COMMISSION STAFF WORKING DOCUMENT Accompanying Commission Communication "Removing cross-border tax obstacles for COMMISSION STAFF WORKING DOCUMENT Accompanying Commission Communication "Removing cross-border tax obstacles for EU citizens"
Date: 2010-12-20
Institutions: European Commission
Subjects: European tax cooperation, approximation of laws, intra-EU trade, tax harmonisation

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EUROPEAN COMMISSION 

Brussels, 20.12.2010 
SEC(2010) 1576 final 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying Commission Communication "Removing cross-border tax obstacles for  

COM(2010) 769 

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COMMISSION STAFF WORKING DOCUMENT 

Accompanying Commission Communication "Removing cross-border tax obstacles for 
EU citizens" 

Instruments available to EU citizens for resolving cross-border tax obstacles and 
examples of resolved cases of tax discrimination 

1. 

INTRODUCTION 

It  is  inevitable  that  EU  citizens  investing,  working  or  operating  across  borders  will  have  to 
contend with two or more sets of tax rules that can differ quite considerably. This is because 
EU  Member  States  exercise  sovereignty  in  the  tax  area,  except  to  the  extent  that  EU-wide 
rules exist (such as in the VAT and excise duties areas) and they are free to establish the tax 
rules and rates that they wish, according to their political preferences.  

However,  Member  States  are  obliged  under  EU  law  to  ensure  that  their  tax  rules  do  not 
discriminate between EU citizens on the basis of nationality. Nor can Member States, via their 
tax systems, impose unjustified restrictions to the exercise by EU citizens of the fundamental 
Treaty "freedoms". One of the great achievements of the EU has been to create a frontier-free 
area  within  which  (1)  people,  (2)  goods,  (3)  services  and  (4)  capital  can  all  move  around 
freely.  The  Court  of  Justice  of  the  EU  has  in  many  cases  ruled  that  elements  of  Member 
States' tax laws constituted a restriction to these freedoms.  

The European Commission, as guardian of the Treaty, is responsible for taking action against 
any Member States that apply tax rules that conflict with EU law.  

Any  EU  citizen  has  at  his/her  disposal  easy-to-use  ways  of  contacting  the  Commission  to 
enquire  or  make  a  complaint  about  an  element  of  the  tax  law  of  an  EU  Member  State 
contravenes EU law. 

2. 

REDRESS AT NATIONAL LEVEL 

It is national courts and administrative bodies that are primarily responsible for ensuring that 
national legislation complies with EU law. 

Therefore, an EU citizen that considers a particular measure (law, regulation or administrative 
action)  or  administrative  practice  of  a  Member  State  as  incompatible  with  EU  law,  could, 
either prior to or in parallel with his complaint to the Commission, seek redress from national 
administrative  or  judicial  authorities  (including  national  or  regional  ombudsmen)  and/or 
through the arbitration and conciliation procedures available.  

It is advisable for citizens to use those national means of redress because of the advantages 
they may offer. 

By using the means of redress available at national level an EU citizen should, as a rule, be 
able  to  assert  his  rights  more  directly  and  more  personally  than  he  could  following 
infringement  proceedings  successfully  brought  by  the  Commission  which  may  take  some 
time.  

Only national courts can issue orders to administrative bodies and annul a national decision.  
It is also only national courts which have the power, where appropriate, to order a Member 

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State  to  make  good  the  loss  sustained  by  individuals  as  a  result  of  the  infringement  of 
Community law attributable to it. 

3. 

HOW  THE  EUROPEAN  COMMISSION  HELPS  EU  CITIZENS  TO  TACKLE  CROSS-
BORDER TAX OBSTACLES 

3.1 Informal Channels 

As  announced  in  the  EU  Citizenship  Report  2010  (COM  (2010)  603),  the  Commission  is 
currently  developing  a  one-stop  shop  information  point  on  the  rights  of  citizens  and 
businesses in the EU. Citizens will be able to use its services from anywhere in the EU to find 
answers to questions they may have about very practical issues related to taxation. The one-
stop shop consists of: 
•  The EU Europe Direct Contact Centre1, which offers a free telephone and e-mail service 
which citizens can use from anywhere in the European Union to find answers to questions 
they may have about the EU and EU-related issues, including about very practical issues 
related to taxation.  

•  The Europe Direct Information Centres2, which are located in all the EU Member States 

and which EU citizens can visit, call or e-mail for information  

•  The Your Europe web portal which contains user-friendly information for mobile citizens 
in  the  European  Union.  In  addition  to  information,  Your  Europe  also  guides  users  to  the 
most appropriate assistance services, notably 

•  Your Europe Advice3 (until recently called the Citizens Signpost Service or CSS) 

which is an EU legal advice service for the public.  

•  SOLVIT4,  an  EU  problem  solving  network  closely  associated  with  Your  Europe 
Advice, which tries to resolve problems between individuals or companies and the 
authorities of another country in cases where there is a possible misapplication of 
EU  law.  The  SOLVIT  network  will  endeavour  to  resolve  the  matters  without 
resorting to legal proceedings and is successful in over 90% of cases. 
Finally, EURES5,  a cooperation  network  between the European Commission and the Public 
Employment  Services  of  the  Member  States  of  the  European  Economic  Area,  provides 
information,  advice  and  recruitment/placement  services  for  the  benefit  of  workers  and 
employers.  EURES  advisers  working  in  EURES  cross-border  partnerships  –  composed  of 
Public  Employment  Services  and  social  partners  organisations  –  offer  client  services  to 
mobile cross-border workers in order to meet their specific needs for information and advice 
in areas such as social security and taxation.  

3.2. Formal Channels 

Furthermore, all EU citizens have a right to lodge a complaint with the European Commission 
about any practice of an EU Member State believed to be incompatible with EU law. Practical 
information  on  the  steps  to  be  followed  can  be  found  at  the  following  Internet  link  -  : 
http://ec.europa.eu/taxation_customs/common/rights/index_en.htm.  

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http://ec.europa.eu/europedirect/index_en.htm 
http://europa.eu/europedirect/index_en.htm 
http://ec.europa.eu/citizensrights/front_end/index_en.htm 
http://ec.europa.eu/solvit/ 
http://ec.europa.eu/eures/ 

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Under an EU Pilot project6 that is operating in conjunction with 18 Member States since April 
2008  to  resolve  problems  more  quickly,  the  Commission  may  forward  the  enquiry  or 
complaint  to  the  Member  State  authority  concerned  with  any  questions  or  indications 
identified by the Commission service. The Member State has to reply within 10 weeks. The 
Commission  will  not  identify  the  complainant  unless  he/she  has  specifically  authorised  the 
Commission to do so.  

If the complaint appears to be founded, and the Pilot approach does not achieve results, the 
European  Commission  will  consider  making  use  of  its  Treaty  powers  to  take  legal  action 
against  the  Member  State  concerned  by  opening  infringement  proceedings.  Many  Member 
States will change the offending law following the Commission's action. However, if, a given 
Member State fails to change its national law although the Commission has formally stated its 
incompatibility  with  EU  rules,  the  Commission  can  refer  the  Member  State  to  the  Court  of 
Justice. Where the Court of Justice finds that the Treaty has been infringed, the Member State 
in question is required to take the measures necessary to conform. The EU Treaty also gives 
the Commission power to act against a Member State that does not comply with a previous 
judgment  of  the  European  Court  of  Justice  and  allows  the  Commission  to  ask  the  Court  to 
impose a financial penalty on the Member State concerned.  

4. 

EXAMPLES  OF  AREAS  WHERE MEMBER STATES'  TAX  LAWS  HAVE  BEEN  FOUND  TO 
CONFLICT WITH EU LAW 

The  following  overview  describes  cases  of  discrimination  in  the  tax  area  that  have  been 
resolved, either via a request by a national court of a Member State for a preliminary ruling of 
the Court of Justice or via infringement proceedings launched by the European Commission. 
The overview will help both citizens and Member States to understand the principles involved 
in tax cases that have been examined and the impact of EU law on national tax laws.  

Cross frontier workers 

Example:  Christophe  lives  in  Belgium  and  works  in  Germany.  His  wife  Aurélie  lives  with 
Christophe  in  Belgium  and  does  not  work  so  Christophe's  salary  in  Germany  is  their  main 
source  of  income.  Christophe  pays  taxes  in  Germany  where  he  works.  Although  not  tax 
resident in Germany, Christophe should be entitled to obtain all the tax deductions and reliefs 
against his tax in Germany that he would obtain if he lived in Germany. This is because his 
global family income is mainly from Germany sources.  

If  a  citizen  who  lives  in  one  state  earns  all  or  almost  all  of  his  income  in  another  State  the 
other state should treat him as a resident; that is the other state should give him the same tax 
relief and tax exemptions it would give to a resident, following the Court of Justice's decision 
in the Schumacker case7. In a number of infringement cases, Member States granted personal 
allowances only to nationals or residents. For example, sometimes a joint tax assessment of 
spouses  was  granted  only  to  residents,  even  where  non-residents  earned  all  or  almost  all  of 
their income in the Member State granting the joint assessment option. In other cases, frontier 
workers did not qualify for certain other allowances, such as family or pension allowances.  

Pensioners and students 

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See http://ec.europa.eu/community_law/infringements/application_monitoring_en.htm  
Case C-279/93, Finanzamt Köln-Altstadt v Schumacker, judgment of 14 February 1995 

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Example: Paivi who is a Finnish pensioner lives for most of the year in Spain so is resident 
for  tax  purposes  in  Spain.  Her  sole  income  is  derived  from  a  pension  and  investments  in 
Finland. Finland must allow Paivi the same tax deductions as those available to residents, and 
cannot apply higher tax to her income than it would apply if she resided in Finland.  

The  principle  of  the  Schumacker  case  mentioned  above  also  applies  to  pensioners  and 
students. So students or pensioners earning all or almost all of their income in a state in which 
they are not resident should be treated for tax purposes by that state as if they were residents 
of that state and get the same deductions and allowances as residents of that state8.  

For example, one Member State provided for a scheme of pension savings accounts. Income 
paid out to a pensioner from this scheme was exempt from personal income tax but only if the 
pensioner  was  resident  in  that  Member  State.  In  reaction  to  the  Commission's  request  the 
Member State concerned has extended the exemption to individuals resident in all EEA states. 

Note,  however,  that,  under  the  terms  of  most  double  taxation  treaties  between  EU  Member 
States, a pension will only be taxable in the country where the pensioner is actually resident. 
If he has moved to another country on retirement, the pension might only be taxable there. 

The exception to this is a pensioner receiving a public sector pension (if he worked as a civil 
servant).  He  will,  normally,  under  the  terms  of  most  bilateral  double  taxation  treaties 
concluded between Member States, be taxable on his pension only in the country that pays the 
pension, irrespective of his place of residence.  

Higher taxation of non-nationals 

In a number of Member States workers of a foreign nationality were taxed in situations where 
nationals would be exempt or partly exempt. For example, a Member State imposed a higher 
tax  on  the  income  of  sailors  and  pilots  who  were  nationals  of  other Member  States  than  on 
income of national sailors and pilots performing the same duties, who indeed benefited from 
full  or  partial  exemption.  As  a  result  of  the  action  taken  by  the  Commission,  the  Member 
States  in  question  extended  the  favourable  regime  to  non-national  workers  and  the  workers 
were allowed to request reimbursement for previous tax years.  

Denial  of  tax  deductions  for  contributions  to  foreign  pension  funds  (or  foreign  life 
assurance or sickness funds) 

Example: Sven, a Swedish national employed in Denmark, is continuing to pay premiums to a 
Swedish  pension  fund  under  a  contract  that  he  concluded  prior  to  his  arrival  in  Denmark. 
Denmark must allow Sven a tax deduction against Danish tax due on his employment income 
in respect of the premium he pays to the Swedish pension fund, if it would allow such a tax 
deduction if Sven paid the premium to a Danish pension fund.  

Many Member States did not give citizens tax relief for contributions paid to foreign pension 
funds,  whereas  they  would  allow  relief  for  contributions  paid  to  domestic  funds.  The 
Commission  therefore  launched  nine  infringement  procedures.  Seven  Member  States 
complied  after  the  formal  notice  or  reasoned  opinion  while  two  Member  States  had  to  be 

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Wallentin, Case C-169/03 for students and Turpeinen, Case C-520/04 , for pensioners. 

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referred to the Court of Justice. The Court ruled as suggested by the Commission9: if domestic 
pension contributions qualify for tax relief, then contributions paid to pension funds elsewhere 
in the European Economic Area should also qualify for tax relief.10 As a result of these cases, 
mobile  workers  can  now  remain  in  their  home  pension  schemes  if  they  wish  and 
multinationals  can  set  up  pan-European  pension  funds.  The  same  applies  for  contributions 
made to foreign life assurance or sickness schemes. 

Denial of tax deductions for school fees paid to a foreign school 

The  Commission  has  taken  action  against  some  Member  States  which  did  not  allow  a  tax 
deduction  for  school  fees  paid  to  foreign  schools  while  fees  paid  to  local  schools  were  tax 
deductible.  These  restrictions  place  at  a  disadvantage  both  foreign  schools  which  wish  to 
provide  services  and  parents  who  move  abroad  while  remaining  subject  to  unlimited  tax 
liability in their home Member State. These rules therefore violate EU law rules concerning 
people’s  rights  to  reside,  work  and  establish  themselves  in  other  EU  Member  States  and 
concerning  schools’  right  to  provide  services  in  another  Member  State.  The  Court  ruled 
against  a  Member  State  in  one  case  on  this  point  and  other  Member  States  changed  the 
relevant law before the matter went to Court. 

Denial of tax deductions for mortgage interest paid to a foreign bank or in respect of a 
foreign property 

Example: Pedro is a Spanish national working in Luxembourg and has taken out a mortgage 
with a Spanish bank to buy a house in Spain. Under EU law, the Luxembourg tax authorities 
will  have  to  give  Pedro  a  mortgage  deduction  in  respect  of  the  interest  paid  to  the  Spanish 
bank on his Spanish house, if they would give Pedro such a tax deduction if he was paying the 
mortgage interest to a Luxembourg bank or in respect of a house in Luxembourg. 

In Svensson & Gustavsson11 the Court ruled that where mortgage interest to domestic banks is 
tax deductible, the same should apply to interest paid to a bank established elsewhere in the 
EU.  The  Commission  has  opened  a  number  of  infringement  cases  on  this  issue.  In  all 
instances the Member States concerned have changed their law. 

Some  Member  States  allowed  a  deduction  for  mortgage  interest  only  in  connection  with 
properties  within  their  territories.  After  Commission  action,  the  Member  States  in  question 
amended their law  

Another Member State required non-residents to register loans, in order to be able to deduct 
interest  in  respect  of  mortgage  interest  payments.  There  was  also  a  limit  to  the  mortgage 
interest  deduction  available  to  non-residents  while  residents  were  not  subject  to  this  limit. 
After being contacted by the Commission, the Member State in question amended its law to 
bring the tax treatment of mortgage interest paid by non-residents into line with that applied to 
residents.  

Denial of tax deductions to non-resident sportsmen, artists and consultants 

Certain Member States did not allow non-resident service sportsmen, artists and consultants 
and other service providers to deduct professional expenses related to income that was earned, 

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Case 150/04, Commission v Denmark; Case C-522/04, Commission v Belgium 
Cf. also Danner (Case C-136/00) and Skandia/Ramstedt (Case C-422/01) 
C-484/93. 

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and  therefore  taxable,  in  those  Member  States,  whereas  service  providers  resident  in  those 
countries were entitled to those deductions. These expenses could, for example, include travel 
and hotel expenses, insurance premiums, and so on.  

Effectively, the non-resident service providers were subject to a withholding tax on the gross 
amount of their income whereas comparable resident service providers were subject only to 
taxation  on  their  net  income,  after  deduction  of  expenses.  This  difference  in  taxation  is 
contrary to EU law. As a result of the actions taken by the Commission, the Member States 
concerned changed their legislation so as to allow the deduction of expenses by non-resident 
service providers.  

Exit taxes applied when an individual leaves a country to move to another 

Example:  Christos  and  Athena  decide  to  move  back  to  Greece  after  ten  years  working  in 
Germany. Although moving from Germany they decide to let rather than sell their house in 
Germany and  to  retain their German investments.  They should not be  liable to  any  taxes in 
Germany on accrued capital gains on their assets retained in Germany after their move if they 
would not be liable to such an accrued capital gains tax if they had stayed in Germany 

Exit taxes are taxes levied on accrued capital gains when taxpayers move their residence or 
transfer individual assets to another Member State. In domestic situations, such capital gains 
will usually be taxed only when they are actually realised; that is, when the assets are sold or 
otherwise  disposed  of.  However,  if  an  individual  taxpayer  moves  to  another  Member  State 
before  selling  his  assets,  his  original  state  of  residence  risks  losing  the  taxing  rights  on  the 
capital gains which have accrued on those assets, because he will become taxable in his new 
State  of  residence.  Many  Member  States  have  attempted  to  deal  with  this  issue  by  taxing 
accrued, although as yet unrealised, capital gains at the moment of transfer of the residence or 
assets by the taxpayer. However, the Court of Justice ruled that such immediate taxation of 
latent  capital  gains  on  assets  transferred  to  another  Member  State  infringes  the  principle  of 
freedom of movement, where no such taxation occurs in similar domestic situations. Member 
States should therefore provide for an unconditional deferral of collection of the tax due until 
the  moment  of  actual  realisation.  Several  Member  States  have,  as  a  result  of  Commission 
infringement action, changed their exit tax laws.  

Discriminatory  taxation  of  dividends  paid  to  another  Member  State  or  received  from 
another Member State 

Example:  Peter  resides  and  works  in  the  Netherlands.  He  is  employed  there  by  an  Italian 
company and, under an employees' savings plan, has shares in that company. The Netherlands 
must give Peter any Dutch tax exemptions in respect of dividends from that Italian company 
that would be available to him if he received dividends from a Dutch company rather than an 
Italian company.  

The  Court  of  Justice  has  ruled  that  a  Member  State  cannot  tax  dividends  which  leave  that 
State to go to another Member State ("outbound  dividends") at  a higher rate than dividends 
which remain in that Member State in the country ("domestic dividends")12, unless the other 

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European Commission v Kingdom of Spain (C-487/08) 

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Member  State  compensates  for  the  higher  taxation  on  the  outbound  dividends.  Similarly,  a 
Member  State  cannot  tax  dividends  coming  from  another  Member  State  ("inbound 
dividends") at a higher rate than domestic dividends13. Essentially the Court stated that higher 
taxation of inbound or outbound dividends constitutes a restriction on the free movement of 
capital  within  the  Internal  Market.  The  Commission  has  launched  over  forty  infringement 
cases against Member States because of their discriminatory tax rules in this area. A number 
of Member States have already made changes to their tax laws as a result and, in two cases 
that went to the Court of Justice, the Court found the rules incompatible with EU law.  

For  example,  the  Commission  commenced  infringement  proceedings  against  one  Member 
State  which  exempted  a  certain  amount  of  dividend  income  from  income  tax  only  if  the 
related shares were issued in that Member State. The Commission informed the Member State 
that this rule could be in conflict with the principal of freedom of movement of capital and as 
a  result  the  exemption  has  been  extended  also  to  dividends  from  shares  issued  in  other 
countries. 

Discriminatory taxation of investment in securities 

In  principle  heavier  or  discriminatory  taxation  of  investments  with  cross-border  element  is 
prohibited under the EU law. The Commission has investigated a case where a Member State 
did  not  tax  capital  gains  from  the  disposal  of  shares  on  a  regulated  market  of  that  Member 
State but did apply tax to capital gains from the disposal of shares traded on regulated markets 
in other Member States. This was not in compliance with the principle of the free movement 
of capital.  

Another  Member  State  applied  higher  taxation  to  bonds  issued  in  foreign  currencies  than 
bonds issued in the local currency.  

In both cases the Member States decided, after being contacted by the Commission, to extend 
the preferential treatment also to investments made into other Member States.  

Property taxes 

Capital gains taxes on sales of houses  

Example: Dorota has sold her house in Portugal, and bought a house in Poland in order to live 
there.  Dorota  should  benefit  from  any  Portuguese  tax  relief  in  respect  of  her  capital  gains 
from the sale of the house that she would enjoy if she purchased her new home in Portugal 
rather than Poland.  

Some Member States allowed an exemption from capital gains tax on the sale of a property if 
the  vendor  bought  a  replacement  property  in  that  Member  State  but  did  not  allow  the 
exemption if the vendor bought the replacement property in another Member State. This was 
an obstacle to the right to move and reside freely within the EU. Most of the Member States in 
question have now changed their law.  

Capital gains taxes on sales of holiday homes 

Some Member States levied higher capital gains taxes on non-residents selling their holiday 
home. After Commission action, the Member States concerned amended their law.  

Inheritance taxes on houses and other real estate 

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Verkooijen Case C-35/98 

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Some  Member  States  had  a  favourable  mechanism  for  the  calculation  for  inheritance  tax 
purposes of the value of domestic immovable property, whereas the value of property situated 
abroad  was  set  at  the  normal  market  value14.  After  Commission  action,  the  Member  States 
concerned  amended  their  law.  Similarly  national  rules  that  provide  more  favourable  tax 
deductions if the deceased was resident in the Member State in question before death are also 
illegal. 

An exemption from inheritance tax on property situated in the taxing Member State that is not 
available in relation to property situated in other Member States is also illegal. One Member 
State limited inheritance tax reliefs to forestry land and agricultural land situated within that 
Member State. The Commission informed the Member State concerned that such a restriction 
appears  to  be  contrary  to  the  principle  of  the  free  movement  of  capital.  As  a  result,  the 
Member State extended the relief to all such properties and land in EEA countries. 

Tax exemptions on purchase  

Tax  deductions  for  the  construction  or  purchase  of  a  dwelling  that  are  only  available  if  the 
dwelling  is  situated  in  the  territory  of  the  Member  State  concerned  are  illegal  as  are 
exemptions from purchase taxes available only to citizens of the Member State granting the 
exemption. For example, one Member State allowed a tax exemption for the first purchase of 
real  estate  in  that  Member  State,  but  did  not  allow  that  exemption  in  respect  of  property 
purchased abroad. As a result of the Commission's infringement action the Member State has 
changed its law. 

Taxation of income from letting or leasing of real estate 

Tax deductions available only if the real estate is located in the Member State in question are 
illegal.  

So is a system whereby residents are taxed on a net basis, while non-residents are taxed on a 
gross basis, resulting in higher tax for non-residents.  

Higher  taxation  of  foreign  investment  funds  and  companies  in  relation  to  income  from  real 
estate is contrary to EU law.  

For  example,  in  one  case,  a  foreign  national  who  lived  and  was  subject  to  tax  in  a  certain 
Member State owned a house in his Member State of origin which was let out to tenants. He 
was  unable  to  reduce  his  taxable  rental  income  by  an  amount  representing  depreciation  for 
wear and tear as he would have been able to do if the house had been situated in the Member 
State in which he lived. The Commission requested the Member State concerned to change its 
law and as a result the favourable depreciation regime was extended to buildings situated in 
all EEA countries.  

Donations to foreign charities 

A number of Member States did not grant the same tax relief for donations to foreign charities 
as for donations to domestic charities. Most Member States complied with the Commission's 
request to change their law, while a few cases are still pending.  

Tax problems related to the registration of imported second hand cars 

Example: Michael, who has been living for a few years in Hungary, has retired and decided to 
change  his  normal  residence  to  Ireland,  where  he  has  a  holiday  house.  To  take  his  car, 

14 

Jäger, Case C-256/06. 

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previously  bought  and  registered  in  Hungary,  to  Ireland,  he  will  have  to  re-register  it  in 
Ireland and pay registration tax there. EU rules do not require Ireland to refrain from applying 
tax  to  a  car  which  has  already  suffered  registration  tax  in  Hungary  and  nor  do  they  require 
Hungary  to  partially  refund  registration  tax.  However,  the  amount  of  registration  tax  to  be 
paid  in  Ireland  should,  under  EU  non-discrimination  rules,  take  account  of  the  age  of  the 
vehicle.  

EU law does not preclude Member States from imposing a registration tax on a car when it is 
used for the first time in that Member State. Therefore, when a second hand car is brought in 
from  abroad,  a  Member  State  can  impose  a  registration  tax  even  if  a  similar  tax  was  also 
applied  in  the  original  country  when  the  car  was  new.  However,  the  registration  tax  on  the 
imported second hand car should be applied in a non-discriminatory way. This means that the 
amount of tax on the imported second-hand car should correspond to the residual amount of 
tax contained in the value of a similar car that was registered in that Member State when new. 
In  practice,  however,  the  methods  applied  for  calculating  the  tax  on  imported  cars  may  in 
certain Member States be based on criteria such as mileage or the age of vehicles and these 
are  not  always  sufficient  to  reflect  accurately  changes  in  the  cars'  values.  The  result  can  be 
that the amount of registration tax on imported cars is higher than the equivalent tax included 
in  the  prices  of  domestic  cars.  This  contravenes  EU  law  that  prohibits  discriminatory 
treatment  of  goods  which  should  be  able  to  be  moved  freely  across  borders  within  the  EU. 
Following the Commission's actions in this area, one Member State has abolished registration 
tax on second hand cars and others have adjusted their method of valuation of second hand 
cars  or  brought  their  legislation  into  line  with  EU  law  in  other  ways.  The  Commission  is 
continuing its investigations into Member States' tax rules in this area.  

Difficulties  with  purchases  of  alcohol  and  tobacco  from  other  Member  States  for  own 
use in Member State of residence  

Example: Marina, who is English, has been in Spain on her holidays and has purchased a case 
of  12  bottles  of  wine  and  600  cigarettes  to  bring  back  with  her  to  the  UK.  As  long  as  the 
goods are for her personal use and not for resale she will not have to pay excise duty in the 
UK. However, if she is bringing alcohol and tobacco which is not for her personal use excise 
duty on them becomes liable in the UK. 

Under  EU  legislation,  EU  citizens  are  entitled  to  bring  back  to  their  home  country  excise 
goods  (tobacco  and  alcoholic  beverages)  which  have  been  bought  in  another  Member  State 
without incurring further tax in their Member State of residence.  

However, this only applies if 1) the goods are transported by the individuals themselves and 
2) the goods are for the individuals' own use; the rule does not apply if the goods are bought 
on behalf of a third party.  

Where Member States suspect that such goods are not for own use, they are required to have 
regard to specified criteria before concluding that the goods are not, in fact, for own use. One 
such criterion is the quantity of goods15. However quantity is only one criterion that should be 

15 

See  "Your  Europe"  website  at  http://ec.europa.eu/youreurope/citizens/travel/allowed-banned/alcohol-
tobacco-cash/index_en.htm?profile=0 

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taken into account for excise duty purposes and the Member States may not apply any strict 
quantitative limits (except in respect of certain new Member States whose duty rates do not 
meet EU minimum levels). If a Member State decides in a particular case that goods are not 
for own use, it is entitled to apply sanctions, but these must be reasonable and proportionate in 
accordance with general principles of EU law.  

Some Member States take account only of the criterion of quantity. This is not in conformity 
with  the  spirit  of  EU  legislation  and  the  Commission  has,  therefore,  opened  infringement 
procedures against these Member States.  

Higher administrative burdens on non-residents 

Sometimes  Member  States  impose  heavier  tax  compliance  burdens  on  non-residents 
compared to residents. For example, one Member State required its non-resident taxpayers to 
appoint a fiscal representative when registering with tax authorities. As a result of the action 
taken  by  the  Commission  the  Member  State  in  question  has  recently  abolished  this 
requirement.  

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