Comments on ECJ C-125/24: VAT exemption on reimportation: fiscal logic vs. administrative pitfalls

Advocate General Opinion on VAT Exemption for Re-Imported Goods in Sweden

Case Overview: The Advocate General of the European Court of Justice (ECJ) issued an opinion regarding Case C-125/24, which examines Sweden’s VAT rules related to the re-importation of goods, specifically horses exported to Norway and later returned to the EU without a formal customs declaration.
VAT Exemption Conditions: The opinion emphasizes that, according to Article 143(1)(e) of the EU VAT Directive 2006/112/EC, VAT should not be charged on goods re-imported into the EU if the main eligibility conditions for the exemption are met, regardless of procedural compliance with customs requirements.
Independence from Customs Procedures: The Advocate General clarified that a procedural failure to comply with certain customs procedures, as outlined in Article 86(6) of the EU Customs Code, does not affect the eligibility for VAT exemption under the VAT Directive, reinforcing the potential for VAT exemption to apply independently of customs procedural requirements.

Click on the logo to visit the website

Returning Goods and VAT Exemption: Goods leaving the EU lose their Union status and are treated as non-Union goods upon reimportation, necessitating customs formalities and potentially incurring VAT. However, legislation provides relief for “returning goods” that meet specific conditions, allowing for avoidance of both import duties and VAT.
Case C-125/24 (Palmstråle) and Legal Inquiry: The case centers on whether the VAT exemption for returning goods is contingent on fulfilling all customs formalities, even when the goods substantively qualify for exemption. The Swedish court has referred this question to the EU Court, prompting an analysis of the relationship between the Union Customs Code and the VAT Directive.
Advocate General Kokott’s Opinion: AG Kokott argues that the VAT exemption should not be denied solely due to procedural errors in customs regulations, emphasizing the different purposes of VAT and customs law. She suggests that compliance with customs formalities should not be a strict prerequisite for the VAT exemption, advocating for a more flexible interpretation that prioritizes substantive conditions over administrative compliance.