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Flashback on ECJ cases C-101/00 (Tulliasiamies and Siilin) – A vehicle registration tax does not have the features of a VAT

On September 19, 2002, the ECJ issued its decision in the case C-101/00 (Tulliasiamies and Siilin).

Context: Taxation of imported used cars -First paragraph of Article 95 of the EC Treaty (now, after amendment, first paragraph of Article 90 EC) – Sixth VAT Directive.


Article in the EU VAT Directive

Article 33 of the Sixth VAT Directive (Article 401 of the EU VAT Directive 2006/112/EC).

Sixth VAT Directive

Article 33 (Other taxes, duties and charges)

Without prejudice to other Community provisions, the provisions of this Directive shall not prevent a Member State from maintaining or introducing taxes on  insurance contracts, taxes on betting and gambling, excise duties, stamp duties and, more generally, any taxes, duties or charges which cannot be characterized as  turnover taxes.

VAT Directive 2006/112/EC.

Article 401
Without prejudice to other provisions of Community law, this Directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties or, more generally, any taxes, duties or charges which cannot be characterised as turnover taxes, provided that the collecting of those taxes, duties or charges does not give rise, in trade between Member States, to formalities connected with the crossing of frontiers. ▼B


Facts

  • On 2 March 1998 Mr Siilin bought from a garage in Germany, at a price of DEM 7 350, a used Mercedes Benz car (model 190 2.0 diesel). The car had been brought into use on 13 November 1986 and had done 180 000 km. It had an automatic transmission and a sunroof.
  • On 20 April 1998 Mr Siilin imported the car into Finland and declared it to the Helsinki district customs board (‘the customs office’) for the purposes of car tax.
  • By decision of 20 April 1998 (‘the assessment notice’), the customs office determined the amount of car tax payable by Mr Siilin at FIM 46 288 and the amount of value added tax on that tax (at the rate of 22%) at FIM 10 183, making a total of FIM 56 471.
  • That amount was calculated by the customs office on the basis of a comparison between Mr Siilin’s used car and a car of the same make, of a different model (C 220 D) but with technical characteristics very similar to those of the model of Mr Siilin’s car. The list price for the reference car as a new car in Germany was DEM 41 100 excluding tax. The customs office added to that price DEM 2 200 for the automatic transmission and DEM 1 680 for the sunroof. The taxable value was thus fixed at DEM 44 980, or FIM 136 851 after conversion. Pursuant to the Autoverolaki, a flat-rate reduction of FIM 4 600 and an amount of FIM 85 963, corresponding to a depreciation coefficient of 65%, were deducted from that amount.
  • On 21 April 1998 Mr Siilin paid the customs office the car tax and the value added tax thereon. He then brought proceedings against the assessment notice in the Uudenmaan lääninoikeus, which had jurisdiction.
  • He submitted, first, that the amount of the tax fixed for the car he had imported was greater than the amount of the residual tax incorporated in the value of a car already on the Finnish market, registered new in Finland and similar in age, characteristics and condition. He claimed that the tax levied was therefore discriminatory and contrary to Article 95 of the Treaty. Citing the judgments in Case C-345/93 Nunes Tadeu [1995] ECR I-479 and Case C-375/95 Commission v Greece [1997] ECR I-5981, he argued that the depreciation of a car cannot be linear and that its value falls by more than 5% a year.
  • He submitted, second, that the charging of value added tax on the car tax was contrary to the Sixth Directive, so that that tax should not be applied.
  • He therefore sought, first, annulment of the assessment notice as regards the value added tax on the car tax. He sought, second, for the case to be remitted to the customs office as regards the car tax, in order for that tax to be fixed in such a way as not to exceed the amount of residual tax incorporated in the value of a car already on the Finnish market, registered new in Finland and similar in age, characteristics and condition.
  • The customs office submitted that Mr Siilin’s action should be dismissed, arguing that the car tax and the value added tax on that tax had been determined in accordance with Finnish law.
  • In its decision of 3 June 1999, the Uudenmaan lääninoikeus found that it was in accordance with Paragraph 5 of the Autoverolaki to determine the amount of tax on Mr Siilin’s car by referring to the tax on a new car with similar technical and other characteristics and making a reduction as provided for by that law.
  • Noting, however, that the car in question was a used car imported into the Republic of Finland from another Member State, the Uudenmaan lääninoikeus pointed out that in Nunes Tadeu the Court had ruled that it was contrary to Article 95 of the Treaty for a Member State to charge on used cars from other Member States a tax which, being calculated without taking the vehicle’s actual depreciation into account, exceeded the residual tax incorporated in the value of similar used cars already registered in the national territory.
  • The Uudenmaan lääninoikeus held that in this case the car tax had been calculated without the customs office examining the actual depreciation of Mr Siilin’s car or checking whether the amount of car tax fixed for that vehicle exceeded the residual tax incorporated in the value of a similar used car of the same make and year registered in Finland. It therefore set aside the assessment notice as regards the car tax and remitted the case to the customs office to determine the amount of that tax.
  • As regards the value added tax on the car tax, the Uudenmaan lääninoikeus held that it was not contrary to the Sixth Directive to levy it, since it was not a tax which by its essential properties constituted ‘value added tax’ within the meaning of that directive or a turnover tax prohibited by Article 33 of the directive.
  • However, having set aside the part of the assessment notice which concerned the car tax because of its excessive amount, the Uudenmaan lääninoikeus considered that the value added tax on that tax might also have been set too high. It therefore set aside the assessment notice and remitted the case to the customs office with respect to the value added tax as well.
  • Two applications were made to the Korkein hallinto-oikeus for leave to appeal against the decision of the Uudenmaan lääninoikeus.
  • One application, by the Tulliasiamies, sought for the decision of the Uudenmaan lääninoikeus to be set aside with respect both to the car tax and to the value added tax thereon. The other application, by Mr Siilin, related only to the part of the decision concerning the value added tax on the car tax. He sought for the decision to be set aside in that respect and a declaration that such value added tax should not be charged in relation to the car he had imported.

Questions

Car tax

1.    Under Paragraph 11 of the Autoverolaki, in determining car tax on a vehicle imported as Community goods, the basis of the taxable value is the transaction value of the vehicle for the taxable person. The transaction value is the customs value within the meaning of the Customs Code and implementing regulation so far as applicable.

May [Article 95 of the Treaty] be interpreted as meaning that such national legislation relating to the determination of the taxable value for car tax purposes is not discriminatory, taking into account in particular that the taxable value of a vehicle will be a different amount depending on the marketing stage at which the importer of the vehicle operates, that is, whether he operates as a wholesaler, a retailer or a consumer?

2.    Under Paragraph 7(1) of the Autoverolaki, the basis of the tax levied on an imported used car is the tax on an equivalent new vehicle, with the reductions as laid down in that provision. Under the old law 1482/1994, the tax charged on an imported used car was the tax on an equivalent new car reduced by 0.5% for every complete calendar month calculated from the time when the vehicle had been registered or had been in use for six months, and the tax was reduced for only the first 150 months of use. Under the current law 1160/1998, the tax charged on an imported used car is the tax on an equivalent new car reduced by 0.6% per month of use for the first 100 months of use and then for the next 100 months by 0.9% per month of use of the residual value calculated at the end of each preceding month, and for subsequent months of use by 0.4% of the residual value calculated at the end of each preceding month. Months of use are taken as complete calendar months from when the vehicle was first put into use or registered.

May [Article 95 of the Treaty] be interpreted as meaning that such national tax legislation is not discriminatory, taking into account in particular that

–    the starting point is the tax on an equivalent new car,

–    under the previous law the tax was reduced only after a period of six months, and

–    under both the previous and current law the tax is reduced linearly as described above?

3.    In addition to using the bases of calculation prescribed in the national tax legislation, is it always necessary to establish a vehicle’s individual characteristics to ensure that the levying of car tax does not lead, in the individual case, to discrimination contrary to [Article 95 of the Treaty]?

Value added tax payable on car tax

4.    May the [Sixth Directive] be interpreted as meaning that the tax called value added tax payable on car tax under Paragraph 5(1) of the Autoverolaki and Paragraph 1(5) of the Arvonlisäverolaki is value added tax within the meaning of the [Sixth Directive], taking into account that under national legislation the tax is levied exclusively on the basis of car tax?

5.    If the answer to Question 4 is in the negative, may such a tax nevertheless be regarded as a tax or charge the levying of which is permitted under Article 33 of the [Sixth Directive]?

6.    If such national tax provisions are not regarded as contrary to the [Sixth Directive], may [Article 95 of the Treaty] be interpreted as meaning that those tax provisions are not discriminatory within the meaning of that article?’


AG Opinion

(1)    The answer to the first three questions is that Article 90 EC is to be interpreted as not precluding a national tax provision under which, in order to determine the taxable value of a used car for the purpose of assessing car tax,

–    the customs value is used,

–    the taxable value is determined in such a way that all the essential characteristics of the used car are – at least abstractly – taken into account,

unless this leads to the amount of tax exceeding the amount contained in the value of a used car already taxed and on the domestic market, and to the actual depreciation not being taken into account.

Article 90 EC is further to be interpreted as precluding a national tax provision under which, to determine the taxable value of a used car for the purpose of assessing car tax, the commercial level is to be taken into account, the taxable value is reduced only after six months have elapsed, and the reduction is made in linear fashion in the way applicable in the main proceedings.

(2)    The answer to the fourth and fifth questions is that 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 – is to be interpreted as meaning that a tax called value added tax such as that at issue in the main proceedings may not be regarded as value added tax within the meaning of that directive but as a tax, duty or charge which is permitted under Article 33 of that directive.

The answer to the sixth question is that Article 90 EC is to be interpreted as meaning that a tax called value added tax such as that at issue in the main proceedings is discriminatory as stated in that article in so far as the amount of tax exceeds the amount contained in the value of a used car present on the domestic market and already taxed.


Decision 

1.    The first paragraph of Article 95 of the EC Treaty (now, after amendment, the first paragraph of Article 90 EC) allows a Member State to apply to used vehicles imported from another Member State a system of taxation under which the taxable value is determined by reference to the customs value as defined by Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code and Commission Regulation (EEC) No 2454/93 of 2 July 1993 laying down provisions for the implementation of Regulation No 2913/92, but precludes the taxable value from varying according to the marketing stage where this may result, at least in certain cases, in the amount of the tax on an imported used car exceeding the amount of the residual tax incorporated in the value of a similar used car already registered in the national territory.

2.    The first paragraph of Article 95 of the Treaty precludes a Member State from applying to used cars imported from another Member State a system of taxation under which the tax on those vehicles

–    is equal, during the first six months from the registration or bringing into use of the vehicle, to the tax charged on a similar new vehicle, and
–    is equal, from the 7th to the 150th month of use of the vehicle, to the tax on a similar new vehicle, with a linear reduction by a percentage of 0.5% per full calendar month,

since such a system of taxation does not take the actual depreciation of the vehicle into account and does not provide a guarantee that the amount of tax it determines will in no case exceed the residual tax incorporated in the value of a similar used car already registered in the national territory.

3.    Where a Member State applies to used cars imported from other Member States a system of taxation under which the actual depreciation of the vehicles is defined in a general and abstract way on the basis of criteria laid down by national law, the first paragraph of Article 95 of the Treaty requires that system of taxation to be arranged in such a way, making allowance for the reasonable approximations inherent in any system of that type, as to exclude any discriminatory effect. That requirement presupposes, first, that the criteria on which the flat-rate method of calculating the depreciation of vehicles is based are made public and, second, that the owner of a used vehicle imported from another Member State is able to challenge the application of a flat-rate method of calculation to that vehicle, which may mean that its particular characteristics have to be examined in order to ensure that the tax applied to it does not exceed the residual tax incorporated in the value of a similar used vehicle already registered in the national territory.

4.    A tax such as that at issue in the main proceedings, described in national law as ‘value added tax’ on car tax, does not constitute ‘value added tax’ within the meaning 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, in the version of Council Directive 92/111/EEC of 14 December 1992 amending Directive 77/388 and introducing simplification measures with regard to value added tax, and is compatible with Article 33 of that directive.

5.    The first paragraph of Article 95 of the Treaty precludes the levying of a tax such as that at issue in the main proceedings, which is payable on car tax, in so far as the amount charged as such a tax on a used car imported from another Member State exceeds the amount of the residual tax incorporated in the value of a similar used car already registered in the national territory.


Summary/Interesting considerations

Point 99 of the Decision

The Court has held that among the essential characteristics of value added tax are the following features:

  • it applies generally to transactions relating to goods or services; it is proportional to the price charged by the taxable person in return for the goods and services which he has supplied;
  • it is charged at each stage of the production and distribution process, including that of retail sale, irrespective of the number of transactions which have previously taken place;
  • the amounts paid during the preceding stages of the process are deducted from the tax payable by a taxable person, with the result that the tax applies, at any given stage, only to the value added at that stage and the final burden of the tax rests ultimately on the consumer (see Joined Cases C-338/97, C-344/97 and C-390/97 Pelzl and Others [1999] ECR I-3319, paragraph 21 and the case-law cited).

Source


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Reference to the case in the other EU MS


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