WRITTEN QUESTION E-1703/01

by Glyn Ford (PSE) to the Commission

(14 June 2001)

Subject: Taxation on cars

When you buy a bottle of wine in an EU Member State you pay the tax in the country from which it is purchased. When you buy a car in an EU Member State you pay the tax in the country in which the car is to be registered and not in the country in which it was originally purchased. Does the Commission not feel that the purchasing of goods should be treated in the same way?

Answer given by Mr Bolkestein on behalf of the Commission

(30 July 2001)

When a non-taxable person purchases goods, other than those subject to excise duty, in a Member State and he transports the goods himself to another Member State, for example where he has his permanent address or usually resides, he pays the VAT of the Member State where he purchases the goods. However, when the goods concerned are new means of transport, the Council decided in 1992 to adopt a special scheme whereby a new taxable event was created. This new taxable event, mentioned under Article 28a(1)(b) of the Sixth VAT Directive, 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 basis of assessment(1) is the intracommunity acquisition of new means of transport affected for consideration within the Member State by taxable persons, non-taxable legal persons or by any other non-taxable person. This implies that for new means of transport, purchased by a non-taxable person, the VAT becomes due in the Member State of arrival, which is normally where the new means of transport is to be registered.

New means of transport are defined under Article 28a(2) of the Sixth VAT Directive.

A car will be considered a new means of transport when:

- its capacity exceeds 48 cc or 7,2 kilowatts and it is intended for the transport of persons or goods and;

- it is supplied not more than 6 months after the date of first entry into service or;

- it has traveled less than 6 000 kilometers.

When introducing the current VAT arrangements, the Council decided to adopt a specific scheme for the supplies of new means of transport because the existing divergences in rates applicable in the different Member States were likely to create severe distortions of competition for the goods concerned. The risk of a change in commercial flows was estimated to be too important to allow non-taxable persons to purchase these goods at the VAT rate of the Member State of origin and therefore these derogatory provisions were inserted for the supplies of new cars.

Similar budgetary considerations apply with respect to other taxes related to passenger cars, and in particular registration and annual circulation taxes, concerning which so far there is little Community legislation. Therefore, each Member State is allowed to apply its national fiscal provisions providing that it respects the general provisions of the EC Treaty and in particular the non-discrimination clause. Existing harmonisation only concerns two Council Directives, adopted in 1983(2).

The Commission presented a Proposal for a Council Directive(3) in 1998, with the overall objective of bringing the tax treatment of vehicles, which accompany private individuals moving from one Member State to another, more in line with the concept and principles of the Single Market and updating the provisions of the two Council Directives mentioned above. This proposal remains on the Council's table as any decision on fiscal matters needs to be taken by unanimity at the Council.

(1) OJ L 145, 13.6.1977.

(2) Council Directives 83/182/EEC and 83/183/EEC of 28 March 1983, concerning respectivelly tax exemptions for certain means of transport temporarily imported into one Member State from another, and exemptions applicable to permanent imports from one Member State to another of the personal property of individuals, including passenger cars (OJ L 105, 23.4.1983).

(3) OJ C 108, 7.4.1998.