
Article 78 (Taxable amount)
The taxable amount shall include the following factors:
- (a) taxes, duties, levies and charges, excluding the VAT itself;
- (b) incidental expenses, such as commission, packing, transport and insurance costs, charged by the supplier to the customer.
For the purposes of point (b) of the first paragraph, Member States may regard expenses covered by a separate agreement as incidental expenses.
Article 79
The taxable amount shall not include the following factors:
(a) price reductions by way of discount for early payment;
(b) price discounts and rebates granted to the customer and obtained by him at the time of the supply;
(c) amounts received by a taxable person from the customer, as repayment of expenditure incurred in the name and on behalf of the customer, and entered in his books in a suspense account.
The taxable person must furnish proof of the actual amount of the expenditure referred to in point (c) of the first paragraph and may not deduct any VAT which may have been charged.
Facts
- In the course of January 1999, DBI bought a new car intended for the use of its director.
- According to the national court, as is usual in Denmark when a motor vehicle is purchased from an authorised dealer, the dealer dealt with registration of the vehicle in the purchaser’s name and the provision of number plates before supplying the car.
- The invoice for the purchase of the vehicle refers to a total price of DKK 498 596. That price can be broken down as follows: (1) the amount charged by the dealer to the purchaser, excluding VAT and registration duty; (2) VAT at the standard rate of 25% on the price of the vehicle and (3) registration duty on the sum of (1) and (2) subject to certain adjustments and deductions.
- As it considered that the method of calculation set out in the previous paragraph is contrary to the provisions of Article 11(A) of the Sixth Directive and that VAT must be based on the total price of the vehicle including the registration duty, DBI brought an action before the Østre Landsret (Eastern Regional Court).
- It is clear from the order for reference that, depending on whether VAT is calculated employing the method used by the Danish tax authorities or in accordance with the method advocated by DBI, there is a difference of DKK 14 899 in the amount of the total price of the vehicle. That difference can be explained by the progressive nature of the registration duty.
Questions
- Is Article 11(A)(2)(a) in conjunction with Article 11(A)(3)(c) of the Sixth VAT Directive 1 to be interpreted as meaning that a registration duty for motor vehicles (cars) must be included in the taxable amount for VAT, where a purchase agreement is entered into for the supply of a new motor vehicle for use for carrying passengers, where the motor vehicle is supplied, in accordance with the purchase agreement and the purchaser’s intended use, by the dealer to the consumer in the registered state and for an overall price which includes both the price paid to the dealer and also the duty?
- May a Member State arrange its tax system in such a way that the registration duty is regarded as an expense which the dealer pays on behalf of the final purchaser, so that it is the final purchaser who is immediately liable to pay the duty?
- Is it of significance with respect to Questions 1 and 2 that a car may be purchased and supplied without payment of registration duty, which will be possible if the purchaser does not intend to use the car for ordinary carriage of passengers or goods within the area in which the Traffic Law applies?
- Is it of significance that used motor vehicles are to a not insubstantial extent imported or brought inter alia as goods in connection with a transfer of residence by the final consumer, who pays the registration duty himself without the intervention of a dealer?
- Is it of significance that the liability to registration duty arises or falls due – possibly as an expense – before the liability to VAT arises or falls due?
AG Opinion
A registration duty for motor vehicles (cars) which the dealer has paid in his customer’s name prior to delivery, which has been entered in his books in a suspense account and which together with the price of the vehicle is subsequently invoiced to the customer, does not constitute a duty which is to be included in the basis of assessment for VAT in accordance with Article 11(A)(2)(a) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, but constitutes an amount which must be excluded from the taxable amount in accordance with Article 11(A)(3)(c) of the Directive.
Decision
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 harmonisation 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).
Summary
In the context of a sales contract which provides that the dealer supplies the vehicle with a registration in accordance with its intended use by the buyer and for a price that includes the tax paid by him before delivery on the registration of new motor vehicles, that tax is , the chargeable event of which is not the supply but the first registration of the vehicle on the national territory, not covered by the concept of taxes, duties and levies within the meaning of Article 11A(2)(a) of the Sixth Directive . This tax corresponds to an amount received by the taxable person from the purchaser of the vehicle as reimbursement of costs incurred in the name and on behalf of the latter within the meaning of paragraph 3(c) of that provision.
Source
Similar ECJ cases
Newsletters
