Special Report No 13/2011 ‘Does the control of customs procedure 42 prevent and detect VAT evasion?’
Date: 2011-12-15
Institutions: European Court of Auditors
Subjects: VAT, administrative check, customs regulations, tax evasion

EUROPEAN
COURT OF AUDITORS

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DOES THE CONTROL OF CUSTOMS 

PROCEDURE 42 PREVENT AND DETECT 

VAT EVASION?

EN

 
 
 
 
Special Report No 13 

 2011

DOES THE CONTROL OF 
CUSTOMS PROCEDURE 42 
PREVENT AND DETECT VAT 
EVASION?

(pursuant to Article 287(4), second subparagraph, TFEU)

EUROPEAN COURT OF AUDITORS

EUROPEAN COURT OF AUDITORS
12, rue Alcide De Gasperi
1615 Luxembourg
LUXEMBOURG

Tel. +352 4398-1
Fax +352 4398-46410
e-mail: euraud@eca.europa.eu
Internet: http://www.eca.europa.eu

Special Report No 13 

 2011

A great deal of additional information on the European Union is available on the Internet. 

It can be accessed through the Europa server (http://europa.eu).

Cataloguing data can be found at the end of this publication

Luxembourg: Publications Office of the European Union, 2011

ISBN 978-92-9237-421-1

doi:10.2865/39479

© European Union, 2011

Reproduction is authorised provided the source is acknowledged.

Printed in Luxembourg

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

CONTENTS

3

Paragraph

GLOSSARY

I–VII	

EXECUTIVE	SUMMARY

1–5	

INTRODUCTION

6–11	

6–8	

AUDIT	SCOPE	AND	APPROACH

AUDIT	QUESTIONS

9–11	

AUDIT	SCOPE	AND	APPROACH

12–49	

OBSERVATIONS

12–24	

14–17 

18–24 

	THE	COMMISSION	HAS	PROPOSED	IMPROVEMENTS	TO	THE	EU	REGULATORY	FRAMEWORK	BUT	
MORE	NEEDS	TO	BE	DONE

 THE REGULATORY FRAMEWORK DOES NOT ENSURE THE UNIFORM AND SOUND MANAGEMENT OF THIS VAT 
EXEMPTION BY MEMBER STATES’ CUSTOMS AUTHORITIES …

 … AND THE REGULATORY FRAMEWORK DOES NOT ENSURE THAT THE INFORMATION CONCERNING 
THESE TRANSACTIONS IS ALWAYS MADE AVAILABLE TO THE TAX AUTHORITIES IN THE MEMBER STATE  
OF DESTINATION

25–46	

CONTROL	IN	MEMBER	STATES	IS	DEFICIENT	…

27–35 

 CUSTOMS AUTHORITIES IN THE AUDITED MEMBER STATES DO NOT ENSURE THE VALIDITY AND 
COMPLETENESS OF DATA AND THE FULFILMENT OF OTHER EXEMPTION CONDITIONS

36–42 

ESSENTIAL INFORMATION IS NOT MADE AVAILABLE

43–46 

CROSS-CHECKING OF KEY DATA IS NOT CARRIED OUT IN ALL CASES

47–49	

…	AND	CREATES	LOSSES	IN	VAT	COLLECTION

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4

50–59	

CONCLUSIONS	AND	RECOMMENDATIONS

ANNEX	I		 —	 DESCRIPTION	OF	THE	PROCEDURE
ANNEX	II		 —	 ECA	CONTROL	MODEL	FOR	CUSTOMS	PROCEDURE	42	
ANNEX	III		 —	 BENCHMARKING	OF	MEMBER	STATES	AGAINST	THE	ECA	CONTROL	MODEL
ANNEX	IV		 —	 	RESULTS	OF	THE	TESTING	OF	EXEMPTION	AND	OTHER	SUBSTANTIVE	

CONDITIONS

ANNEX	V		 —	 CONFIRMATION	OF	VAT	TAXATION	IN	THE	MEMBER	STATES	OF	DESTINATION

REPLY	OF	THE	COMMISSION

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

	
	
	
	
	
	
GLOSSARY

5

Administrative	cooperation: Exchange of information between Member States whereby tax authorities 
assist each other and cooperate with the Commission pursuant to Council Regulation (EC) No 1798/20031 
in order to ensure the proper application of VAT on supplies of goods and services, intra-Community 
acquisition of goods and importation of goods. Exchanges of information between Member States cover, 
as a rule, any information that may help effect a correct assessment of VAT, including any information 
relating to specific cases. They take place both on request and without prior request.

Anti	Tax	Fraud	Strategy	Group	(ATFS): The expert group created by the Commission with Member 
States as a response to the ECOFIN Council conclusions of 28 November 2006, with a view to conducting 
the technical discussions on the conventional measures to reinforce the existing VAT system and to fight 
VAT fraud.

CCIP: Customs Code Implementing Provisions.

Customs	controls: Specific acts performed by customs authorities in order to ensure the correct applica-
tion of customs rules; such acts may include examining goods, verifying declaration data and the exist-
ence and authenticity of electronic or written documents, examining the accounts of undertakings and 
other records, inspecting means of transport, inspecting luggage and other similar acts.

Customs	declaration: The act whereby a person indicates a wish to place goods under a given customs 
procedure.

Fiscalis: A Community action programme to finance initiatives from tax administrations to improve 
the operation of the taxation systems in the internal market through communication and information-
exchange systems, multilateral controls, staff exchanges, seminars and other training activities.

Free	circulation: The status of goods imported from third countries which have undergone all import 
formalities in order to be able to be sold or consumed on the EU market.

Intra-Community	supply: Supply of goods dispatched or transported to a destination outside their 
respective territory but within the EU, by or on behalf of the vendor or the person acquiring the goods, 
for another taxable person, or for a non-taxable legal person acting as such in a Member State other 
than that in which dispatch or transport of the goods began.

Intra-Community	acquisition	of	goods: The acquisition of the right to dispose as owner of movable 
tangible property dispatched or transported to the person acquiring the goods, by or on behalf of the 
vendor or the person acquiring the goods, in a Member State other than that in which dispatch or trans-
port of the goods began.

Local	Clearance	Procedure: A simplified procedure whereby a trader receives the goods directly at his/
her premises (or the designated place) and usually the customs declaration is lodged and the goods are 
released by means of an entry in the trader’s own records.

Member	State	of	importation: Member State where the goods are physically imported into the EU and 
released for free circulation.

1  Council Regulation (EC) No 1798/2003 of 7 October 2003 on administrative cooperation in the field of value added tax and repealing Regulation 
(EEC) No 218/92 (OJ L 264, 15.10.2003, p. 1).

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Member	State	of	destination: The Member State to which the goods are dispatched or transported 
other than that in which the importation takes place.

Recapitulative	statement: A statement to be submitted by every taxable person identified for VAT pur-
poses who makes intra-Community supplies. The recapitulative statement shall be drawn up each month 
and record the total value of goods supplied to each acquirer in other Member States, listed by VAT 
identification number.

Re-importation: Release for free circulation of goods previously temporarily exported in the framework 
of another customs procedure, e.g. outward processing.

Release	of	goods: The act whereby the customs authorities make goods available for the purposes 
stipulated by the customs procedure under which they are placed.

Risk	profile: A combination of risk criteria and control areas (eg. type of goods, countries of origin) 
which indicates the existence of risk and leads to a proposal to carry out a control measure. When these 
criteria are developed at EU level following a common risk management framework they are known as 
EU risk profiles.

SAD: Single Administrative Document.

SCAC: The Standing Committee on Administrative Cooperation is a regulatory committee pursuant to 
Article 44 of Council Regulation (EC) No 1798/2003 assisting the Commission in matters as laid down in 
that regulation. It is composed of the representatives of the Member States and chaired by the repre-
sentative of the Commission.

Transfer: The dispatch or transport of goods by or on behalf of the importer for the purposes of his busi-
ness to a destination outside the territory of the Member State in which the importation takes place, but 
within the Community.

VAT: Value Added Tax.

VAT-based	own	resources: In 2009, VAT-based own resources amounted to 13,7 billion euro and made 
up 11,7 % of EU revenue. VAT own resources are computed on a harmonised VAT assessment base. The 
starting point for the calculation of the own resources accruing from VAT is the total net VAT revenue 
collected by each Member State during a given year. If less VAT is collected because of evasion or fraud, 
this would normally also lower VAT own resources paid to the Community budget, unless the assessment 
bases to be taken into account are capped at 50 % of GNI, as is the case for some Member States.

VAT	identification	number	(VAT	ID.	No): An individual number given to each taxable person intend-
ing to make supplies of goods or services, or to make acquisitions of goods for business purposes. Each 
number has a prefix of two letters by which the Member State of issue is identified.

VIES: The VAT Information Exchange System is an electronic network for transmitting information relat-
ing to the validity of VAT identification numbers of companies registered in the Member States. Further-
more, information relating to (tax exempt) intra-Community supplies is also made available to Member 
States’ administrations through VIES. The information relating to VAT-registration data is input by the 
national administrations and fed into national databases for remote consultation. This applies also to the 
intra-Community supplies declared on recapitulative statements. The system was set up to compensate 
for the elimination of customs formalities and checks.

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EXECUTIVE 
SUMMARY

VI.
T h e   C o u r t   f o u n d   t h a t   t h e   a p p l i c a t i o n   o f 
c u s t o m s   p r o c e d u r e   4 2   h a s   l e d   t o   s i g n i f i -
c a n t   l o s s e s .   B a s e d   o n   t h e   r e s u l t s   o f   i t s 
s a m p l e   t e s t i n g,   t h e   e x t r a p o l a t e d   a m o u n t 
o f   t h e   l o s s e s   i n   2 0 0 9   i s   a p p r o x i m a t e l y 
2  2 0 0   m i l l i o n   e u ro,   o f   w h i c h   1  8 0 0   m i l l i o n 
we re   i n c u r re d   i n   t h e   s e ve n   s e l e c te d   M e m -
b e r   St ate s   a n d   4 0 0   m i l l i o n   i n   t h e   2 1   M e m -
b e r   S t a t e s   o f   d e s t i n a t i o n   o f   t h e   i m p o r t e d 
g o o d s   i n   t h e   s a m p l e.  Th i s   re p re s e nt s   2 9  % 
o f   t h e  VAT   t h e o re t i c a l l y   a p p l i c a b l e   o n   t h e 
t a x a b l e   a m o u n t   o f   a l l   t h e   i m p o r t s   m a d e 
u n d e r   c u s t o m s   p r o c e d u r e   4 2   i n   2 0 0 9   i n 
th ese s eve n EU  M ember States.

VII.
The  Commission  sh ould, in par ti c ular :

( a)  amend the CCIP to implement the com -
pulsor y  and unifor m commun icati on  o f 
key data for the management of the VAT 
e xe m p t i o n   f r o m   t h e   t r a d e r   t o   t h e   c u s -
tom s auth or ities;

( b)  e n c o u r a g e   t h e   C o u n c i l   t o   a c t   u p o n 
i t s   p r o p o s a l   t o   a m e n d   t h e   VAT   D i r e c -
t i v e   a n d   h o l d   t h e   i m p o r t e r   j o i n t l y   a n d 
s e v e r a l l y   l i a b l e   f o r   t h e   VAT   l o s s   i n   t h e 
M e m b e r   S t a t e   o f   d e s t i n a t i o n   w h e r e   a 
complete and timely VAT recapit ul ati ve 
statement is not submitted by him/her ;

( c)   encourage the automatic verification of 
t h e   va l i d i t y   o f  VAT   I D.   N o s   i n   t h e   M e m-
ber States’ customs elec tronic clearance 
systems ;

I.
C u s t o m s   p r o c e d u r e   4 2   i s   t h e   r e g i m e   a n 
i m p o r t e r   u s e s   i n   o r d e r   t o   o b t a i n   a   VAT 
e xe m p t i o n   w h e n   t h e   i m p o r t e d   g o o d s   w i l l 
b e   t r a n s p o r t e d   t o   a n o t h e r   M e m b e r   S t a t e. 
The VAT is due in the M ember State of des -
tin at ion. 

II.
T h e   o b j e c t i v e   o f   t h e   C o u r t ’s   a u d i t   w a s   t o 
a s s e s s   w h e t h e r   co nt ro l   o n   c u s to m s   p ro ce -
d u re   4 2   a n d   t h e   re l ate d   p ro ce s s e s   p re ve nt 
a n d   d e t e c t   VAT   e v a s i o n .   G o o d s   i m p o r t e d 
under  this p rocedure r is k e it her  re m ai ni n g 
u n t a xe d   i n   t h e   M e m b e r   S t a t e   o f   i m p o r t a -
t i o n   o r   b e i n g   c o n s u m e d   i n   t h e   M e m b e r 
S t a t e   o f   d e s t i n a t i o n   w i t h o u t   VAT   b e i n g 
c h a rg e d.  Th u s   t h e re   i s   a   r i s k   o f   l o s s   o f  VAT 
revenu e fo r M e mb er States. 

III.
T h e   c o n t r o l   a c t i v i t i e s   a n d   p r o c e d u r e s   o f 
c u s t o m s   a n d   t a x   a u t h o r i t i e s   i n   o n e   M e m -
b e r   S t a t e   c a n   h a v e   a   d i r e c t   e f f e c t   o n   t h e 
r e v e n u e   o f   o t h e r   M e m b e r   S t a t e s .   U n c o l -
l e c t e d  VAT   a l s o   h a s   a n   e f fe c t   o n   t h e   c o m -
p o s i t i o n   a n d   i n c i d e n ce   o f   t h e   U n i o n’s   O w n 
R esources. 

IV.
Th e   Co u r t   fo u n d   t h a t   t h e   Co m m i s s i o n   h a s 
taken reasonable steps to improve the leg-
i s l at i ve   f ra m e wo r k   by   p ro p o s i n g   to   a m e n d 
the VAT Direc tive. However, this framewor k 
needs to b e imp roved fu r t her.

V.
T h e   C o u r t   f o u n d   t h a t   c o n t r o l   o f   t h i s   p r o -
ce d u re   i n   s e ve n   s e l e c te d   M e m b e r   St ate s   i s 
deficient  be cau se:

(a)  c u s t o m s   a u t h o r i t i e s   d o   n o t   e n s u re   t h e 

va lidit y and co mp l eten ess o f ke y  dat a,

(b)  essential information is not made avail -

able to  ta x au th or it ies,  and

(c)  cross- check ing of key data is not carried 

ou t by  tax aut ho r ities in al l  cas es.

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EXECUTIVE 
SUMMARY

(d)  c r e a t e   a n   E U   r i s k   p r o f i l e   s o   t h a t   M e m -
ber  States   h ave  a  com mon  ap p roa c h  to 
p e r f o r m i n g   r i s k - o r i e n t e d   a n d   r a n d o m 
d o c u m e n t a r y   c h e c k s   o n   i m p o r t s   u n -
d e r   c u s t o m s   p r o c e d u r e   4 2 ,   i n   o r d e r   t o 
ver ify the transpor t to another M ember 
S t a te   a n d   o t h e r   e xe m p t i o n   co n d i t i o n s, 
a n d   t h e   co r re c t n e s s   o f   t h e  VAT   t a x a b l e 
amou nt ;

(e)  m a k e   a   p r o p o s a l   t o   a m e n d   t h e  VAT   D i -
r e c t i v e   i n   o r d e r   t o   i d e n t i f y   s e p a r a t e l y 
t h e   i n t r a - C o m m u n i t y   s u p p l i e s   f o l l o w -
i n g   i m p o r t s   u n d e r   t h i s   c u s t o m s   p ro c e -
d u r e   i n   t h e   t r a d e r s’  VAT   r e c a p i t u l a t i v e 
statements to facilitate a reconciliation 
b e t w e e n   c u s t o m s   a n d   t a x   d a t a   i n   t h e 
M ember  St ate o f imp or tatio n;

(f )   submit a proposal to set up a direc t au -
t o m a t i c   e xc h a n g e   o f   i n f o r m a t i o n   c o n -
c e r n i n g   r i s k - p r o n e   t r a n s a c t i o n s   u n d e r 
customs procedure 42 bet ween the cus-
toms authorities of the Member State of 
i m p o r t a t i o n   a n d   t h e   t a x   a u t h o r i t i e s   i n 
th e M emb er St ate o f dest inatio n .

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INTRODUCTION

9

1.  

2.  

3.  

 C u s t o m s   p r o c e d u r e   4 2   i s   t h e   r e g i m e   a   t r a d e r   u s e s   i n   o r d e r 
t o   o b t a i n   a   VAT   e x e m p t i o n   w h e n   t h e   g o o d s   i m p o r t e d   f r o m 
o u t s i d e   t h e   E U   i nto   t h e   M e m b e r   St ate   o f   i m p o r t at i o n   w i l l   b e 
tra nsp o r ted to  a s econd M em be r  State 2. Th e VAT is due  in t he 
latter,  the  M emb er State of  dest in ati on .

I n  t he ab se nce  of  p rop er contro l,  g oods  r is k  rema i nin g  in  t he 
M e m b e r   St ate   o f   i m p o r t at i o n   w i t h o u t   p ay m e nt   o f  VAT   o r   b e -
ing consumed in the Member State of destination without VAT 
be ing  charg ed th ere.

G et t ing  custo ms p rocedure 42  r i ght  de pe nds  o n:

2  This procedure is commonly 
known as customs procedure 

42 because in such cases the 

importer of the goods must 

indicate in box 37 of the SAD a 

code starting with the digits 42. 

When goods are re-imported, 

code 63 should be indicated 

instead. For the purposes of this 

report, references to customs 

procedure 42 include customs 

procedure 63.

3  An importer who is not 
registered for VAT purposes in 

the Member State of importation 

can use a tax representative to 

(a )  t he  imp or te r 3  p rov iding   complete  and  valid VAT   i n for m a -

fulfil his tax obligations.

t ion  in t he  imp o r t  d ecl aration; 

(b)  cu sto ms   aut hor it ies  c heck in g  th is   info r mat io n  be fore  re -

l eas in g  the g oo ds ;  and th en

(c)  se nding  t he info r matio n  to  th e ta x  aut ho r i ti es ;

(d )  t a x   a u t h o r i t i e s   c o m p a r i n g   t h i s   i n fo r m a t i o n   w i t h   t h a t   i n -
c l u d e d   i n   t h e  VAT   re c a p i t u l at i ve   s t ate m e nt   s u b m i t te d   by 
t he  imp or ter.  Th is  s t atement  list s  al l  t he   im por ter ’s  s ale s 
to  o the r M emb er  St ates;

(e)  t h e   i n f o r m a t i o n   t h e r e i n   b e i n g   m a d e   a v a i l a b l e   t o   o t h e r 
M emb e r States’ t ax au thor ities  usi n g t he  VAT  I n for mat ion 
Exc hang e Syste m ( VI ES );

(f )  t ax au tho r it ies  in th e M ember  State o f  de st inati on e n s ur-
ing that VAT is charged there by compar ing the acquirer ’s 
VAT  retur n w ith the info r mation  avai lable  i n V IE S.

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4.  

The process is illustrated in the Char t and the legal framework 
gover ning t his p roced ure is set  out  i n A nn ex  I. 

C H A R T

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11

5.  

VAT evasion affec ts the financial interests of Member States. I t 
has an impac t on the EU budget as it leads to lower VAT-based 
O w n   R e s o u r c e s .   T h i s   l o s s   i s   c o m p e n s a t e d   b y   t h e   G N I - b a s e d 
ow n res ou rce, distor ting  individual M em be r  State s’ contr ibu-
t i o n s   t o   t h e   E U   b u d g e t .   M o re ove r,   t a x   f r a u d   u n d e r m i n e s   t h e 
func tioning of the inter nal mar ket and prevents fair competi -
tion. The Box describes a t ypical, but fic titious, fraudulent use 
of  cu sto ms pro cedu re 42.

B O X

T YPIC AL,	BU T	FIC TI TIOU S,	FR AUD ULE NT	US E	OF	CUS TOMS	PROCE DURE	42

A yacht worth 6,6 million euro is imported in Member State 1 under customs procedure 42 with a 
declared immediate delivery of the yacht to Member State 2. Three years later the customs authorities 
of Member State 1 inspect the yacht in their territory and find that the ship’s log shows that it has 
never been to Member State 2. Information sent by the tax authorities of Member State 2 demon-
strates that the declared acquirer in that Member State has not accounted for the VAT. The amount 
of VAT evaded in Member State 1 is 1,3 million euro.

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

AUDIT SCOPE AND APPROACH

12

4  Fiscalis Project Group No 29 
on the abuse of the VAT rules 

upon importation. This group 

is made up of experts from 

Member States.

5  Belgium, Denmark, Spain, 
France, Austria, Slovenia and 

Sweden.

6  Belgium, Bulgaria, Czech 
Republic, Denmark, Germany, 

Ireland, Spain, France, Italy, 

Lithuania, Hungary, Malta, the 

Netherlands, Austria, Poland, 

Portugal, Romania, Slovakia, 

Finland, Sweden and the United 

Kingdom.

6.  

7.  

8.	

9.  

10.  

11.  

AUDIT	QUESTIONS

T h e   m a i n   o b j e c t i v e   o f   t h e   a u d i t   w a s   t o   a s s e s s   w h e t h e r   t h e 
Commission and Member States have set up an effec tive regu -
lator y and control framework in respec t of this procedure and 
whe th er this co ntro l  p revents an d d ete c ts  VAT e vasi on.

The   key   aud it   ques tio n  at   the  Co mmi s sio n  le ve l  was   wh et h er 
there is a sound regulator y framework in the fight against VAT 
eva sio n unde r c us to ms p ro cedure  4 2 .

At the Member State level the audit assessed whether national 
c u s t o m s   a n d   t a x   a u t h o r i t i e s   c a r r y   o u t   e f f e c t i v e   c o n t r o l s   i n 
resp ec t o f this  procedu re.

AUDIT	SCOPE	AND	APP ROAC H

Th e   Co u r t   d e s i gn e d   a   co nt ro l   m o d e l   ( A n n ex   I I )   b a s e d   l a rg e l y 
o n   t h e   r e c o m m e n d a t i o n s   o f   b e s t   p r a c t i c e   p r o d u c e d   b y   t h e 
Fiscalis Projec t Group No 29 4. The implementation of this con-
tro l   mo del   wou l d  hel p   en su re  th e   soun d  m ana ge me nt   of   th i s 
VAT   e xe m p t i o n .   T h e   C o u r t   c a r r i e d   o u t   a n   a s s e s s m e n t   o f   t h e 
r e g u l a t o r y   f r a m e w o r k   d r a w n   u p   b y   t h e   C o m m i s s i o n .   I t   a l s o 
assessed the operation of the control approaches in seven se -
lec ted M ember States 5 against the EC A’s control model. These 
Member States repor ted a combined taxable amount of goods 
im p or ted und er cu stoms  p rocedure  4 2  in  2 0 0 9  of ove r  4 0  bi l-
l i o n   e u ro   a n d   a cc o u n te d   fo r   6 8  %   o f   t h e   v a l u e   o f   E U   i m p o r t s 
und er t his p ro cedu re in 2009 .

T h i s   a s s e s s m e n t   w a s   d o n e   b y   t e s t i n g   a   r a n d o m   s a m p l e   o f   a 
minimum of 30 impor ts per M ember State (219 in total) made 
in  2009 u nder c us to ms p ro cedure 4 2 . 

Th e   Co u r t   a l s o   s o u g ht   co n f i r m at i o n   w h e t h e r  VAT   wa s   i n d e e d 
charged in the 21 M ember States of destination 6 of the goods 
im p or ted in t he  s am p le.

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

OBSERVATIONS

13

12.  

13.  

THE	COMM ISSION	HAS	P RO POS ED	
IMPROVEMENTS	TO	THE	EU	REGU L ATORY	
FR AME WORK	BUT	MORE	NEED S	TO	BE	DO NE

The Commission has 7 as a specific objec tive ‘to create a frame -
wo r k  fo r  EU  t ax  adminis t ration s  to  en abl e  t he m  to  ef fi cie ntly 
c o m b a t   f r a u d   i n   o rd e r   t o   i n c re a s e   t h e i r   re ve n u e’.   I n   t h e   c u s-
toms area, one of its specific objec tives is ‘ to ensure effec tive 
management of the Customs Union for the benefit of European 
citize ns,  eco nomic  op erato rs an d custom s adm in i st rat ion s  by 
e n s u r i n g   u n i fo r m   a p p l i c at i o n   o f   l e gi s l at i o n ,   e q u a l   t re at m e nt 
o f   e c o n o m i c   o p e r a t o r s   a n d   b y   g re a t e r   c o m p u t e r i s a t i o n’.  T h e 
Co u r t   reviewed  th e  ac t ivit ies  und er take n   by  t h e  Com mis s ion 
in order to achieve these objec tives in the contex t of customs 
pro cedu re 42.

Th e   Co m m i s s i o n   h a s   e n co u r a g e d   t h e   e xc h a n g e   o f   b e s t   p r a c-
t i c e s   f o r   c o n t r o l   o f   t h i s   p r o c e d u r e   u s i n g   t h e   a v a i l a b l e   f o r a 8 
and proposed to improve the legislative framewor k by initiat-
i n g   t h e   a m e n d m e n t   t o   A r t i c l e   1 4 3   o f   t h e  VAT   D i r e c t i v e.  T h i s 
amendment makes the communication of the VAT ID. Nos. and 
t h e   e v i d e n c e   o f   t h e   i n t e n d e d   t r a n s p o r t   t o   a n o t h e r   M e m b e r 
State, w hic h are ess ential  for  th e m an age me nt of  th is  VAT  ex-
e m p t i o n   by   c u s to m s   a u t h o r i t i e s,   co m p u l s o r y   f ro m   1   J a n u a r y 
2 0 1 1 9.   H o w e ve r,   t h e   re q u i r e m e n t s   o f   t h e   a m e n d e d   d i r e c t i v e 
we re   a l re a d y   i n   fo r c e   i n   2 0 0 9   i n   t h e   s e ve n   s e l e c t e d   M e m b e r 
States  un der n at io nal  c u sto ms r ule s.

TH E	RE GUL ATORY	F R A ME WORK	DOES	NOT	 	
EN SUR E	T HE	UNIF O RM	AN D	SOU ND	MAN AGE ME NT	 	
OF	T HIS	VAT	EX EMP T IO N	BY	M EM BE R	STATE S’	C USTOMS	
AUT HO RIT IES	…

14.  

Th e   c u s to m s   a u t h o r i t i e s   o f   t h e   2 7   M e m b e r   S t ate s   s h o u l d   a c t 
as ‘if they were one’ and economic operators impor ting goods 
u n d e r   c u s t o m s   p ro c e d u re   4 2   s h o u l d   b e   g r a n t e d   e q u a l   t re a t -
ment  no mat ter w here t he impor t  ta k es  place.

7   DG TAXUD’s activity statement 
of operational expenditure 

accompanying the preliminary 

draft budget for 2010.

8  Fiscalis experts groups, SCAC, 
Customs Code Committee-Data 

Integration and Harmonisation 

section and ATFS.

9  Council Directive 2009/69/
EC of 25 June 2009 amending 

Directive 2006/112/EC on the 

common system of value added 

tax as regards tax evasion linked 

to imports (OJ L 175, 4.7.2009,  

p. 12).

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10  Commission Regulation 
(EEC) No 2454/93 of 2 July 1993 

laying down provisions for the 

implementation of Council 

Regulation (EEC) No 2913/92 

establishing the Community 

Customs Code (OJ L 253, 

11.10.1993, p. 1).

15.   C u s t o m s   l e g i s l a t i o n 1 0  h a s   n o t   b e e n   a m e n d e d   t o   r e f l e c t   t h e 
n e w   re q u i re m e nt s   o f   t h e  VAT   D i re c t i ve.  Th u s   t h e   u n i fo r m   i m -
plementation by customs authorities of the communication of 
the  infor mat io n in p aragrap h 1 3  is  n ot  en sure d.

16.  

17.  

The boxes of the customs impor t declaration (usually k nown as 
the SAD) which the impor ter must fill in to indicate the VAT ID. 
Nos above are used differently from M ember State to M ember 
S t a t e.  Th i s   l a c k   o f   s t a n d a rd   t re a t m e n t   c a u s e s   a n   a d m i n i s t r a -
t i v e   b u r d e n   fo r   a n   i m p o r t e r   w h o   o p e r a t e s   i n   m o r e   t h a n   o n e 
M e m b e r   S t a t e .   T h e   i n d i c a t i o n   o f   t h e   c o u n t r y   o f   d e s t i n a t i o n 
code and other evidence of the intended transpor t to another 
M e mb er St ate  is  no t requ ired by  th e  CC IP.

Th e  VAT   D i re c t i ve   re q u i re s   t h e   i m p o r te r   to   co m m u n i c a te   t h e 
VAT ID Nos at the moment of impor t as a condition for the ex-
emption. However customs legislation does not require these 
to be communicated at that moment when the local clearance 
procedure is used. Under this simplified procedure the VAT ID 
Nos.  are  o nl y  comm un icated  at  a  late r   st ag e  wh en   th e   g oods 
have b een  re le ased.

…	AN D	T HE	RE GU L ATO RY	F R AM E WORK	DOES	NOT	
ENS URE	T HAT	T HE	INF O RMATI ON	CONC ERNIN G	THE SE	
TR A NS AC T IO NS	IS	ALWAYS	MADE	AVAIL ABL E	TO	THE	TAX	
AUT HOR ITI ES	IN	T HE	MEM BE R	STATE	OF	DES TINATION

18.  

Swif t transmission of information to the tax authorities of the 
Member State of destination concerning intra-Community sup -
plies following impor ts under customs procedure 42 is essen-
tial  for  the e ar l y d etec tio n o f VAT  evas ion . 

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19.  

20.  

21.  

The Co un cil,  at  t he in it iative of t h e Com mi ss ion ,  has  re duced 
the repor ting per iod of the recapitulative statements and the 
time  l imit  fo r exc hanging  infor m ati on t he re of  be t we en  M e m -
ber States. As a result, since the beginning of 2010, recapitula-
tive statements should be submitted monthly 11 and a deadline 
of one month for their exchange between Member States 12 has 
b e e n   s e t .   T h i s   h a s   b e e n   i m p l e m e n t e d   i n   s i x   o f   t h e   M e m b e r 
States audited. However the Commission has not been able to 
avo i d   t h e   s i t u a t i o n   fo u n d   b y   t h e   Co u r t   i n   D e n m a r k   w h e re b y 
t r a d e r s   a re   s t i l l   l o d g i n g  VAT   re c a p i t u l a t i ve   s t a t e m e n t s   q u a r -
ter ly  in 2011.

Th e   Co m m i s s i o n’s   p ro p o s e d   a m e n d m e nt   to   t h e  VAT   D i re c t i ve 
to hold the trader jointly and severally liable for the VAT losses 
c a u s e d   w h e n   t h e   l at te r   f a i l s   to   s u b m i t   t h e  VAT   re c a p i t u l at i ve 
s t a t e m e n t   h a s   n o t   y e t   b e e n   t a k e n   u p   b y   t h e   C o u n c i l .   N o n -
s u b m i s s i o n   o f   t h e   re c a p i t u l a t i v e   s t a t e m e n t   p r e ve n t s   t h e   i n -
fo r m a t i o n   c o n c e r n i n g   t h e s e   t r a n s a c t i o n s   f r o m   r e a c h i n g   t h e 
M e mb er St ate  of des tinat ion . 

I n the Cour t ’s view, when the customs authorities of the Mem-
b e r   S t a t e   o f   i m p o r t a t i o n   c o n s i d e r   a n   i m p o r t   t o   b e   p a r t i c u -
lar ly r isk y 13, they should send the VAT ID. Nos and VAT taxable 
amount immediately after the impor tation takes place direc tly 
t o   t h e   t a x   a u t h o r i t i e s   i n   t h e   M e m b e r   S t a t e   o f   d e s t i n a t i o n ,   a 
for m  o f ‘ear ly  war nin g system’.

22.   No  s uc h syste m concer ning impor ts  un de r  th i s proce du re ex-
ist s, des pite t he fac t that t he Coun c il  re ques ted th e  Comm is -
sio n  to   co me  fo r ward  wit h  the  n ece s sar y   le gis lati ve  propos al 
by the end of  20 10 14. 

23.  

Th e   Co m m i s s i o n   i s s u e d   g u i d e l i n e s   to   c u s to m s   a u t h o r i t i e s   o n 
t h e   a u d i t   o f   t h e s e   i m p o r t s.  T h e s e   g u i d e l i n e s   a d v i s e   t h e m   t o 
use ‘mutual assistance’ in order to request fur ther information 
from other M ember States instead of using the administrative 
coo p erat io n ar rangements in  force 15. 

11  Pursuant to Article 3 of 
Council Directive 2008/117/

EC of 16 December 2008 

amending Directive 2006/112/

EC on the common system of 

value added tax to combat tax 

evasion connected with intra-

Community transactions  

(OJ L 14, 20.1.2009, p. 7).

12  Council Regulation (EC) No 
37/2009 of 16 December 2008 

amending Regulation (EC) No 

1798/2003 on administrative 

cooperation in the field of value 

added tax, in order to combat 

tax evasion connected with 

intra-Community transactions 

(OJ L 14, 20.1.2009, p. 1).

13  For example imports made by 
a suspicious trader or sensitive 

goods.

14  Council’s second statement 
in Annex II to Council doc. 

10430/09: ‘The Council invites 

the Commission to promptly 

examine the setting up of 

an automatic exchange 

between Member States of 

the information collected in 

accordance with Articles 143(2) 

(a) and (b) of Directive 2006/112/

EC and to come forward, when 

appropriate, with the necessary 

legislative proposals by the end 

of 2010’.

15  Council Regulation (EC) 
No 1798/2003.

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16  Spain and Slovenia.

17  Pursuant to Council 
Regulation (EC) No 515/97 

of 13 March 1997 on mutual 

assistance between the 

administrative authorities of the 

Member States and cooperation 

between the latter and the 

Commission to ensure the 

correct application of the law on 

customs and agricultural matters 

(OJ L 82, 22.3.1997, p. 1).

24.   As a result t wo of the audited M ember State customs author i -
ties 16 sent mutual assistance requests 17 to their counterpar ts in 
the Member State of final destination when they had concerns 
a b o u t   t h e   r e a l i t y   o f   t h e   t r a n s p o r t   o f   g o o d s   t o   t h e   l a t t e r.   I n 
parallel, they should have used VAT administrative cooperation 
a r r a n g e m e n t s.   U n d e r   m u t u a l   a s s i s t a n c e   c u s t o m s   a u t h o r i t i e s 
do not necessarily send the infor mation to the tax author ities 
and so there is the risk that the latter are not aware that goods 
remain u ntaxed in their ter r itor y.

CONTROL	IN	ME MBER	S TATES	I S	DEF I C I EN T	…

25.  

T h e   p r e v i o u s   s e c t i o n   s h o w s   t h a t   t h e   r e g u l a t o r y   f r a m e w o r k 
n e e d s   t o   b e   i m p ro v e d   f u r t h e r   a s   i t   d i d   n o t   f u l l y   e n s u r e   t h a t 
the  r ight  infor matio n is  made avai lable  to th e  ta x auth or it ie s 
in the Member State of destination. M ember States are prima -
r ily responsible for the prevention, deter rence, detec tion and 
cor rec t io n o f VAT  fraud. I n th e ca se  of  cus toms  proced ure 4 2 , 
t h e   a c t i o n s   o f   o n e   M e m b e r   S t a te   c a n   h ave   a   d i re c t   e f fe c t   o n 
the  VAT received in an other M embe r  State. 

26.  

The following sec tion describes how the seven Member States 
who s e  ar range ment s   fo r  custom s  proce dure   4 2   t he   Cour t  au-
dited have fulfilled their responsibilities. The obser vations are 
bas ed  on:

(a )  a comparison between their arrangements and the Cour t ’s 

co nt ro l  mo del  (see A n nex  III) ;

(b)  a n   a n a l ys i s   o f   M e m b e r   S t ate s’  re s p e c t   o f   t h e   s u b s t a nt i ve 

req uireme nt s of  t his p ro cedure  (s ee  A nn ex  IV) ;

(c) 

infor matio n  ob tained  f rom  2 1   M e mber   St ates   of   de st in a -
tion (see footnote 6) about whether VAT had been charged 
in t heir ter r itor y (s ee A n nex  V) .

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27.  

28.  

29.  

CUSTO MS	AUT HOR ITI ES	IN	THE	AU DITE D	M EM BE R	STATE S	
DO	NOT	ENS URE	T HE	VALID I T Y	AND	COMP LE TENE SS	
OF	DATA	AN D	T HE	F ULF IL MENT	OF	OTHE R	E XE M PTION	
CON DIT IONS

i m p o r t e r s  s h o u l d  p r o v i d e  v a l i d  v a t  i d.  n o s  t o  c u s t o m s 
a u t h o r i t i e s  a t  t h e  m o m e n t  o f  i m p o r t 

I f   VAT   I D.   N o s   a r e   n o t   p r o v i d e d ,   c u s t o m s   a u t h o r i t i e s   c a n n o t 
make   t he   t ax  aut ho r ities  in   t he  M em be r   State   of   im por tati on 
aw a re   o f   i m p o r t s   u n d e r   t h i s   p ro ce d u re.   I f   t h e y   a re   n o t   va l i d, 
the infor mation concer ning these transac tions will not be ac -
ce p te d   by  V I E S   a n d   t h u s   w i l l   n o t   re a c h   t h e   t a x   a u t h o r i t i e s   i n 
the  M e mb er St ate o f destin ation.

I n   2 0 0 9 ,   t h e   i n d i c a t i o n   o f   t h e s e   VAT   I D.   N o s   i n   t h e   S A D   w a s 
a l r e a d y   c o m p u l s o r y   i n   t h e   s e v e n   s e l e c t e d   M e m b e r   S t a t e s   i n 
a c c o r d a n c e   w i t h   t h e i r   n a t i o n a l   c u s t o m s   r u l e s .   H o w e v e r,   t h e 
i m p o r te r ’s  VAT   I D.   N o   wa s   i n   m a ny   c a s e s   n o t   i n d i c ate d   i n   t h e 
S A D   i n   S p a i n ,   Fr a n c e   a n d   A u s t r i a ,   a n d   t h e   VAT   I D.   N o   o f   t h e 
f i n a l   re c i p i e n t   o f   t h e   g o o d s   w a s   n o t   s h o w n   i n   t h e   S A D   i n   a l l 
the   imp or t s  sel ec ted  in  t he  sampl e  in   B e lgium,   D en mar k   an d 
Fran ce  (se e po ints  1 and 3  of A nn ex  III) .

T h e   c u s t o m s   e l e c t r o n i c   c l e a r a n c e   s y s t e m   p e r fo r m s   a n   a u t o -
mat ic ver if ic at ion  in V IE S o f the vali di t y  of  th e  impor te r ’s VAT 
I D.   N o   i n   D e n m a r k   a n d   S l o v e n i a   o n l y.   T h e   s a m e   v e r i f i c a t i o n 
i s   o n l y   m a d e   i n   re s p e c t   o f   t h e   f i n a l   re c i p i e n t ’s  VAT   I D.   N o.   i n 
Spain. However, this verification is not per formed in any of the 
vis ited   M emb er  St ates   b efore  th e   g oods   are   re le ase d  for   f re e 
circulation when they are impor ted under the Local Clearance 
Pro ced ure.   I n  B el giu m  it   was  poss ibl e  to  im por t   g oods  und er 
customs procedure 42 showing a dummy VAT ID. No in the SAD 
(see  p oints 2,  3 and 4 o f A n nex  III) .

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18  Based on Article 143(1)(d) of 
the VAT Directive.

19  Judgment of the Court of 
27 September 2007 in Case 

C-409/04 Teleos and Others 

[2007] ECR I -7797, paragraph 42; 

Judgment of the Court of  

27 September 2007 in  

Case C-184/05 Twoh 

International [2007] ECR I-7897, 

paragraph 23; Judgment of 

the Court of 18 November 

2010 in Case C-84/09 X [2010] 

ECR I-0000, paragraph 27; 

Judgment of the Court of 

7 December 2010 in Case 

C-285/09 Generalbundesanwalt 

beim Bundesgerichtshof, 

paragraph 41; and Judgment of 

the Court of 16 December 2010 

in Case C-430/09 Euro Tyre 

Holding BV, paragraph 29, 

on the application of the first 

subparagraph of Article 28c(A)(a) 

of the Sixth Directive, which has 

been replaced by Article 138 (1) 

of the VAT Directive in force.

30.   As   a   re s u l t ,   c a s e s   i n   w h i c h   t h e   i m p o r te r ’s  VAT   I D.   N o   wa s   n o t 
v a l i d   a t   t h e   t i m e   o f   t h e   i m p o r t   w e r e   f o u n d   i n   1 7   o f   t h e   2 1 9 
impor ts in the sample. These impor ts were made in Spain and 
Aust r ia   ( see  p o int   1  o f  A nn ex  IV) . Th e  fin al  re cipient ’s VAT  ID. 
N o   w a s   n o t   v a l i d   a t   t h e   t i m e   o f   t h e   i m p o r t   i n   a n o t h e r   1 2   o f 
the 219 impor ts in the sample. These impor ts were in Belgium, 
D e nmar k ,  France and Aus tr ia (s ee  poi nt  2  of  A nn ex  IV) .

t h e  g o o d s  s h o u l d  p hys i c a l l y  l e ave  t h e  t e r r i t o r y  o f  t h e 
i m p o r t i n g  m e m b e r  s t a t e

31.   At  t he mo me nt  of imp o r tat ion  it  must  alre ady  be  cer tai n t hat 
the goods are intended to be transpor ted from the impor ting 
M e mb er  St ate   to  anot her  M ember   St ate.  I n   t he   Cour t ’s  v ie w 18 
the goods should be transpor ted af ter the impor t without be -
i n g   p ro ce s s e d   i nto   g o o d s   o f   a   d i f fe re nt   n at u re.  Th e   e v i d e n ce 
t h at   t h e   i m p o r te d   g o o d s   a re   i nte n d e d   to   b e   t ra n s p o r te d   ( fo r 
ex a m p l e   t h e   t ra n s p o r t   d o c u m e nt   n u m b e r )   s h o u l d   b e   p rov i d-
ed to  c ustom s au thor ities  by  th e i mpor te r  upon  re ques t.  Thi s 
could be ensured by referring to this evidence in the SAD and 
by t he in dicatio n o f the cou ntr y  of  de st in at ion  code  th erei n.

32.  

The   SA D  was   accep ted  and   yet  cont ai n ed   n o  refe re n ce   to  th e 
evide nce  o f  t he  intended  t ran spor t  to  a not h er   M em be r   St ate 
i n   2 0 5   o u t   o f   t h e   2 1 9   i m p o r t s   i n   t h e   s a m p l e .   E v e n   i n   S p a i n , 
whe re it  is o bl igator y to  record in  t h e S AD t h e n umber  of  t h e 
tra nsp o r t   do c ument   to   th e  M em ber   St ate  of   d es ti n ati on,   t hi s 
wa s  no t  do ne   in  20  out  o f  t he  3 0   impor ts   audi te d  ( s ee  poi nts 
5 a nd  6 of A n nex  III).

33.   As   rul ed   by  t he  Cour t   o f  Jus tice 19,  th e  exem pt io n  f rom  VAT  of 
the intra-Community supply of goods becomes applicable only 
w h e n   t h e   i m p o r te r   d e m o n s t rate s   t h at   t h e   g o o d s   h ave   p hys i -
cal l y l ef t  the imp o r ting M ember   St ate.

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34.   No evidence was provided by the impor ter that the goods have 
p h y s i c a l l y   l e f t   t h e   t e r r i t o r y   o f   t h e   i m p o r t i n g   M e m b e r   S t a t e 
in   36  o ut   o f  the   21 9  imp o r t s  of  th e  s ampl e. Thi s  was   par t icu -
la r l y t he  cas e in B el giu m (s ee poi nt 3  of  A nn ex IV) . M oreover, 
i n   t w o   c a s e s   i n   B e l g i u m   a n d   o n e   c a s e   i n   S p a i n   t h e   d e c l a r e d 
goods were car par ts while the goods supplied to the Member 
State of destination were finished cars. I n such cases it is ver y 
d i f f i c u l t   to   e n s u re   t h at   a l l   t h e   i m p o r te d   g o o d s   h ave   a c t u a l l y 
b e e n   t r a n s p o r t e d   t o   a n o t h e r   M e m b e r   S t a t e   ( S e e   p o i n t   4   o f 
A nn ex   IV).

20  Belgium, Denmark, Spain, 
Slovenia and Sweden.

ex  p o s t  c h e c k s  wo u l d  f u r t h e r  e n s u r e  t h a t  exe m p t i o n 
co n d i t i o n s  a r e  f u l f i l l e d

35.   R a n d o m   a n d   r i s k - b a s e d   e x   p o s t   c h e c k s   o n   t h e   f u l f i l m e n t   o f 
t h e s e   a n d   o t h e r   e xe m p t i o n   c o n d i t i o n s   ( s e e   p o i n t s   1   t o   5   o f 
Annex IV) help ensure that payment of VAT is not evaded. Such 
c h e c k s   we re   a b s e n t   i n   B e l g i u m   a n d   D e n m a r k   ( s e e   p o i n t   9   o f 
A nn ex   III).

ES SEN TI AL	INF O RMAT ION	IS	NOT	MADE	AVAIL ABL E

d a t a  o n  i m p o r t s  u n d e r  c u s t o m s  p r o ce d u r e  42  s h o u l d  b e 
m a d e  av a i l a b l e  t o  t h e  t a x  a u t h o r i t i e s  o f  t h e  m e m b e r  s t a t e 
o f  i m p o r t a t i o n

36.  

Th e   re l e va nt   i n fo r m at i o n   re co rd e d   i n   t h e   c u s to m s   e l e c t ro n i c 
clearance system should, in the Cour t ’s view, be automatically 
s e n t   t o   t h e   t a x   a u t h o r i t i e s   i n   t h e   M e m b e r   S t a t e   o f   i m p o r t a -
t i o n .   A l l   t h e   i m p o r t s   s e l e c te d   i n   t h e   s a m p l e   we re   n o t i f i e d   to 
t a x   a u t h o r i t i e s   i n   f i ve 2 0  o f   t h e   s e ve n   M e m b e r   S t a t e s   a u d i t e d 
b u t   n o t   i n   Au s t r i a   a n d,   i n   p a r t i c u l a r,   Fr a n c e   ( s e e   p o i n t   1 0   o f 
Annex III). However the usefulness of the data transmitted has 
ser io us  limit atio ns  in B el giu m an d Swe de n.

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37.  

38.  

39.  

40.  

Th e  Cour t   no ted  that   in  B el gium   th e re  are   cas es   i n  w hic h   t he 
SAD only records one item for goods destined for onward ship -
m e nt   to   a   n u m b e r   o f   o t h e r   M e m b e r   St ate s,   w i t h o u t   b re a k i n g 
dow n  th e  amo unt   rel at in g  to  each   of  th em . Th is   pre ve nts   th e 
tax authorities from per forming a meaningful comparison be -
t ween the data received from the customs authorities and the 
VAT  recap itu l ative statement. 

21  Cf. Article 86 of the VAT 
Directive.

I n   S w e d e n   t a x   a u t h o r i t i e s   w e r e   n o t   a b l e   t o   i d e n t i f y   t h e   t a x 
re p re s e n t a t i ve’s  VAT   I D.   N o   i n   t h e   i n fo r m a t i o n   re c e i ve d   f ro m 
t h e   c u s to m s   a u t h o r i t i e s.   H e re   to o,   a   co m p a r a t i ve   a n a l ys i s   o f 
customs data with the VAT recapitulative statement cannot be 
pe r fo r med. 

t h e  i n t ra- co m m u n i t y  s u p p l y  s h o u l d  b e  r e p o r t e d  i n  t h e 
v a t  r e c a p i t u l a t i ve  s t a t e m e n t  a n d  t h e  i n fo r m a t i o n  m a d e 
av a i l a b l e  t o  t h e  t a x  a u t h o r i t i e s  o f  t h e  m e m b e r  s t a t e  o f 
d e s t i n a t i o n  v i a  v i e s

Th e   t a x   a u t h o r i t i e s   s h o u l d   e n s u re   t h a t   c o m p l e te,   t i m e l y   a n d 
a c c u r a t e   i n fo r m a t i o n   c o n c e r n i n g   t h e   i n t r a - C o m m u n i t y   s u p -
p l i e s   o r   t r a n s fe r s   fo l l o w i n g   i m p o r t s   u n d e r   t h i s   p r o c e d u r e   i s 
made available to the Member State of destination using VIES.

I n Austr ia, Slovenia and Sweden traders systematically repor t 
t h e   s t a t i s t i c a l   v a l u e   o r   t h e   c u s t o m s   v a l u e   o f   t h e   i m p o r t   p re -
ce ding   the   int ra- Comm un i t y  su ppl y   in   t h e VAT   re c a pit ulat ive 
statement. These values are lower than the VAT taxable amount 
o f   t h e   i m p o r t   a s   t h e   l a t t e r   i n c l u d e s   o t h e r   c h a r g e s   s u c h   a s 
t r a n s p o r t   c o s t s ,   c u s t o m s   a n d   e xc i s e   d u t i e s 2 1.  T h e r e fo r e ,   u n -
d e r s t a t e d   a m o u n t s   a re   t r a n s m i t t e d   i n  V I E S   t o   o t h e r   M e m b e r 
States  w ho are  no t ab l e to  asses s  th e  cor rec t  VAT ba se.

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22  In contravention of Spanish 
tax law.

23  Cf. Article 19 of Council 
Regulation (EC) No 1798/2003.

24  Pursuant to Article 3 of 
Commission Regulation (EC) 

No 1925/2004 of 29 October 

2004 laying down detailed 

rules for implementing certain 

provisions of Council Regulation 

(EC) No 1798/2003 concerning 

administrative cooperation in 

the field of value added tax  

(OJ L 331, 5.11.2004, p. 13).

41.  

42.  

43.  

44.  

w h e n  i n f o r m a t i o n  co n ce r n i n g  t ra n s a c t i o n s  c a n n o t  b e 
t ra n s m i t t e d  t h r o u g h  v i e s,  i t  o u g h t  t o  b e  exc h a n g e d  b y 
o t h e r  m e a n s

I n   S p a i n   1 5   o u t   o f   t h e   3 0   i t e m s   s e l e c t e d   i n   t h e   s a m p l e   we r e 
im p or ted by  com p an ies es tablish ed  i n an oth e r  M e mbe r  State 
not identified for VAT purposes 22 and who had not appointed a 
tax representative. The intra- Communit y supplies or transfers 
fo l l ow i n g   s u c h   i m p o r t s   co u l d   t h e re fo re   n o t   b e   re p o r te d   i n   a 
VAT  recap itu l ative statement/V IE S .

T h e   S p a n i s h   t a x   a u t h o r i t i e s   d i d   n o t   i n f o r m   o t h e r   M e m b e r 
S t ate s   u s i n g  ‘e xc h a n g e   o f   i n fo r m at i o n   w i t h o u t   p r i o r   re q u e s t ’ 
b e c a u s e   s u c h   exc h a n g e s   a re   e i t h e r   n o t   co m p u l s o r y 2 3  o r   h ave 
n o t   b e e n   s p e c i f i c a l l y   fo re s e e n   fo r   t ra n s a c t i o n s   fo l l ow i n g   i m -
por ts  u nde r customs  p rocedure 4 2 24.

CROS S -CHECK ING	O F	KE Y	DATA	I S	NOT	C ARRI E D	OUT	I N	
ALL	C A SE S

I n   o rder  to  de tec t   c ases  o f  non- s ubm iss i on   of  th e  re c apit ula -
tive statement and to ensure its completeness, tax authorities 
could implement a systematic automated comparison between 
t h e  VAT   t a x a b l e   a m o u n t   o f   i m p o r t s   re co rd e d   by   t h e   c u s to m s 
aut ho r it ies w it h th e amount of t he  int ra- Commun it y s uppl ie s 
o r   t r a n s f e r s   d e c l a r e d   i n   t h e   r e c a p i t u l a t i v e   s t a t e m e n t .   T h e 
a m o u nt s   i n   t h e   l at te r   s h o u l d   b e   at   l e a s t   e q u a l   to   t h e   fo r m e r. 
I f th is is  no t t he c ase a fur ther  inve s ti gat ion  would be  n ece s -
sar y,  hav ing  re g ard to  the r is k fac tor s  ar is in g  in  t h e cas e. 

Slovenia is the only M ember State which has implemented an 
effec tive reconciliation. I t uses IT tools to automatically com -
pare customs data with data in the relevant VAT recapitulative 
statements. Differences are highlighted and assigned to a tax 
i n s p e c t o r   fo r   f u r t h e r   i nve s t i g a t i o n .   H o we ve r,   t h i s   t a k e s   i n t o 
account the statistical amount and not the VAT taxable amount 
(see  p oint 11 o f A n nex  III). 

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25  The VAT exemption conditions 
were not fulfilled in more than 

10 % of the items selected in the 

sample of Belgium, Spain and 

Sweden (see Annex IV, points 1 

to 5).

26  An extrapolation based upon 
the rates of error found by the 

Court in the sample of imports 

audited in each of the seven 

Member States.

27  Using the average VAT rate 
(18,67 %) applicable in the 

Member States of importation 

if all the goods imported in the 

sample remain there.

28  The information reported in 
the VAT recapitulative statement 

was not complete in more than 

10 % of the items selected in 

the sample of Belgium, Spain, 

Austria and Slovenia (see 

Annex IV, point 7).

45.  

46.  

47.  

I n   t h e   C o u r t ’s   v i e w   t a x   a u t h o r i t i e s   i n   t h e   M e m b e r   S t a t e   o f 
d e s t i n at i o n   s h o u l d   c ro s s - c h e c k   t h e   d at a   re ce i ve d   f ro m   o t h e r 
M e mb er  State s  via V I ES  w ith   the VAT  ret ur n   submi tte d  by  t he 
recip ient o f th e go od s. 

I n 10 cases of the sample the intra- Communit y supply was re -
por ted to  th e M emb er State of  de st in at ion  vi a V IE S but th e se 
Member States of destination informed the Cour t that the sub -
s e q u e nt   i nt ra - Co m m u n i t y   a cq u i s i t i o n   h a d   n o t   b e e n   re p o r te d 
b y   t h e   t r a d e r   i n   h i s   VAT   r e t u r n .   A   c r o s s - c h e c k   b e t w e e n   V I E S 
an d  t he VAT   retu r n  wo uld   have  ale r ted   th e  M embe r   St ates   to 
the  dis cre pan c y.

…	AND	CREATES	LO SSE S	I N	VAT	CO LLEC TI ON

E r ro r s   d e te c te d   i n   t h e   te s t s   l i s te d   i n   A n n ex   I V   c a r r i e d   o u t   by 
t h e   Co u r t   o n   t h e   s a m p l e   o f   2 1 9   i m p o r t s   m a d e   i n   2 0 0 9   e i t h e r 
have a direc t financial impac t in the Member State of impor ta-
tion or a potential impac t in the VAT collec tion of the Member 
State of destination. The ex trapolated amount of the losses is 
approximately 2 200 million euro, of which 1 800 million were 
i n c u r re d   i n   t h e   s e ve n   a u d i t e d   M e m b e r   S t a t e s 2 5  a n d   4 0 0   m i l -
lio n  in  the  21   M em b er  States   of  de s ti nat ion   of   t he   g oods   im-
por ted in the sample 26. I n the seven Member States this repre -
sents 29 % of the VAT theoretically applicable 27 on the taxable 
am o unt  o f  al l  th e  imp o r t s   made   un de r   c us tom s  proce dure   4 2 
in  2009.

48.  

The ex trapolated loss of 400 million euro arose in the Member 
States  of  d est inat ion  fo r t wo reas on s:

 ο I n c o m p l e t e   i n f o r m a t i o n   w a s   r e c e i v e d   f r o m   t h e   M e m b e r 
State of impor tation 28. This accounts for more than 150 mil-
l ion  euro  o f the  ex trap ol ated loss,  and

 ο the infor mation received from the M ember State of impor -
tation was not properly used: it was not cross- checked with 
the recipients’ VAT returns. This accounts for approximately 
250  mil l ion eu ro of th e ex trapolate d  los s.

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

49.  

Th e   i m p o r t s   o f   t h e   s a m p l e   s e l e c te d   i n   t h e   s e ve n   M e m b e r 
States of impor tation should have been followed by intra-
Communit y supplies or transfers to 21 Member States. The 
Cour t requested these 21 M ember States of destination to 
con fir m  t hat  the goods  imp or ted  we re  in de e d s uppl ied  or 
t r a n s f e r r e d   t o   a   s e c o n d   M e m b e r   S t a t e   a n d   t h a t   t h e   c o r -
re s p o n d i n g   i n t r a - Co m m u n i t y   a c q u i s i t i o n s   h ave   b e e n   d e -
c l a r e d   t o   t h e   t a x   a u t h o r i t i e s   b y   t h e   r e s p e c t i v e   r e c i p i e n t 
of the goods. Out of the 213 items 29 sent for confir mation, 
r e p l i e s   w e r e   r e c e i v e d   i n   r e s p e c t   o f   1 7 5 3 0.   I n   2 0   ( 1 1  % )   o f 
these it was repor ted that VAT had not been charged in the 
M e mb er St ate o f destin atio n. Fur th e r  de tai ls  are  provi de d 
in  A n nex  V.

23

29  Out of the total of 219 goods 
imported, 213 items were sent 

for confirmation. In six cases the 

information available on the 

spot did not allow the follow-up 

of the physical flow of the goods.

30  Germany refused to reply 
to the Court’s request. The 

Court notes that on 25 May 

2011 the Advocate General 

in Case C-539/09 European 

Commission v Federal Republic 

of Germany has highlighted the 

close connection between the 

Member States’ VAT revenue 

and the Union’s revenue from 

own resources accruing from 

VAT and that the Court of 

Auditors has the power to review 

administrative cooperation in 

the field of VAT.

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

CONCLUSIONS AND 
RECOMMENDATIONS

24

50.  

51.  

52.  

The Cour t found that the Commission has improved the regula-
tor y framewor k but that more needs to be done. I t also found 
th at  co nt rol  in M emb er St ates  is d ef ici e nt.

The application of customs procedure 42 has led to significant 
los se s. Based on  res ul ts  o f t he sampl e te st s,  th e ex t rapol ated 
a m o u n t   o f   t h e   l o s s e s   i n   2 0 0 9   i s   a p p r ox i m a t e l y   a r o u n d   2 2 0 0 
million euro, of which 1 800 million were incurred in the seven 
au dited  M emb er St ates  and 40 0  mi llio n in  t h e M e m ber  St ate s 
of  des tinat io n of  th e goo ds  impor te d in  t h e s ample.  Th i s re p -
resents 29 % of the VAT theoretically applicable on the taxable 
amo u nt   o f  a ll   t he  imp o r ts   made   un de r   c us tom s  proce dure   4 2 
in 20 09 in t hese s even EU M em be r  St ates  (s e e  paragraph  4 7 ) .

The regulator y framework allows for the collec tion of key data 
for  t he  manag ement  of   th is  VAT  exem pti on   at   t he   ti me   of   im-
p o r t a t i o n .   H owe ve r   f u r t h e r   e f fo r t   s h o u l d   b e   m a d e   t o   e n s u re 
the necessar y degree of unifor mit y in the management of the 
g r a n t i n g   o f   t h i s   VAT   e x e m p t i o n   b y   c u s t o m s   a u t h o r i t i e s   b e -
t we en M e mbe r St ates  in o rder  to ac h i eve  th e  goa l to ‘a c t as  i f 
they were one’. The differences can be exploited by fraudsters 
(se e p aragraph s 14  to  17 ).

R E C O M M E N D AT I O N 	 1

T h e   Co mm issi o n  sh o ul d  am e n d  th e  CCI P   to   imp l e m e nt  th e 
co mp uls o r y an d uni f o r m co mmuni c ati o n at th e tim e of im -
p o r t ati o n  o f  th e  re l ev ant  VAT  I D.   N os ,  th e  re f e re n ce   to  th e 
e v i d e n c e   o f   t h e   i n t e n d e d   t r a n s p o r t   t o   t h e   M e m b e r   St a t e 
o f   f i n a l   d e s t i n ati o n ,   th e   i d e nti f i c ati o n   o f   t h e   l at te r   a n d   o f 
t h e   VAT   t a x a b l e   a m o u n t   o f   t h e   i m p o r t .   T h i s   s h o u l d   a p p l y 
e quall y to Lo c a l Cl e ar an ce  Pro ce dure s .

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

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53.  

The introduc tion of joint and several liability for not repor ting 
in fo r mat ion  re lating  to intra- Comm un i t y  t ran sac t ion s fol low-
ing impor ts under this procedure would enable ear lier detec-
tio n o f VAT  evas ion (s ee p aragra ph  2 0 ).

R E C O M M E N D AT I O N 	 2

T h e Co mmissio n sh oul d encour ag e th e Coun cil to ac t up o n 
i t s   p r o p o s a l   t o   a m e n d   t h e   VAT   D i r e c t i v e   i n   o r d e r   t o   h o l d 
the imp or ter (or his tax representative) jointly and severally 
l i a b l e   f o r   t h e   VAT   l o s s   i n   t h e   M e m b e r   St a te   o f   d e s t i n a t i o n 
w h e re a co mp l e te an d tim e l y VAT re c ap i tulati ve s t ate m e nt 
is n ot sub m i t te d by him .

54.  

Th e   co - ex i s te n ce   o f   t wo   c h a n n e l s   o f   co m m u n i c at i o n   ( m u t u a l 
assistance in the customs field and administrative cooperation 
for VAT   p ur po se s )  b et ween  M embe r   St ates   an d  auth or i ti es   of 
d i f f e r e n t   k i n d s   ( c u s t o m s   a n d   t a x )   h i n d e r s   t h e   s e a m l e s s   a n d 
streaml ine d co mmu nic atio n bet we e n t he  compe tent auth or i-
ties, and imp edes the c harging of  VAT  in  t h e M e mbe r  State  of 
final  de st inat ion ( see p aragraphs  2 3   an d 2 4 ) . 

R E C O M M E N D AT I O N 	 3

The Commission should provide guidance to Member States’ 
co m p e te nt   a u t h o r i t i e s   i n   o rd e r   to   c l a r i f y   w h e n   to   u s e   m u-
t ual  as sist ance  or adminis trat ive  cooperat io n.

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

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55.   C u s t o m s   a n d   t a x   c o n t r o l s   a r e   n o t   w o r k i n g   e f f e c t i v e l y   w h e n 
d e a l i n g   w i t h   t h e  VAT   e xe m p t i o n   u p o n   i m p o r t a t i o n   u s i n g   t h e 
cu sto ms pro ce du re 42. Cases  of n on - compl ian ce  wi th  VAT ex-
emp t ion  co ndit ions,  e.g.   us e  of  i nvali d VAT  ID.   N os  a nd  o th er 
sub s ta nt ive  requirem ents,   suc h  as  th e   cor re c tn es s   of  th e  VAT 
t a x a b l e   a m o u n t   o r   t h e   s u b m i s s i o n   o f   c o m p l e t e ,   c o r r e c t   a n d 
t i m e l y   r e c a p i t u l a t i v e   s t a t e m e n t s ,   w e r e   f o u n d   i n   a l l   M e m b e r 
States  visite d (see p aragrap hs  2 7   to 3 5 ,  3 9  an d 4 0 ).

R E C O M M E N D AT I O N 	 4 	 A N D 	 5

4 .  T h e   Co m m issi o n   sh o u l d   e n co u r a g e   th e   au to m ati c   ve r i -
f i c a t i o n   o f   t h e   v a l i d i t y   o f   VAT   I D .   N o s   i n   V I E S   i n   t h e 
M e m b e r St ate s cus to ms e l e c tro ni c   cl e ar an ce  s y s te ms .

5.  T h e Co mmission should create an EU risk prof ile s o that 
M e m b e r   St a t e s   h av e   a   c o m m o n   a p p r o a c h   t o   p e r f o r m -
i n g   r i s k- o r i e n t e d   a n d   r a n d o m   d o c u m e n t a r y   c h e c k s   o n 
imp o r t s   un d e r  p ro ce du re  42   in  o r d e r   to  ve r i f y   th e  re al -
i t y o f th e  t r ansp o r t to an oth e r  M e m b e r  St ate  an d oth e r 
e xe m p t i o n   co n d i t i o n s ,   a n d   t h e   co r r e c t n e s s   o f   t h e   VAT 
t a x ab l e  am o u nt .

56.  

T h e   m a n a g e m e n t   o f   t h e  VAT   e xe m p t i o n   b y   t wo   d i f fe re n t   a u -
t h o r i t i e s   ( c u s t o m s   a n d   t a x )   h i n d e r s   t h e   e f fe c t i v e n e s s   o f   t h e 
controls as there is no seamless communication between them 
concer ning impor ts under this procedure. (see paragraphs 36 
to  38).

57.   Au t o m a t e d   e xc h a n g e   o f   c o m p l e t e   a n d   a c c u r a t e   i n fo r m a t i o n 
bet ween Member States’ tax authorities through VIES depends 
on  the   imp o r ter ’s   w il l ingness   to  submi t  a  compl ete VAT  re ca-
pit ul at ive   st ate ment  to  t ax  aut hor it ie s.  Th e  audi t  foun d  l it tle 
s y s t e m a t i c   c r o s s - c h e c k i n g   o f   i n f o r m a t i o n   b e t w e e n   c u s t o m s 
a n d   t a x   d a t a   i n   t h e   M e m b e r   S t a t e   o f   i m p o r t a t i o n   ( s e e   p a r a -
grap hs  43 and 44).

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

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R E C O M M E N D AT I O N 	 6

T h e Co mmissi o n sh o ul d make a p ro p os al to am e n d th e VAT 
D ire c ti ve in o r d e r  to i d e nti f y s e p ar ate l y  th e intr a - Co mmu -
nit y supplies following imp or t s under this pro ce dure in the 
trader s’ VAT re c apitulative s t atem ent s . T his would allow an 
e f f e c t i ve   r e co n c i l i a t i o n   b e t w e e n   c u s t o m s   a n d   t a x   d a t a   i n 
th e M e m b e r St ate o f imp o r t ati o n .

58.   W h e n   i t   i s   d i s c o v e r e d   e x   p o s t   t h a t   t h e   i m p o r t e r   i s   n o t   r e g -
i s t e re d   fo r  VAT   p u r p o s e s   a n d   h a s   n o t   a p p o i n t e d   a   t a x   re p re -
sentative in the Member State of impor tation, the information 
c o n c e r n i n g   t h e   i n t r a - Co m m u n i t y   s u p p l i e s   w i l l   r e a c h   t h e   t a x 
authorities of the Member State of destination only if those in 
the Member State of impor tation are willing to send it without 
pr io r req ues t b ec aus e cur rently  t hi s exchan g e  of  i nfor mat ion 
is no t co mp uls or y (s ee p aragraph s 4 1   an d 4 2 ) .

R E C O M M E N D AT I O N 	 7

T h e   C o m m i s s i o n   s h o u l d   s u b m i t   a   p r o p o s a l   t o   c h a n g e   t h e 
l e gisl ati o n s o th at M e m b e r St ate s  are o b li g e d to e xch an g e 
t h e   i n f o r m at i o n   n e ce ss a r y   f o r   t h e   co r r e c t   c h a r g i n g   o f   VAT 
in th e M e m b e r  St ate o f d e s tinati o n  w i th o u t  p r i o r  re qu e s t .

59.  

Th e   c h a rgi n g   o f  VAT   i n   t h e   M e m b e r   S t ate   o f   d e s t i n at i o n   a l s o 
depends upon the final consignee’s willingness to declare the 
int ra- Commu nit y acq uisitio n in  t he  VAT ret ur n . Comple te  an d 
re l e va nt   i n fo r m at i o n   i s   n o t   a l ways   s e nt   u n d e r   a d m i n i s t rat i ve 
c o o p e r a t i o n   t o   t a x   a u t h o r i t i e s   i n   t h e   M e m b e r   S t a t e   o f   d e s-
t i n a t i o n   o r   t h e   l a t t e r   d o   n o t   s y s t e m a t i c a l l y   c r o s s - c h e c k   t h e 
i n fo r m a t i o n   re ce i ve d   u n d e r   a d m i n i s t r a t i ve   co o p e r a t i o n   w i t h 
VAT  ret ur ns  (see p aragrap hs 4 5  an d 4 6 ).

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R E C O M M E N D AT I O N 	 8

The Commission should submit a proposal to set up a direc t 
au to m at i c   e xch a n g e   o f   i n f o r m at i o n   co n ce r n i n g   r isk- p r o n e 
trans ac tions under cus toms pro ce dure 42 b et we en the cus-
t o m s   a u t h o r i t i e s   o f   t h e   M e m b e r   St a t e   o f   i m p o r t a t i o n   a n d 
the tax authorities in the Member State of destination (early 
w ar nin g  s y s te m).

Th i s   R e p o r t   wa s   a d o p te d   by   C h a m b e r   I V,   h e a d e d   by   M r   I g o r s 
LU D B O R Ž S ,   M e m b e r   o f   t h e   Co u r t   o f   Au d i to r s,   i n   Lu xe m b o u rg 
at  its  me eting  o f 11  O c tob e r 20 1 1 .

Fo r  th e  Co u r t  o f  Audi to rs

Víto r  M anue l  da  S I LVA   C A L D E I R A
Presi de nt

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

 
 
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A N N E X 	 I

D E S C R I P T I O N 	 O F 	T H E 	 P R O C E D U R E

When goods are impor ted and released for free circulation in a M ember State, VAT is pay-
able in that Member State 1. However, when at the time of impor tation it is already cer tain 
th at   t he  imp o r ted  go ods   are  inte nd ed   to  go   to  an ot he r   M e m ber   St ate,   t h e VAT   is   due  in 
th e M e mbe r State o f final  dest in at ion .  Th is  is  a n  exem pt ion  o n VAT  at  i m por t at i on  based 
on the fac t that the impor t is followed by an exempt intra- Communit y supply or transfer 
of g o od s to ano ther M emb er State 2.

This  p roce dure  is  common l y  k nown   as ‘customs  procedure  42’  bec ause  in   such   cas es  the 
imp o r ter o f t he go od s m ust  indi c ate i n box 3 7 o f th e S AD  a code  st ar t ing  wit h t he digi ts 
4 2 ,   s i g n i f y i n g   t h a t   t h i s   i s   a n   i m p o r t   w i t h  ‘s i m u l t a n e o u s   re l e a s e   fo r   f re e   c i rc u l a t i o n   a n d 
h o m e   u s e   o f   g o o d s   w h i c h   a r e   t h e   s u b j e c t   o f   a   VAT- e xe m p t   s u p p l y   t o   a n o t h e r   M e m b e r 
State 3’.  When  go od s are re -impor te d,  co de  6 3  sh ould  be   ind ic ate d i nste ad.

The  p ro cedu re   is  re lativel y   straightfo r ward  for   t he   appli c ant,   who   su bm it s  t he   st andard 
impor t SAD to the customs author ities of the impor ting M ember State and indicates cus-
toms procedure code 42 (for impor ts) or 63 (for re -impor tations) in box 37. At the moment 
o f   i m p o r t a t i o n   i t   m u s t   a l re a d y   b e   c e r t a i n   t h a t   t h e   g o o d s   a r e   i n t e n d e d   t o   b e   c o nv e ye d 
from  th e impo r ting  M emb er State  to  ano th e r  M em be r  St ate.

Custo ms  a ut hor it ies in th e impor tin g M e mber  St ate  are re spon s ible for grant in g t he VAT 
exemption. Ar ticle 131 of the VAT Direc tive empowers this M ember State to lay down the 
condit ion s gover n ing th is exempt ion  w it h a vie w to e ns ur ing  it s co r re c t  a nd s t rai ghtfor-
wa rd  ap pl icat io n and p revent ing  any  evasi on,   avo idan ce  o r  abu se.

1  Article 201 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (the VAT Directive) 
(OJ L 347, 11.12.2006, p. 1). 

2  Article 143(1)(d) of the VAT Directive.

3  Cf. Annex 38 of Commission Regulation (EEC) No 2454/93.

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

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A N N E X 	 I

Af te r g oo ds  have b een rel eas ed for  free  ci rc ulat ion  in  th e  i mpor ti n g M em b er St ate, they 
s h o u l d   b e   e i t h e r   s u p p l i e d   t o   a   c u s t o m e r   o r   d i r e c t l y   t r a n s fe r r e d   t o   t h e   i m p o r t e r   i n   a n -
ot he r  M emb er  State. This  su p ply   or   tran sfe r   of   g ood s  i s  an   intra - Co m m un it y  t rans ac ti on 
exem pte d of VAT p ursu ant  to  Ar t ic l es  1 7  and  1 38  o f  t he  VAT  D ire c t i ve.

The impor ter or his tax representative must fulfil some obligations in the impor ting Mem -
ber St ate,  in additio n to  t he oblig ation s im pose d on  e ve r y  t axabl e pe r so n 4:

(a )  To be identified for VAT purposes in the impor ting Member State or to appoint a  fiscal 

rep res ent ative there 5,

(b)   Either to be identified for VAT purposes in the Member State of destination in the case 

o f t ra nsfer or to  su p p l y t he goods  to  a c us tom er  d uly  id enti f ie d t h ere,  a nd

(c)  To include this intra- Communit y supply or transfer in a recapitulative statement sub -

mit ted  to  th e tax aut ho r ities  of  th e i mpor ti ng  M e m ber  St ate 6. 

4  VAT Directive 2006/112/EC — Article	242 ‘Every taxable person shall keep accounts in sufficient detail for VAT to be applied and its 
application checked by the tax authorities’. Article	220 ‘Every taxable person shall ensure that … an invoice is issued, either by himself or 

by his customer or, in his name and on his behalf, by a third party’.	Article	250	(1) ‘Every taxable person shall submit a VAT return setting 

out all the information needed to calculate the tax that has become chargeable and the deductions to be made including, in so far as is 

necessary for the establishment of the basis of assessment, the total value of the transactions relating to such tax and deductions and the 

value of any exempt transactions’. 

5  Article 214 and 204 of the VAT Directive.

6  Article 262 of the VAT Directive.

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A N N E X 	 I

From the beginning of 2011 7, the exemption shall apply only if at the time of impor tation 
the impor ter has provided to the competent author ities of the M ember State of impor ta -
tion  at  l east  t he fol l ow in g infor mati on :

(a )  his  VAT   ide nt ificat io n  nu mber  is s ue d  i n   t he   M e m ber   St ate   of   i m por t at i on   or  t he VAT 
identification number of his tax representative, liable for payment of the VAT, issued 
in t he  M emb er  State of im por t at ion ;

(b)   t h e  VAT   i d e n t i f i c a t i o n   n u m b e r   o f   t h e   c u s t o m e r   t o   w h o m   t h e   g o o d s   a re   s u p p l i e d   i n 
accordance with Ar ticle 138(1), issued in another M ember State, or his own VAT iden-
t i f i c at i o n   n u m b e r   i s s u e d   i n   t h e   M e m b e r   St ate   i n   w h i c h   t h e   d i s p atc h   o r   t ra n s p o r t   o f 
t he  g oo ds  ends   w hen  t he  g oods  a re  s ubj e c t   to  a  tran s fer   i n   accordan ce  wit h  Ar ticle 
138 (2)(c );

(c)  t he e vidence  t hat th e impor te d goods  are  i nten de d to be  tran sp or ted or  d is patched 

fro m  the  M e mb er State of impor tati on  to  ano th e r  M e mbe r  State.

Howeve r,  M e mbe r  States   may   prov id e  t hat   t he   e vid en ce  re fer re d  to  i n  po int   (c)   b e  indi -
cated  to  the comp etent author itie s  on ly  upon  re que st.

The t ax au th or ities t he M emb er  State  o f  im por tati on e nte r  t he  info r m at i on co nt ained in 
the recapitulative statement in the VIES database, mak ing this data available for check ing 
by  the  t ax a ut ho r ities  in  the M embe r  St ate  of  d es ti nat io n.

The customer (supply) or the impor ter himself (transfer) must declare to the tax author i -
ties an intra- Co mmun it y acq uis iti on  i n t he  M e mbe r  St ate o f  d est i nat io n,  a t ax able  event 
th at  mak es t he VAT  b ecome c h arge able  i n  th is  f in al  co untr y  of   des t inat io n. 

7 Pursuant to Articles 1 and 2 of Council Directive 2009/69/EC.

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A N N E X 	 I I

E C A 	 CO N T R O L 	 M O D E L 	 F O R 	 C U S TO M S 	 P R O C E D U R E 	 4 2

I.	

II.  

III .  

C o m p u l s o r y   i n d i c a t i o n   i n   b o x   4 4   o f   t h e   S A D   o f   a   v a l i d   VAT   I D.   N o   o f   b o t h   t h e 
imp o r ter  (o r  his  tax  represe ntati ve )   an d  t h e  fi nal  con signe e   ( c u sto m er   or   t he  im -
p o r te r   h i m s e l f   i n   t h e   c a s e   o f   t ra n s fe r s )   i n   t h e   M e m b e r   S t a te   o f   d e s t i n a t i o n .  V I E S 
ve r i f i c a t i o n   o f   t h e   v a l i d i t y   o f   t h e s e  VAT   I D.   N o s   p r i o r   to   t h e   re l e a s e   o f   g o o d s   fo r 
free circulation. O ther wise, VAT is due upon impor tation (Cf. expec ted key controls 
No s 1  to 4  in A n nex  III).

A   r e f e r e n c e   t o   t h e   e v i d e n c e   o f   t h e   i n t e n d e d   t r a n s p o r t   t o   t h e   M e m b e r   S t a t e   o f 
de st inat ion,  e. g. trans p or t  doc ume nt  N o,  and  th e  countr y o f  dest inat io n co de are 
shown, respec tively, in boxes No. 44 and 17 (a) of the SAD. O ther wise the customs 
de cl arat ion is not accepte d (C f.  expe c te d  key  cont rol s  N os  5  to  8  i n A nn ex  III).

Customs author ities ver ify ex post using proper r isk management techniques that 
t r a n s p o r t   t o   t h e   M e m b e r   S t a t e   o f   d e s t i n a t i o n   i n d i c a t e d   i n   b ox   1 7 ( a )   o f   t h e   S A D 
wa s   a c t u a l l y   c a r r i e d   o u t   s h o r t l y   a f te r   t h e   i m p o r t,   t h at   t h e   g o o d s   s u p p l i e d   to   t h e 
Member State of destination are the same as the goods impor ted, that the impor ter 
a n d   t h e   s u p p l i e r   o f   g o o d s   a re   t h e   s a m e   p e r s o n ,   a n d   t h a t   t h e   c u s t o m s   v a l u a t i o n 
and the VAT taxable amount are correc t. I f the requirements above are not fulfilled 
VAT is recovered ex post. When there is an understatement of the taxable amount, 
the trader is requested to correc t the value of the corresponding intra- Communit y 
s u p p l i e s   o r   t r a n s fe r s   o f   g o o d s   i n   t h e   r e c a p i t u l a t i v e   s t a t e m e n t ,   i f   n e c e s s a r y   (C f. 
expe c ted ke y co ntrol  No 9  in A nn ex  III) .

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A N N E X 	 I I

IV.  

V.	

Automatic exchange of information between the customs and tax authorities of the 
M emb er  State of imp or tation con ce r n in g  t h es e im por ts  (C f.  ex pe c ted k ey control 
No  10 in  A n nex  III).

Ta x   a u t h o r i t i e s   c o m p a re   t h e   i n fo r m a t i o n   re c e i ve d   f ro m   t h e   c u s t o m s   a u t h o r i t i e s 
with the VAT recapitulative statement lodged by the impor ter (or his tax represent -
ative )  in  order   to  ensu re  the   com ple ten e ss/ acc urac y  o f   th e   lat te r.  I f   t h e  am ounts 
rep o r ted  herein  are  l es s  than  th e VAT   t ax able   am ount   o f   t he   im por t s,   t h e  t ax  r is k 
management system should decide whether fur ther investigation of the difference 
i s   n e e d e d   h av i n g   re g a rd   t o   t h e   r i s k   f a c t o r s   a r i s i n g   i n   t h e   c a s e   (C f.   e x p e c t e d   k e y 
co nt ro l N o  11  in A n nex III) .

VI.   Where the recapitulative statement is not submitted or the infor mation therein is 
no t co mp le te /a cc u rate, tax auth or it ie s in  th e  M em be r  St ate  of  d est i nat io n a re in-
formed using administrative cooperation arrangements (Cf. expec ted key controls 
No s 1 2 and 13 in A n nex  III) .

VII .   Ta x   a u t h o r i t i e s   i n   t h e   M e m b e r   S t a t e   o f   d e s t i n a t i o n   c o m p a re   t h e   i n fo r m a t i o n   re -
ceived from other M ember States with the VAT retur ns submitted by the customer 
(acq uirer) o r t he imp or ter  h imse lf  i n  th e  c a s e o f t ransfer s  (C f.  A nn ex  V) .

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

A N N E X 	 I I I

B E N C H M A R K I N G 	 O F 	 M E M B E R 	 S TAT E S 	 AG A I N S T 	T H E 	 E C A 	 CO N T R O L	
M O D E L

34

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A N N E X 	 I V

R E S U LT S 	 O F 	T H E 	T E S T I N G 	 O F 	 E X E M P T I O N 	 A N D 	 OT H E R	
S U B S TA N T I V E 	 CO N D I T I O N S

35

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Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A N N E X 	 V

CO N F I R M AT I O N 	 O F 	VAT 	TAX AT I O N 	 I N 	T H E 	 M E M B E R 	 S TAT E S 	 O F	
D E S T I N AT I O N

36

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G

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

	
	
	
	
	
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
	
	
	
	
	
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3737

REPLY OF THE  
COMMISSION

EXECUTIVE	SUMMARY

I.
In the area of VAT, the legal basis for adopt-
i n g   n e w   l e g i s l a t i o n   i s   c o v e r e d   b y   A r t i c l e 
113 of the Treaty on the Functioning of the 
Eu ro p e a n   U n i o n ,   w h e re by   n e w   l e gi s l at i o n 
p ro p o s e d   by   t h e   Co m m i s s i o n   n e e d s   to   b e 
adopted unanimously by the Council. 

Fur thermore, the subsidiarity principle does 
not allow the Commission to regulate on the 
way  the  Member  States  control  and  collec t 
the payment of VAT. The examples provided 
in the obser vations in this repor t fall mainly, 
if not exclusively, under the Member States’ 
competence.

O n   t h e   o t h e r   h a n d ,   i n s o f a r   a s   a   M e m b e r 
S t a te   e n co u n te r s   d i f f i c u l t i e s   w i t h   re s p e c t 
to  the  collec tion  of VAT,  the  Commission  is 
always prepared to engage into discussions 
with  that  Member  State  in  order  to  tr y  and 
find  EU  solutions  to  these  problems  in  the 
v a r i o u s   f o r a   a v a i l a b l e   ( e . g .   t h e   S t a n d i n g 
Committee for Administrative Co- operation 
(SCAC), Fiscalis working groups, the Anti Tax 
Fraud Strategy Group (ATFS), Customs work-
ing groups, etc).

A s   c o n c e r n s   t h e   s p e c i f i c   e x e m p t i o n   o f 
VAT   p ay m e nt   u p o n   i m p o r t at i o n   ( s o   c a l l e d 
‘c u s t o m s   p ro c e d u re   4 2 ’ ) ,   t h e   Co m m i s s i o n 
became aware of this problem since 2006. It 
has set up a Fiscalis project group to inves-
tigate  the  problem  and  come  for ward  with 
recommendations  for  solutions. This  led  to 
the modification of Ar ticle 143(2) of the VAT 
Direc tive,  where  the  conditions  for  apply -
ing the exemption were specified in a more 
detailed manner. This revised Ar ticle 143(2) 
is applicable as of 1 Januar y 2011. 

To  suppor t  the  implementation  of  the VAT 
D i r e c t i v e   t h e   c u s t o m s   a u t h o r i t i e s   a g r e e d 
in  an  administrative  arrangement  on  a  har-
m o n i s e d   a p p ro a c h   a s   re g a rd s   c o m p l e t i n g 
c u s t o m s   d e c l a r a t i o n s   w i t h   VAT   n u m b e r s . 
Taking into account the need to change the 
n a t i o n a l   I T   c u s to m s   d e c l a r a t i o n s’  s ys te m s 
t h e   a r r a n g e m e n t   w i l l   b e   a p p l i c a b l e   i n   a l l 
Member States by 1 Januar y 2013 at the lat-
est.

I V.
Since 2011 several initiatives to improve the 
situation  have  been  implemented  with  the 
aim to permit more targeted information on 
transac tions  in  the  field  of  customs  proce -
d u re   4 2   b e t we e n   t h e   M e m b e r   S t a te s   co n -
ce r n e d.   Th e   Co m m i s s i o n   w i l l   e va l u ate   t h e 
e f fe c t i ve n e s s   o f   t h e s e   m e a s u re s   t o g e t h e r 
with  the  Member  States  and  is  prepared  to 
take appropriate action (including proposals 
to change the legislation).

V.	 (a)
The  tables  in  Annexes  III  and  IV  show  that 
customs authorities ensured the validity and 
completeness of some key data.

V.	 (b)
See reply to paragraph IV above.

V I.
The audits carried out by the Cour t in Mem-
ber  States  cover  the  period  before  the  new 
legislation entered into force and before the 
administrative arrangement has been imple-
mented by all Member States. The Commis -
sion  expec ts  an  improvement  in  the  situa -
tion.

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V II .	(f )
The  Commission  considers  that  such  auto -
matic  communication  bet ween  customs  of 
t h e   M e m b e r   S t a t e   o f   i m p o r t a t i o n   a n d   t a x 
authorities of the Member State of destina -
t i o n   wo u l d   b e   h i g h l y   co m p l e x   d u e   to   t wo 
different  legal  bases  in  the Treat y.  A  more 
pragmatic solution would therefore be that 
t h e   f l ow   o f   i n fo r m at i o n   t a k e s   p l a ce   i n   t h e 
M ember  State  of  impor tation  bet ween  the 
n a t i o n a l   c u s t o m s   a n d   t a x   a u t h o r i t i e s.   Ta x 
author ities  in  the  M ember  State  of  impor -
tation would subsequently communicate to 
tax authorities in the Member State of des-
tination  under  the  existing  administrative 
cooperation rules.

I nformation  on  impor ts  using  the  customs 
procedure  42  should  be  closely  monitored 
t h r o u g h   a   s e p a r a t e   w o r k i n g   f i e l d   w i t h i n 
E u r o f i s c   w h e r e   i t   i s   a l r e a d y   t a r g e t e d   a n d 
transmitted faster than via the VAT recapitu-
lative statement. An amendment of the VAT 
Direc tive  or  of  the  Regulation  on  adminis -
trative cooperation and combating fraud in 
the field of value added tax 1 does therefore 
not  seem  necessar y  nor  is  it  suppor ted  by 
Member States.

1  Council Regulation (EU) No 904/2010 of 7 October 2010 on 
administrative cooperation and combating fraud in the field of 

value added tax (recast) (OJ L 368/1, 12.10.2010).

VII.	(a)
Since 2011 several initiatives to improve the 
situation have been implemented. The Com-
m i s s i o n   w i l l   e v a l u a te   t h e   e f fe c t i ve n e s s   o f 
these  measures  together  with  the  Member 
States  and  is  prepared  to  take  appropriate 
ac tion  (including  proposals  to  change  the 
legislation) if necessar y.

VII.	(b)
Th e   Co m m i s s i o n   a g re e s   t o   e n c o u r a g e   t h e 
Council  to  resume  the  discussions  as  soon 
as possible.

VII.	(c)
The Commission agrees to encourage Mem-
ber  States  to  provide  automatic  access  for 
customs  to VAT  I nformation  Exchange  Sys-
te m   ( V I E S )   i n   o rd e r   to   e n s u re   a n   e f fe c t i ve 
control of the customs procedure 42.

VII.	(d)
Th e   Co m m i s s i o n   w i l l   a c t i ve l y   s u p p o r t   a ny 
initiative  (in  the  MS)  that  could  lead  to  the 
creation of an EU risk profile, however until 
n o w   t h e   M e m b e r   S t a t e s   a g r e e d   t o   w o r k 
within the anti-fraud network Eurofisc where 
the risk analysis is kept at national level.

VII.	(e)
The Commission has explored this possibil-
i t y   w i t h   M e m b e r   S t a te s,   w h o   p re fe r   a   t a r -
geted exchange of information via Eurofisc. 
A n   a m e n d m e n t   o f   t h e   VAT   D i re c t i ve   d o e s 
t h e r e fo r e   n o t   s e e m   fo r e s e e a b l e   n o r   d o e s 
it  find  the  unanimous  suppor t  by  M ember 
States  that  is  necessar y  for  legislative  pro-
posals in taxation.

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INTRODUCTION

OBSERVATIONS

3.	(a)
Whereas  Ar ticle  143(2)  of  the VAT  Direc tive 
sets out the framework for the exemption, it 
is up to Member States to implement it. 

3.	(b)
The VAT Directive requires that information 
is provided to the competent authorities of 
the  Member  State.  I n  prac tice,  information 
is usually provided to customs authorities.

3.	(f )
The comparison of the acquirer ’s VAT return 
with the information available in VIES is par t 
of the normal domestic control procedures.

B ox
I n   t h e   f i c t i t i o u s   e x a m p l e   c h o s e n   b y   t h e 
Cour t the VAT can be reclaimed according to 
the principles laid down in the VAT Directive 
either  in  M ember  State  1,  i.e.  the  M ember 
State of impor tation, because the exemption 
wa s   gra nte d   u n d u l y   o r   i n   M e m b e r   S t ate   2 
because it has been indicated as the countr y 
of destination.

1 2.	
The audits carried out by the Cour t in Mem-
b e r   S t a t e s   c o v e r e d   t h e   p e r i o d   b e fo r e   t h e 
n e w   A r t i c l e   1 4 3 ( 2 )   o f   t h e   VAT   D i r e c t i v e , 
which specifies the conditions for applying 
t h e   e xe m p t i o n   o f   VAT   p a y m e n t   i n   a   m o r e 
detailed  manner  than  in  the  past,  entered 
i nto   fo rce.   I n   a d d i t i o n ,   t h e   a d m i n i s t rat i ve 
arrangement  bet ween  customs  authorities 
which  will  be  implemented  by  all  M ember 
S t a t e s   a t   t h e   l a t e s t   b y   1   J a n u a r y   2 0 1 3   i s 
expected to substantially improve the situa-
tion. The Commission will carefully monitor 
the implementation.

1 5.	
I n   o r d e r   t o   r e f l e c t   t h e   n e w   r e q u i r e m e n t s 
of  the  VAT  Direc tive  in  the  customs  area  a 
unanimously agreed administrative arrange -
m e n t   fo r   t h e   S i n g l e   Ad m i n i s t r a t i ve   D o c u -
ment was made and will be implemented by 
a l l   M e m b e r   St ate s   at   t h e   l ate s t   by   1   J a n u -
ar y 2013. This enables harmonised informa-
tion to be provided in a customs declaration 
when customs procedure 42 is applied. The 
Commission  will  evaluate  the  effec tiveness 
of  this  measure  together  with  the  Member 
States  and  is  prepared  to  take  appropriate 
ac tion  (including  proposals  to  change  the 
legislation, where necessar y).

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1 9.	
The  Commission  in  the  course  of  2009  and 
2 0 1 0   ra i s e d   a n d   d i s c u s s e d   t h e   p ro b l e m   o f 
D e n m a r k   i n   AT F S   (A nt i   Ta x   Fra u d   S t rate g y 
Group)  and  SC AC  (Standing  Committee  on 
administrative cooperation). 

As of 1 July 2011 the situation for Denmark 
has been remedied and Denmark is now also 
applying the community acquis in this field.

2 1.	
Eurofisc is intended to cover this.

The Commission considers that communica-
tion between customs (in the Member State 
of  impor tation)  and  tax  authorities  (in  the 
Member  State  of  destination)  as  suggested 
by  the  Cour t  would  be  highly  complex  due 
to   t wo   d i f fe re nt   l e g a l   b a s e s.   Th e   Co m m i s -
sion is of the opinion that a more pragmatic 
solution would therefore be that the flow of 
information takes place in the Member State 
o f   i m p o r t a t i o n   b e t w e e n   c u s t o m s   a n d   t a x 
author ities. Tax  author ities  in  the  M ember 
S t a t e   o f   i m p o r t a t i o n   wo u l d   s u b s e q u e n t l y 
communicate to tax authorities in the Mem-
ber  State  of  destination  under  the  existing 
VAT administrative cooperation rules. 

2 2.	
The Commission considers that the need to 
respond to the request from the Council was 
made obsolete by the creation of the work-
i n g   f i e l d   o n   c u s t o m s   4 2 0 0   i m p o r t s   u n d e r 
Eurofisc,  which  is  an  early  warning  system 
for these transactions.

16.	
The  Commission  Regulation  312/2009  pro -
vides  standards  for  the  SAD  boxes  used  to 
i n d i c a t e   t h e   p e r s o n   a n d   i t s   i d e n t i f i c a t i o n 
numbers  to  be  used  in  a  customs  declara -
tion. Having noticed that national arrange -
m e n t s   fo r   t h e   i m p l e m e n t a t i o n   o f   c o d e   4 2 
were divergent, the administrative arrange -
m e n t   a g r e e d   w i t h   M e m b e r   S t a t e s   f u r t h e r 
h a r m o n i s e d   r u l e s   o n   f i l l i n g   t h e   re q u e s te d 
VAT numbers in box 44 of the customs dec-
laration. The advantage of having this obli-
g a t i o n   i n   a n   a d m i n i s t r a t i v e   a r r a n g e m e n t 
— which has been agreed upon by all Mem-
b e r   S t a t e s   —   i s   t o   e n s u r e   h a r m o n i s a t i o n 
w h i l e   p r o v i d i n g   t h e   p o s s i b i l i t y   t o   a m e n d 
it  quick ly. This  arrangement  will  be  imple -
mented at the latest by 1 Januar y 2013.

As regards the indication of the code for the 
countr y  of  destination  the  Commission  has 
already  discussed  with  M ember  States  the 
idea to make it mandator y in the framework 
o f   t h e   i m p l e m e nt at i o n   o f   t h e   M o d e r n i s e d 
Customs Code. 

See also reply under 31.

17.	
T h e   C o m m i s s i o n   i s   o f   t h e   o p i n i o n   t h a t   a 
s p e c i a l   re p o r t i n g   re q u i re m e n t   to   co m m u -
n i c a t e   VAT   I D   n u m b e r s   a t   t h e   m o m e n t   o f 
impor tation  would  not  meet  trade  facilita-
t i o n   p u r p o s e s   i n t e n d e d   b y   t h e   s i m p l i f i e d 
procedures.  VAT  ID  numbers  are,  however, 
available and communicated at the moment 
when supplementar y declaration is lodged. 
In addition, simplified procedures are availa-
ble only to the reliable traders, i.e. economic 
operators  fulfilling  some  of  the  Authorised 
Eco n o m i c   O p e rato r ’s   c r i te r i a   (Ar t i c l e   2 5 3 c 
CCIP) and having been subjected to an audit 
(Ar ticle  253b  (4)  CCIP).  Rules  are  laid  down 
also  for  the  reassessment  of  ever y  author-
i s a t i o n   f o r   s i m p l i f i e d   p r o c e d u r e s   ( A r t i -
cle 253 (8) CCIP). 

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3 7.	
The current rules foresee that for each item 
(i.e. goods falling under the same tariff sub-
heading) there is one customs declaration.

4 1.	
I n   t h e   c a s e   m e nt i o n e d   by   t h e   Co u r t ,   i f   n o 
t a x   re p re s e nt at i ve   i s   a p p o i nte d   t h e   M e m -
ber  State  of  impor tation  should  refuse  the 
exemption  for VAT.  According  to  the  infor-
mation  of  the  Commission,  the  situation  in 
Spain has since been addressed. 

4 2.	
Under  the  provisions  of  the  newly  adopted 
legislation in the field of Ar ticle 143, a Mem-
b e r   S t a t e   s h o u l d   re f u s e   t h e   e xe m p t i o n .   I f 
i r re g u l a r i t i e s   h a ve   b e e n   i d e n t i f i e d   t o d a y, 
this  could  best  be  communicated  to  other 
Member States concerned using Eurofisc. 

4 3.
T h i s   c h e c k i n g   ( c o m p a r i s o n   b e t w e e n   t h e 
VAT  taxable  amount  of  impor ts  by  customs 
a u t h o r i t i e s   w i t h   t h e   a m o u n t   o f   t h e   i n t r a -
Community supplies or transfers declared in 
the recapitulative statement) would be fully 
effec tive  only  provided  recommendation  6 
were implemented.

4 5.
The Commission agrees with the Cour t. 

4 6.
As  mentioned  in  the  introduc tion,  Member 
St ate s   a re   re s p o n s i b l e   fo r   co nt ro l l i n g   a n d 
collec ting  the VAT. VIES  is  a  tool  offered  to 
M e m b e r   S t a t e s   t o   b e t t e r   e xc h a n g e   i n fo r -
mation  in  the  field  of VAT  for  cross  border 
transac tions  and  assist  them  in  the  before 
mentioned tasks.

23 .	
The Commission will propose to amend the 
Customs Audit Guide. To this end a Customs 
2 0 1 3   p ro j e c t   g ro u p   i s   b e i n g   c re a t e d   w i t h 
p a r t i c i p a t i o n   o f   M e m b e r   S t a t e s’  a u d i t o r s 
who  will  also  look  at  the  recommendations 
for audit on customs procedure code 42.

24 .	
I n   a d d i t i o n   t o   t h e   f o r m a l i s e d   a u t o m a t i c 
exchange of information, Member States can 
a l s o   s p o nt a n e o u s l y   exc h a n g e   i n fo r m at i o n 
with their counterpar ts from other Member 
States.

27 .	
Th e   Co m m i s s i o n   h a s   e n co u r a g e d   M e m b e r 
S t a t e s   t o   g r a n t   t h e i r   c u s t o m s   a u t h o r i t i e s 
automatic access to VIES and will keep doing 
so.

28 .	
The Commission has confirmed in April 2011 
w i t h   S p a i n ,   Fr a n c e   a n d   A u s t r i a   t h a t   t h e y 
have  now  implemented  the  requirement  to 
p rov i d e   VAT   n u m b e r s   i n   c u s t o m s   d e c l a r a -
t i o n s .   B e l g i u m   a n d   D e n m a r k   w e r e   g o i n g 
to  take  measures  to  better  implement  the 
requirements for collecting of the VAT ID. No 
of the final recipient of the goods.

Joint	reply	to	31	a nd	32	
The Commission will reflect on the possibil-
ity to indicate the existence of the evidence 
of the intended transpor t in the SAD.

As regards the indication of the code for the 
countr y  of  destination  the  Commission  has 
a l r e a d y   d i s c u s s e d   w i t h   M e m b e r   S t a t e s   t o 
make  it  mandator y  in  the  framework  of  the 
implementation of the Modernised Customs 
Code.

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Joint	reply	47	and	48	
T h e   C o m m i s s i o n   n o t e s   t h a t   t h e   s a m -
p l e   t e s t e d   b y   t h e   C o u r t   c o n c e r n e d   2 0 0 9 , 
w h e re a s   t h e   a m e n d e d   l e gi s l a t i o n   e n te re d 
into  force  only  in  2011  in  order  to  improve 
the collection system.

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CONCLUSIONS	AND		
RECOMMENDATIONS

50.
The EU regulator y framework is the respon-
sibility  of  the  Commission,  the  Council  and 
the Member States.

Since  2006  the  Commission  has  made  sev-
e r a l   p r o p o s a l s   t o   i m p r o v e   t h e   r e g u l a t o r y 
framework 2.

5 1.
W i t h   a m e n d e d   A r t i c l e   1 4 3   e n t e r i n g   i n t o 
force  on  1  Januar y  2011  the  legislation  has 
i m p r o v e d   c o n s i d e r a b l y.   C u s t o m s   a n d   t a x 
administrations are fully aware of the prob -
l e m   c o n c e r n i n g   t h e   n e e d   t o   c o o p e r a t e   i n 
o r d e r   t o   e n s u r e   a   c o r r e c t   a p p l i c a t i o n   o f 
the  exemption  for VAT  payment  and  conse -
q u e n t l y   h ave   s t a r t e d   t o   c o o p e r a t e   b e t t e r : 
M e m b e r   S t a t e s   h a v e   s e t   u p   i n   N o v e m b e r 
2010 a specific work ing field under Eurofisc 
in  order  to  monitor  transac tions  under  cus-
toms procedure 42 closely. 

Recommendatio n	1
S i n c e   2 0 1 1   s e v e r a l   i n i t i a t i v e s   t o   i m p r o v e 
the  situation  have  been  implemented  (see 
a b ove ) .   Th e   Co m m i s s i o n   w i l l   e va l u ate   t h e 
e f fe c t i ve n e s s   o f   t h e s e   m e a s u re s   t o g e t h e r 
with  the  Member  States  and  is  prepared  to 
take appropriate action (including proposals 
to change the legislation) if necessar y. 

2   Council Directive 2008/117/EC of 16 December 2008 amending 
Directive 2006/116/EC on the common system of VAT to combat 

tax evasion connected with intra-Community transactions. This 

reduced the timeframes for submitting recapitulative statements; 

Council Directive 2009/69/EU of 25 June 2009 amending Directive 

2006/112/EC on the common system of value added tax as regards 

tax evasion linked to imports. This proposal is also still on the table 

of Council for the part relating to the joint and several liability; 

Council Directive 2010/24/EU of 16 March 2010 concerning 

mutual assistance for the recovery of claims relating to taxes, duties 

and other measures. The directive intends to improve the capacity 

of Member States in cross border collection of taxes; Council 

Regulation 904/2010/EU of 7 October 2010 on administrative 

cooperation and combating fraud in the field of VAT and repealing 

Regulation 1798/2003. The regulation aims to strengthen 

administrative cooperation between Member States. Some of the 

new measures that are incorporated in this regulation are: a legal 

base for setting up Eurofisc, common minimum standards for the 

registration and deregistration of taxable persons, an improvement 

of the VIES system and automated access to data.

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57.
T h i s   c h e c k i n g   ( c o m p a r i s o n   b e t w e e n   t h e 
VAT  taxable  amount  of  impor ts  by  customs 
a u t h o r i t i e s   w i t h   t h e   a m o u n t   o f   t h e   i n t r a -
Community supplies or transfers declared in 
the recapitulative statement) would be fully 
effec tive  only  provided  recommendation  6 
were implemented.

Recommendatio n	6
The Commission has explored this possibil-
i t y   w i t h   M e m b e r   S t a t e s   w h o   p r e fe r   a   t a r -
geted exchange of information via Eurofisc. 
A n   a m e n d m e n t   o f   t h e   VAT   D i re c t i ve   d o e s 
t h e r e fo r e   n o t   s e e m   fo r e s e e a b l e   n o r   d o e s 
it  find  the  unanimous  suppor t  by  M ember 
States  that  is  necessar y  for  legislative  pro-
posals in taxation.

5 8.
The  Commission  would  like  to  point  to  its 
answers under paragraphs 41 and 42.

Recommendatio n	7
T h e   C o m m i s s i o n   i s   c u r r e n t l y   r e v i s i n g   t h e 
t ra n s a c t i o n s   fo r   w h i c h   M e m b e r   St ate s   a re 
obliged to automatically exchange informa-
tion.  Member  States  are  however  reluc tant 
to include transactions under customs pro -
cedure 42 as these transactions are intended 
to   b e   d e a l t   w i t h   m o re   e f f i c i e n t l y   t h ro u g h 
Eurofisc.

Recommend ation	2
Th e   Co m m i s s i o n   a g re e s   t o   e n c o u r a g e   t h e 
Council  to  resume  the  discussions  as  soon 
as possible.

54.
The two channels of communication are the 
result  of  different  ar ticles  of  the  EU Treat y 
created for different purposes and reflecting 
different EU powers in customs and taxation.

Recommend ation	3
Th e   Co m m i s s i o n   p rov i d e s   g u i d a n ce   u n d e r 
different fora (e.g. in Fiscalis project groups, 
S C AC ,   e tc. )   Th e   Co m m i s s i o n   w i l l   a l s o   p ro -
pose to amend the Customs Audit Guide.

Recommend ations 	4	a nd	5
4.
The Commission has been informed recently 
by Member States that they are work ing on 
granting  the  customs  authorities  access  to 
the VIES  system  where  this  is  not  the  case 
yet.

5.
Th e   Co m m i s s i o n   w i l l   a c t i ve l y   s u p p o r t   a ny 
initiative  that  could  lead  to  the  creation  of 
an EU risk profile. However, until now, Mem-
ber  States  agreed  to  wor k  within  Eurofisc, 
w h e re a s   t h e   r i s k   a n a l y s i s   c o n t i n u e s   t o   b e 
kept at national level. The results are shared 
with all other Member States. 

56 .
C o o p e r a t i o n   b e t w e e n   c u s t o m s   a n d   t a x 
authorities in this field is improving follow-
ing  the  effor ts  under taken  by  the  Commis-
sion in this field, e.g. Fiscalis Project Group 
29,  Customs  Code  Committee,  SCAC,  ATFS, 
joint customs and tax seminars.

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Recomme ndatio n	8
The  Commission  considers  that  such  auto -
matic  communication  bet ween  customs  of 
t h e   M e m b e r   S t a t e   o f   i m p o r t a t i o n   a n d   t a x 
authorities of the Member State of destina -
t i o n   wo u l d   b e   h i g h l y   co m p l e x   d u e   to   t wo 
different  legal  bases  in  the Treat y.  A  more 
pragmatic solution would therefore be that 
t h e   f l ow   o f   i n fo r m at i o n   t a k e s   p l a ce   i n   t h e 
M ember  State  of  impor tation  bet ween  the 
n a t i o n a l   c u s t o m s   a n d   t a x   a u t h o r i t i e s.   Ta x 
author ities  in  the  M ember  State  of  impor -
tation would subsequently communicate to 
tax authorities in the Member State of des-
tination  under  the  existing  administrative 
cooperation rules.

I nformation  on  impor ts  using  the  customs 
procedure  42  should  be  closely  monitored 
t h r o u g h   a   s e p a r a t e   w o r k i n g   f i e l d   w i t h i n 
E u r o f i s c   w h e r e   i t   i s   a l r e a d y   t a r g e t e d   a n d 
transmitted faster than via the VAT recapitu-
lative statement. An amendment of the VAT 
Direc tive  or  of  the  Regulation  on  adminis -
trative cooperation and combating fraud in 
the  field  of  value  added  tax  does  therefore 
not  seem  necessar y  nor  is  it  suppor ted  by 
Member States.

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

45

European Court of Auditors

Special	Report	No	13/2011	

Does	the	control	of	customs	procedure	42	prevent	and	detect	VAT	evasion?

Luxembourg: Publications Office of the European Union

2011 — 44 pp. — 21 × 29,7 cm

ISBN 978-92-9237-421-1

doi:10.2865/39479

Special Report No 13/2011 – Does the control of customs procedure 42 prevent and detect VAT evasion?

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CUSTOMS  PROCEDURE 42  IS THE  REGIME  AN  IMPORTER  USES  IN  ORDER 

TO  OBTAIN  A  VAT  EXEMPTION  WHEN  THE  IMPORTED  GOODS  WILL 

BE  TRANSPORTED  TO  ANOTHER  MEMBER  STATE.  IN  THE  ABSENCE  OF 

PROPER  CONTROL,  GOODS  RISK  REMAINING  IN  THE  MEMBER  STATE  OF 

IMPORTATION  WITHOUT  PAYMENT  OF  VAT  OR  BEING  CONSUMED  IN 

THE  MEMBER  STATE  OF  DESTINATION  WITHOUT  VAT  BEING  CHARGED 

THERE.  THE  REPORT  FOUND  THAT  CONTROL  OF  THIS  PROCEDURE 

IN  SEVEN  SELECTED  MEMBER  STATES  IS  DEFICIENT  AND  HAS  LED  TO 

SIGNIFICANT  VAT  LOSSES.  THE  REPORT  RECOMMENDS,  INTER  ALIA, 

IMPROVING THE COMMUNICATION OF KEY DATA WITHIN AND BETWEEN 

MEMBER  STATES,  ENCOURAGING  THE  AUTOMATIC  VERIFICATION 

OF  VAT  IDENTIFICATION  NUMBERS,  CREATING  A  COMMON  EU  RISK 

PROFILE  FOR  IMPORTS  UNDER  PROCEDURE  42  AND  ENCOURAGING 

ACTION  ON  A  PROPOSED  AMENDMENT  OF  THE  VAT  DIRECTIVE. 

EUROPEAN COURT OF AUDITORS