Commission communication on the decisions of the European Court of Justice of 5 May 1982 and 21 May 1985 (the Gaston Schul cases) relating to the importation by an individual of used goods purchased in another Member State from an individual (1)(86/C 13/02)

In essence, the conclusions which the Commission draws from the judgments of the European Court in the Schul cases are that the double imposition of VAT on goods exported from one Member State to another is contrary to Community law and to the achievement of a genuine common market. In view of the importance of the principles established in these cases for the citizens of the Community and the fact that Member States have been slow to implement them in practice, the Commission wishes to draw public attention to its own policy in this matter. 1. Progress in the establishment of the common market has brought with it an increase in trade, not only between traders, but also between private persons in different Member States. An important obstacle to the free circulation of goods and persons resulted from the fact that goods which had already borne VAT in one Member State were once more subjected to that tax in full on importation into another Member State. Above all this affected secondhand goods purchased by individuals and imported by them into their country of residence. This double taxation gave rise to numerous complaints and was rightly considered by the public to be incompatible with a true common market. 2. The Court, called upon to give a preliminary ruling in case 15/81 (Gaston Schul) , ruled that 'value-added tax which a Member State levies on the importation of products from another Member State supplied by a private person, where no such tax is levied on the supply of similar products by a private person within the territory of the Member State of importation, constitutes internal taxation in excess of that imposed on similar domestic products within the meaning of Article 95 of the Treaty, to the extent to which the residual part of the value added tax paid in the Member State of exportation which is still contained in the value of the product on importation is not taken into account. The burden of proving facts which justify the taking into account of the tax falls on the importer'. 3. Article 95 of the EEC Treaty provides that 'No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products'. The Court set out certain principles on the interpretation of this Article which give a new impetus to the free circulation of goods, and in particular second-hand goods. It ruled, in effect, that the Treaty was not respected where an importing Member State, in making its own VAT charge, failed to take account of the residual part of the VAT already paid in the exporting Member State which is incorporated in the value of the product at the time of its importation. Thus, the basic principle of Case 15/81 is that an individual should not have to suffer double taxation where second-hand goods remain burdened with VAT at the time of importation, to the extent that: - VAT has been paid on the goods in one of the other Member States of the Community and proof of this is furnished by the importer (the private individual or his agent) ; -in the exporting country it is not possible for the individual to obtain reimbursement of the VAT incorporated in the price of the goods. 4. The Court was called upon to clarify the position on a number of points in Case 47/84 (Gaston Schul) . In its decision of 21 May 1985, it laid down the method for calculating the VAT due on the importation by a private person of used goods which had already borne VAT in the Member State of export. The method laid down was as follows: (a) the taxable amount is constituted either by the price of the goods less the residue of the VAT paid in the exporting Member State which is still incorporated in that price or, in the absence of such a price, by the customs value, which is a VAT-free value; (b) the rate of tax is the rate applicable to supplies for consideration effected within the territory of the country of importation; (c) the amount of VAT resulting from the application to the taxable amount at (a) of the rate at (b) shall be reduced by the residue of the VAT paid in the exporting Member State; (d) the residue of VAT in the exporting Member State is: - either the amount of VAT actually paid in that State less the percentage by which the value of the goods has diminished, if the value of the goods has in fact diminished between the last VAT payment and their importation, or -the full amount of VAT actually paid in that State where the value of the goods has increased since the last VAT payment. Consider, by way of example, the case of goods purchased new for 1 000 Ecu plus VAT of 100 Ecu. The VAT inclusive price of the goods as new is 1 100 Ecu: -assuming a depreciation of 50 %, the price of the goods becomes 550 Ecu, of which the residual VAT represents 50 Ecu; at importation, therefore, the value for tax of such goods is 550 - 50 = 500 Ecu. Assuming a VAT rate of 15 % in the importing Member State, VAT payable is 500 × 0,15 = 75 Ecu less residual VAT, that is 75 - 50 = 25 Ecu; -assuming the goods increase in value to be sold for (say) 2 000 Ecu, the value for tax at importation is that value less the full amount of VAT paid in the exporting State, that is 2 000 - 100 = 1 900 Ecu. VAT payable is therefore 1 900 × 0,15 = 285 Ecu, less residual VAT, that is 285 - 100 = 185 Ecu. In certain cases the result of the calculation is a negative amount. In particular, such a result occurs where the VAT rate of the importing Member State is lower than that of the exporting Member State. In such cases, no VAT payment may be demanded by the importing Member State. 5. This case law of the Court has led the Commission to define a general approach in this field: wherever goods from one Member State of the Community are imported into another Member State no taxation may be charged without taking into account the VAT already paid on the goods. Thus, for example, while the Court was concerned only with the case of a supply of goods for consideration, the Commission considers that the scope of its decision covers goods received as gifts where such transfers are exempt within the country and the beneficiary is able to show that the goods have been acquired subject to the conditions of the national market. Another example of a case frequently encountered is that of a removal of goods by a person changing residence from one Member State to another. The Commission considers that the citizen who cannot fulfil the conditions of the Council Directive of 28 March 1983 - on tax exemptions applicable to permanent imports from a Member State of the personal property of individuals (1) is also entitled to benefit from the principle laid down by the Court in these cases. This principle applies equally in cases where temporary importation is not granted (2) . 6. In accordance with the recommendations of the report by the ad hoc committee for a people's Europe which was approved by the European Council, the Commission is watching with particular attention to ensure that the Court's decisions in this field are applied by national administrations. With this purpose, it has commenced proceedings against all Member States for non-respect of Article 95 of the EEC Treaty, some of them having failed to apply the Court's interpretation of this Article, others having only partially applied the principle of the prohibition of double taxation. Individuals who encounter difficulties in this field may address the Commission: - either directly to its Secretariat General, 200, rue de la Loi, B-1049 Bruxelles; -or by the way of one of the Commission's information offices, the list of which is attached. Information offices (3) BELGIUM Bruxelles/Brussel Rue Archimède 73, 1040 Bruxelles Archimedesstraat 73, 1040 Brussel Tel. 235 11 11 Telex 26657 COMINF B DENMARK Koebenhavn Hoejbrohus OEstergade 61 Postbox 144 1004 Koebenhavn K Tel. 14 41 40 Telex 16402 COMEUR DK FRANCE Paris 61, rue des Belles-Feuilles 75782 Paris Cedex 16 Tel. 501 58 85 Telex Paris 630176 F COMEUR Marseille (Suboffice attached to Paris Office) C. M. C. I. /Bureau 320 2, rue Henri Barbusse F-13241 Marseille CEDEX 01 Tel. abbreviated code: 8467 FEDERAL REPUBLIC OF GERMANY Bonn Zitelmannstrasse 22 5300 Bonn, Tel. 23 80 41 Telex 886648 EUROP D Berlin (Suboffice attached to Bonn Office) Kurfuerstendamm 102 1000 Berlin 31 Tel. 892 40 28 Telex 184015 EUROP D Munich (Suboffice attached to Bonn Office) Erhardtstrasse, 27 8000 Muenchen Tel. 23 99 29 00 Telex 52 18 135 GREECE Aq´hna 2, Vassilissis Sofias T. K. 1602 Athina 134 Tel. 724 39 82/724 39 83/724 39 84 Telex 219324 ECAT GR IRELAND Dublin 39 Molesworth Street Dublin 2 Tel. 71 22 44 Telex 2551 EUCO EI ITALY Roma Via Poli 29 00187 Roma Tel. 678 97 22 Telex 610184 EUROMA I Milano (Suboffice attached to Rome Office) Corso Magenta 61 20123 Milano Tel. 80 15 05/6/7/8 Telex 316002 EURMIL I LUXEMBOURG Luxembourg Bâtiment Jean Monnet Rue Alcide de Gasperi 2920 Luxembourg Tel. 430 11 Telex 3423/3446/3476 COMEUR LU NETHERLANDS Den Haag Lange Voorhout 29 Den Haag Tel. 46 93 26 Telex 31094 EURCO NL PORTUGAL Lisboa Rua do Sacramento à Lapa 35 1200 Lisboa Tel. 60 21 99 Telex 18810 COMEUR P SPAIN Madrid Calle de Serrano 41 5a Planta Madrid 1 Tel. 435 17 00/435 15 28 Telex 46818 OIPE E UNITED KINGDOM London 8, Storey's Gate London SW1 P 3 at Tel. 222 81 22 Telex 23208 EURUK G Belfast (Suboffice attached to London Office) Windsor House 9/15 Bedford Street Belfast BT2 7EG Tel. 407 08 Telex 74117 CECBEL G Cardiff (Suboffice attached to London Office) 4 Cathedral Road Cardiff CF1 9SG Tel. 37 16 31 Telex 497727 EUROPA G Edinburgh (Suboffice attached to London Office) 7 Alva Street Edinburgh EH2 4PH Tel. 225 20 58 Telex 727420 EUEDING (1) Case 15/81, ECR 1982, pp. 1409-1437 and Case 47/84, OJ No C 144, 13. 6. 1985, p. 4 (not yet reported) .

(1) Directive 83/183/EEC of 28 March 1983 (OJ No L 105, 23. 4. 1983, p. 64) .

(2) Case 134/83 of 11. 12. 1984 - (Abbink) - OJ No C 3, 5. 1. 1985, p. 4.

(3) In alphabetical order by country where Information offices are located.