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Flashback on ECJ Cases – C-10/08 (Commission v Finland) – Finland is not allowed to allow the deduction of motor vehicle tax from VAT

On March 19, 2009, the ECJ issued its decision in the case C-10/08 (Commission v Finland).

Context: Taxation in Finland of used vehicles imported from other Member States – Conformity of national regulations with the first paragraph of Article 90 EC, the Sixth VAT Directive and Directive 2006/112/EC


Article in the EU VAT Directive

Article 17(1), 17(2) of the Sixth VAT Directive. Articles 167, 168 of EU VAT Directive 2006/112/EC.

Article 167
A right of deduction shall arise at the time the deductible tax becomes chargeable.

Article 168
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18(a) and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.


Facts & Questions

By its application, the Commission of the European Communities asks the Court to find that:

– maintaining in force Article 5 of Law No 1482/1994 on vehicle tax [autoverolaki (1482/1994)] of 29 December 1994 (hereinafter ‘Law No 1482/1994 on to vehicle tax”), as well as Article 102, first paragraph, point 4, of Law No 1501/1993 on value added tax (arvonlisäverolaki (1501/1993)), of 30 December 1993 (hereinafter the “Value Added Tax Act”), and

– by retaining, when taxing vehicles, the same taxable value for vehicles less than three months old as for new vehicles and by applying a depreciation rate of 0.8% per month to vehicles less than six months old when ‘there are no equivalent vehicles on the Finnish market,

the Republic of Finland has failed to fulfill its obligations under the first paragraph of Article 90 EC and Article 17(1) and (2) 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 assessment (OJ L 145, p. 1, hereinafter ‘the Sixth Directive ”), included in Articles 167 and 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, p. 1), which entered into force on January 1, 2007.


AG Opinion

None


Decision

1) By allowing the tax referred to in Article 5 of Law No. 1482/1994 on vehicle tax [autoverolaki (1482/1994)] of 29 December 1994 to be deducted from value added tax, in accordance with Article 102, first paragraph, point 4, of Law No 1501/1993 on value added tax [arvonlisäverolaki (1501/1993)] of 30 December 1993, the Republic of Finland has failed to comply with obligations incumbent on it by virtue of the first paragraph of Article 90 EC and of Article 17 (1) and (2) of Sixth Council Directive 77/388 / EEC of 17 May 1977 in the field of harmonization of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform base, included in Articles 167 and 168 of Council Directive 2006/112 / EC,of 28 November 2006, relating to the common system of value added tax.

2) By retaining, when taxing vehicles, the same taxable value for vehicles less than three months old as for new vehicles, the Republic of Finland has failed to fulfill its obligations under Article 90, first paragraph, CE.

3) The remainder of the appeal is dismissed.

4. Orders the Republic of Finland to bear, in addition to its own costs, three quarters of the costs of the Commission of the European Communities.

5. Orders the Commission of the European Communities to bear its own costs for the remainder.


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