COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE Strengthening the Single Market by removing cross-border tax obstacles for passenger cars
Date: 2012-12-14
Institutions: European Commission
Subjects: free movement of goods, motor car, single market, tax reform, vehicle registration

EUROPEAN 
COMMISSION 

Brussels, 14.12.2012  
COM(2012) 756 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE 

Strengthening the Single Market 
by removing cross-border tax obstacles for passenger cars 

{SWD(2012) 429 final} 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE 

Strengthening the Single Market 
by removing cross-border tax obstacles for passenger cars 

1. 

INTRODUCTION 

More than 230 million passenger cars circulate on European roads. Each year, more than 13 
million  new  passenger  cars  are  registered  in  the  European  Union,  and  about  3  million  used 
cars  are  transferred  between  Member  States,  of  which  up  to  1  million  are  linked  to  people 
migrating from one Member State to another1. 

Car taxation is an important revenue source for all Member States. On average, registration 
and  circulation  taxes  accounted  for  1.9%  of  all  tax  revenues  in  20102.  The  actual  level  and 
design of such national tax regimes is therefore of specific interest for national tax authorities 
as well as for car producers and citizens and enterprises owning and using a car. 

The issues of double or multiple taxation3 and of potential tax discrimination in case of cross-
border transfers of passenger cars are of concern to EU citizens and service providers. In its 
2010 EU Citizenship Report4 the Commission announced that it would work on solutions to 
double registration taxes on cars as this can be an obstacle to EU citizens' right to move freely 
in the EU and  in its Communication 'Removing cross-border tax obstacles for EU citizens'5 
the Commission pointed out that, when buying a car in a Member State other than that of their 
normal residence or when transferring a car to a Member State other than that in which it is 
registered,  EU  citizens  frequently  face  excessively  complex  re-registration  procedures  and 
may have to pay registration and/or circulation taxes twice.  

The  present  Communication  focusses  on  the  tax  aspects  in  cross-border  situations.  High 
registration taxes on cars transferred between Member States in the context of the transfer of 
permanent residence  may  work as  an  obstacle for potential migrants. Also,  the  multitude of 
different and un-coordinated thresholds and technical triggers for different levels of taxation 
such  as  engine  size,  fuel  used  or  CO2  emissions  (be  it  for  registration  or  circulation  taxes) 
further complicates the already diverse market conditions for car producers triggering a tax-
induced fragmentation of the Single Market, which results in tax-induced cross-border trade 
as well.  

1 
2 
3 

4 

5 

Source: Eurostat, ACEA and Öko-Institut. 
Taxation trends in the European Union, 2012 edition, Eurostat, European Commission. 
According to the Court of Justice of the European Union, the successive levying of a registration tax in 
two Member States does not necessarily constitute a double taxation in its narrow sense as the taxable 
event  is  the  right  to  use  the  vehicle  on  national  roads  (See  section  3.1.  of  the  Commission  Staff 
Working Document accompanying this Communication for more details). 
EU  Citizenship  Report  2010  'Dismantling  obstacles  to  EU  citizens'  rights',  COM(2010)603  of 
27.10.2010, see action 6. 
COM(2010)769 of 20.12.2010. 

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The  Commission  has  taken  initiatives  and  put  forward  legislative  proposals  to  solve  these 
problems on three occasions, in 1975, in 1998 and in 20056. The 1975 proposal resulted in the 
adoption of Directive 83/182/EEC7, providing tax exemptions for the temporary introduction 
of  a  motor-driven  road  vehicle  into  a  Member  State  from  another  Member  State.  The  1998 
proposal  aimed  at  introducing  a  mandatory  exemption  when  private  motor  vehicles  were 
permanently brought into a Member State from another Member State in connection with the 
transfer  of  normal  residence  of  a  private  individual.  The  third  proposal  aimed  at  abolishing 
registration taxes altogether and replacing them by annual circulation taxes after a transitional 
period  of  10  years,  and  to  'green'  circulation  taxes.  The  two  last  proposals  have  not  so  far 
received the required unanimous support of the Member States. 

It should be noted that, currently, there is no harmonisation at EU level of car registration and 
circulation  taxes.  This  means  that  the  evolution  of  vehicle  taxation  in  the  EU  has  so  far 
depended to a large extent on the jurisprudence of the Court of Justice of the European Union 
(hereafter 'the Court'). 

Despite  the  jurisprudence  of  the  Court  and  legislative  actions,  it  has  not  been  possible  to 
overcome  the  fragmentation  of  national  tax  schemes  or  to  fully  and  systematically  remove 
double taxation and the potential tax discrimination of cars transferred by citizens from one 
Member State to another. In the present Communication and the accompanying Staff Working 
Document  (hereafter  'the  SWD')  the  current  situation  in  the  field  of  passenger  car8  taxes 
within the Union is described and re-assessed in order to identify best practices that Member 
States should be able to implement within the existing legal framework.  

This  Communication  and  the  SWD  aim  at  clarifying  the  EU  rules  on  vehicle  taxation, 
explaining  rights  and  obligations  of  Member  States,  citizens  and  businesses.  From  the 
questions  put  to  the  Commission,  it  appeared  that  citizens  and  businesses  are  often  not 
sufficiently  aware  of  or  they  do  not  understand  their  rights  and  their  obligations  in  various 
situations, in particular when moving vehicles temporarily or permanently from one Member 
State to another. The SWD, in particular, aims at giving an overview of the rich case law of 
the Court on vehicle taxation and illustrates secondary legislation applicable in this field. 

The  procedures  related  to  re-registration  are  specifically  addressed  in  the  Commission 
proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  simplifying  the 
transfer of motor vehicles registered in another Member State within the Single Market9. The 
solutions  proposed  in  the  present  Communication  for  certain  situations  of  use  of  cars  in  a 
Member State other than the one of registration may have to be reconsidered at a later stage in 
the  light  of  the  outcome  of  discussions  on  that  proposal.  That  proposal  does  however  not 
concern  taxation  and  Member  States  remain  free  to  exercise  their  power  of  taxation  with 
respect to motor vehicles, in accordance with Union law. 

6 
7 

8 

9 

OJ C 267 of 21.11.1975, p.8, COM(1998)30 of 10.2.1998 and COM(2005)261 of 5.7.2005. 
Council Directive 83/182/EEC on tax exemptions within the Community for certain means of transport 
temporarily imported into one Member State from another (OJ L 105, 23.4.1983, p.59). 
While this Communication deals with the taxation of passenger cars only (M1 vehicles), the arguments 
brought  forward  could  be  used  by  analogy  for  other  road  vehicles,  notably  light  duty  vehicles  (N1 
vehicles) or motorized two-wheelers. 
COM(2012)164 of 4.4.2012. 

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2. 

CURRENT RULES ON REGISTRATION AND CIRCULATION TAXES ON PASSENGER CARS 

Given  that  no  secondary  tax  legislation  in  this  area  has  been  adopted  so  far  apart  from 
Directive 83/182/EEC, Member States are free to apply taxes other than VAT on passenger 
cars as long as these taxes are in line with the general principles of EU law.  

2.1. 

Registration taxes 

The  term  'registration  tax'  used  in  this  Communication  includes  all  kinds  of  taxes  currently 
linked  to  the  registration  of  a  vehicle,  regardless  of  their  name  (tax,  excise  duty, 
environmental bonus-malus scheme, etc.) but does not cover fees covering the administrative 
cost for registration of a vehicle or the cost of technical inspections. 

EU legislation 

Directive 83/182/EEC covers temporary use in a Member State other than the Member State 
of  residence.  For  vehicles  for  private  use,  it  provides  that  their  temporary  use  in  a  Member 
State  shall  be  exempt  from  registration  and  circulation  taxes  provided  the  individual 
transferring the vehicle has his normal residence10 in another Member State and the vehicle is 
not disposed of or hired out in the Member State of temporary use or lent to a resident of that 
State. This means that in situations other than those covered by the Directive, Member States 
are in principle allowed to levy registration and/or circulation taxes. 

National legislation 

At present, 18 Member States levy a registration tax on vehicles11. The tax base and level of 
taxation  differ  considerably  between  Member  States12.  Most  common  differentiators  are  the 
purchase price or value of the car, the fuel used (e.g. petrol or diesel), engine size or power 
and the CO2-emissions of a car. Over the last years, many Member States have restructured 
the tax base of registration and circulation taxes to be totally or partially CO2 based. National 
registration taxes are typically levied once in the lifetime of a car, except in Belgium, where 
they are levied each time the (private) ownership of a car changes.  

Most  of  the  problems  that  arise  concerning  passenger  car  taxation  relate  to  one  of  the 
following cross-border scenarios:  

•  Case 1: A citizen moves his car to another Member State upon the transfer of his normal 
residence.  Although  Council  Directive  2009/55/EC  of  25  May  2009  on  tax  exemptions 
applicable to the permanent introduction from a Member State of the personal property of 
individuals13 does not apply to vehicle registration taxes, some Member States provide for 
an  exemption  in  this  situation.  Member  States  levying  a  registration  tax  must  apply  a 
depreciation factor in line with the reduction in the economic value of the imported car. In 
case  of  a  permanent  de-registration  and  export  of  a  car,  some  Member  States  grant  a 

10 

11 
12 

13 

The Directive defines 'normal residence' as the place where a person usually lives, that is at least 185 
days in each calendar year, because of personal and occupational ties, or, in the case of a person with no 
occupational  ties,  because  of  personal  ties  which  show  close  links  between  that  person  and  the  place 
where he is living. 
See Annex I to the SWD. 
More information on the tax base and the level of taxation is available in the database 'Taxes in Europe'. 
http://ec.europa.eu/taxation_customs/taxation/gen_info/info_docs/tax_inventory/index_en.htm. 
OJ L 145, 10.6.2009, p. 36. 

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refund  of  part  of  the  registration  tax  already  paid,  typically  also  applying  some  kind  of 
depreciation factor. 

•  Case 2: A citizen brings his car permanently to his second residence (e.g. a holiday home) 
in  another  Member  State  and  has  to  pay  registration  tax  again.  Some  Member  States  at 
destination exempt this transfer. Also, some Member States at departure grant a refund of 
part of the registration tax. 

•  Case  3:  A  citizen  lives  in  one  Member  State  and  uses  a  company  car  registered  by  his 
employer  or  by  the  company  of  which  he  is  an  administrator  in  another  Member  State. 
The  Member  State  of  registration  may  levy  a  registration  tax.  The  Member  State  of 
residence of the employee or administrator may only levy a registration tax if this is the 
Member State where the car is essentially used on a permanent basis. 

•  Case 4: A citizen lives in one Member State and uses a leased car registered by a leasing 
company  in  another  Member  State.  The  Member  State  of  registration  may  levy  a 
registration tax. The Member State of residence may also levy a registration tax which is 
proportional to the duration of the leasing contract. 

•  Case  5:  A  citizen  lives  in  one  Member  State  and  uses  his  car  frequently  in  another 
Member  State  to  visit  his  partner  or  family.  The  second  Member  State  may  only  levy 
registration tax if the partner or family uses the car regularly. 

•  Case 6: A student is going to temporarily study in another Member State or a worker is 
seconded  by  his  employer  to  another  Member  State.  For  this  period,  both  use  their  car 
primarily  in  their  country  of  studies/secondment.  In  these  cases,  the  Member  State  of 
study/secondment may not levy a registration tax. 

•  Case 7: A car rental company that has registered a car fleet or part of it in one Member 
State would enter into one-way rental contracts or would like to move part of this car fleet 
to another Member State without having to pay registration and circulation taxes so as to 
better manage seasonal peak demand. 

•  Case 8: A citizen or car dealer of a Member State that levies a registration tax sells a car to 
a  citizen  or  company  established  in  another  Member  State  where  it  will  have  to  be  re-
registered.  In  case  of  non-refund of the registration tax still incorporated in the value of 
the car there might be an 'over-taxation' in the first Member State as compared to cars that 
remain  registered  in  that  Member  State  until  their  end  of  life.  However,  some  Member 
States applying a registration tax also provide for a partial refund of the tax already paid in 
case passenger cars are de-registered and exported by professional dealers, i.e. without the 
car owner actually emigrating. 

Given the sparse legislation at EU level in relation to car taxation, the Court has been called 
upon to decide in a number of cases and has set out several principles which Member States 
must  respect  when  applying  registration  taxes  in  situations  such  as  those  described  above. 
However, while this jurisprudence provided solutions to the discrimination between domestic 
and  imported  products,  the  issue  of  double  taxation  occurring  in  situations  such  as  those 
described in cases 1, 2 and 8 was not addressed.  

2.2. 

Circulation taxes 

The term 'circulation tax' used in this Communication includes all kinds of taxes linked to the 
circulation  of  a  car  in  the  territory  of  a  Member  State,  regardless  of  the  name  of  the  tax, 
excluding tolls, vignettes and excise duties on fuels. 

Typically, circulation taxes are levied annually by the Member State in which a passenger car 
is  registered  and  are  differentiated  according  to  engine  size  or  engine  power,  the  fuel  used 
and/or the environmental performance of the car. In case a car was de-registered or changed 

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ownership in the course of the period for which the circulation tax has been paid, a pro-rata 
refund  is  applied.  Thus,  the  problem  of  double  taxation  in  case  of  a  cross-border  use  of 
passenger cars is limited. 

3. 

THE REMAINING PROBLEMS 

3.1. 

The problem of double taxation 

Even though the jurisprudence of the Court has solved a number of issues in the field of the 
levying  of  registration  taxes  in  the  country  of  destination,  a  number  of  problems  remain  in 
various situations. 

Registration taxes 

Citizens  may  be  faced  with  double  taxation  when  moving  a  car  permanently  to  another 
Member State or when primarily using it in a country different from the country where the car 
has initially been registered. 

Double taxation notably arises where citizens are migrating from a Member State that levies a 
registration tax without providing for a refund in case of a transfer of a car to another Member 
State  that  applies  a  registration  tax  without  providing  for  a  tax  exemption  in  such  a  case. 
Double taxation may also occur in cases where a car is registered in a Member State applying 
registration  taxes  and  is  primarily  (temporarily  or  permanently)  being  used  in  another 
Member State also applying registration taxes (cases 3 to 5 above). 

As EU integration proceeds, more and more people move from one country to another to live, 
study, work or retire, or have holiday homes in other Member States, leaving their (second) 
car  there14.  Although  the  EU  rules  prevent  double  taxation  in  some  specific  situations  the 
problem of double taxation may still arise in many other situations. 

Circulation taxes 

Double  taxation  in  the  field  of  circulation  taxes  is  not  to  be  expected  as  they  are  charged 
annually  and  are  only  charged  pro  rata,  i.e.  they  are  typically  refunded  in  case  of 
deregistration. 

3.2. 

Other challenges 

3.2.1.  The lack of information on the application of car registration and circulation taxes in 

cross-border situations 

Citizens  often  complain  not  only  about  double  taxation  but  also  about  the  complexity  of 
foreign tax rules and the difficulties in obtaining information on those rules and procedures. 
These difficulties are partly due to language barriers. 

14 

The number of citizens that reside in a Member State other than their Member State of origin reached 
12.8 million in 2011 The number of cross-border workers (citizens working in another Member State 
than  the  Member  State  of  residence)  has  reached  around  1  million  in  2010.  A  specific  category  of 
'cross-border workers' are the persons living in one Member State and using a motor vehicle registered 
by their employer in another Member State. There are no data available for this category but generally 
company  registrations  accounted  for  about  50.5%  of  the  11.6  million  new  passenger  cars  registered 
across 18 EU Member States in 2008. 

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3.2.2.  The proper application of EU rules in case of temporary or occasional use of a car 

The proper application of Directive 83/182/EEC on the tax treatment in case of temporary or 
occasional  use  of  a  car  in  a  Member  State  other  than  the  one  of  registration  has  been  the 
subject  of  numerous  Court  decisions  and  infringement  procedures  (see  section  3.1.  of  the 
SWD).  Other  situations  in  which  the  Court  has  been  called  upon  to  decide  concern  cross-
border  leasing,  company  cars  used  by  an  employee  or  an  administrator  living  in  another 
Member  State  and  cars  borrowed  by  a  resident  of  a  Member  State  other  than  the  one  of 
registration  (see  sections  3.4.  to  3.7.  of  the  SWD).  By  now,  the  case  law  of  the  Court  has 
crystallised important principles that have clarified the taxing power of Member States, while 
protecting the rights of EU citizens. It seems, however, to be a challenge for some Member 
States  to  bring  national  legislation  and  practices  in  line  with  these  developments.  The 
Commission  is  continuously  engaged  in  monitoring  the  compliance  of  Member  States' 
legislation with the case law of the Court in this field.  

3.2.3.  The case of cross-border car rental  

Car-rental companies rent out motor vehicles for a relatively short period of time. Car-rental 
fleets  are  usually  very  new,  as  vehicles  remain  in  the  fleet  for  about  6-9  months  and  are 
subsequently bought back by manufacturers. The EU passenger car fleet for short-term rental 
is estimated at 1.4 million vehicles. A car rental company providing services across the border 
may face two challenges: 

(1) 

(2) 

15 

The  first  is  the  repatriation  of  a  car  in  case  of  a  one-way  rental15.  Member  States 
often do not allow to re-rent the car to a resident of a country in which the one-way 
rental  ended  without  re-registration  and  payment  of  registration  tax.  Therefore  the 
car can often only be returned if the rental company finds a customer residing in the 
registration country, or if the car is returned by an employee of the rental company or 
is repatriated by trucks. Apart from repatriation costs there is the revenue forgone for 
the period the car cannot be rented out. As a consequence a one-way rental to another 
Member  State  is  expensive,  often  to  the  extent  that  rental  firms  do  not  offer  this 
possibility to customers. 

The second is that it is difficult for car rental companies to cope with seasonal peak 
demand  in  certain  Member  States  by  temporarily  moving  rental  cars  from  one 
Member  State  to  another.  The  costs  of  deregistering  in  the  Member  State  of  origin 
and registering the car and paying registration tax in the Member State of destination 
and  the  revenue  forgone  while  these  procedures  are  ongoing  -  and  the  other  way 
round  after  a  few  months  -  are  too  high  to  justify  the  relocation  of  a  car  for  a  few 
months. As a result, it is often not possible for car rental firms to meet peak demands 
for rental cars in certain Member States during the touristic season, while at the same 
time cars are standing idle in other Member States. Therefore car rental firms would 
like  to  be  able  to  transfer  part  of  their  fleets  to  other  Member  States  for  a  certain 
number of months each year. 

Article  3  of  Directive  83/182/EEC  obliges  Member  States  to  allow  rental  cars  to  be  re-hired  to  non-
residents with the view of being 'exported' if they are in the country as a result of a hire-contract that 
ended in that country. They may also be returned by an employee to the Member State where they were 
originally  hired,  even  if  the  employee  is  a  resident  of  the  Member  State  of  temporary  importation. 
Article  9  of  The  Directive  allows  Member  States  to  introduce  and/or  maintain  more  liberal 
arrangements, e.g. permitting these vehicles to be re-hired to a resident of their country with a view of 
re-exportation. However, not many Member States make use of this possibility. 

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Both  challenges  implicitly  restrict  the  freedom  to  provide  services  across  borders,  increase 
costs for rental companies and  for their customers, or limit the latter's choice of services as 
such  cross-border  services  may  not  even  be  provided  at  all.  As  regards  the  formalities  and 
costs linked to de- and re-registration, a solution is provided in the proposal for a Regulation 
simplifying  the  transfer  of  motor  vehicles  registered  in  another  Member  State  within  the 
Single Market, referred to in section 1. The proposal provides that car rental companies would 
only be required to register their vehicles in the Member State where they have their normal 
residence.  

3.2.4.  Tax-induced market fragmentation  

Most  Member  States  levying  registration  or  circulation  taxes  based  on  the  technical 
specifications of a car do so by differentiating according to technical performance (e.g. engine 
size  or  power)  or  the  amount  of  CO2  emissions16.  Often,  the  thresholds  have  been  set 
according to national market characteristics or national policy ambitions valid at the time of 
their introduction, and also having net revenue implications of successive reforms in mind. 

Car manufacturers have - wherever economically meaningful - adjusted their supply to these 
design features of car taxes, notably by supplying cars to their main markets that remain just 
below certain thresholds, such as providing cars with engine sizes of 1599 cm³ or 1999 cm³. 
However,  these  thresholds  differ  from  country  to  country.  This  absence  of  harmonisation, 
thus, triggers a 'technical' fragmentation of the Single Market. As a result, potential economies 
of scale of a Single Market with around annually 13 million new cars being registered cannot 
be exploited in full, having a negative impact both on the competitiveness of the industry and 
the  effectiveness  of  incentive  schemes.  The  cost  of  cars  is  also  raised  as  a  result.  This  is 
because  a  fragmented  system  induces  car  manufacturers  to  waste  resources  on  fine-tuning 
cars  to  different  thresholds,  and  reduces  the  cost-effectiveness  of  European  climate  policy. 
This fragmentation in car taxes was clearly recognised by the CARS 21 High Level Group in 
201217.  Car  manufacturers  have  therefore  called  for  harmonised  CO2-based  car  taxes.  An 
initiative by the Commission for harmonisation in this respect has however so far not received 
unanimous support by Member States18.  

4. 

POLICY OPTIONS AND BEST PRACTICES 

The  Commission  considers  the  abolition  of  registration  taxes  and  integrating  them  (in  a 
revenue neutral way) into the circulation taxes as well as the harmonisation and 'greening' of 
car taxation as the best solution to the remaining problems identified above. However, as the 
2005 proposal has so far not been adopted, it is appropriate to explore immediate solutions to 
the problems identified in this Communication.  

4.1. 

The problem of double taxation 

So as to avoid double taxation or 'over-taxation' in case an EU citizen permanently moves a 
car  to  another  Member  State  (cases  1,  2  and  8  of  section  2.1),  there  exist  in  principle  three 
policy options: 

16 
17 

18 

See Annex IV of the SWD. 
The  CARS  21  Final  Report,  adopted  on  6  June  2012,  is  available  on  the  following  website: 
http://ec.europa.eu/enterprise/sectors/automotive/files/cars-21-final-report-2012_en.pdf.  
See the 2005 proposal referred to in footnote 6. 

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•  The Member State of destination totally exempts the 'imported' car from registration taxes. 
•  The  Member  State  of  departure  refunds  the  part  of  the  registration  tax  already  paid  still 

incorporated in the value of the car (the residual tax)19. 

•  The Member State of destination reduces the domestic tax due by the tax already paid in 
the  Member  State  of  departure  (imputation  system),  on  top  of  the  depreciation  to  be 
applied when taxing used instead of new cars.  

The following table shows which of the 18 Member States applying a registration tax already 
apply options 1 and/or 2: 

AT  BE  CY  DK  EL  ES 

FI  FR 

IE 

IT  HU  LV  MT  NL  PL  PT  RO  SI 

1. 

X1 

X 

X  X 

X  X 

X 

X 

2. 
1 for the excise duty on cars but not for the registration tax 

X  X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

The  first  option  might  have  some  negative  budget  implications  for  Member  States  levying 
high registration taxes. This high-tax status, however, might also discourage inward migration 
and  inward  cross-border  working  arrangements,  potentially  negatively  affecting  their 
economies.  Also,  this  option  puts  immigrants  coming  with  their  (used)  car  in  a  somewhat 
privileged position as compared to residents. However, since migration itself typically causes 
high  social  and  economic  costs  for  the  immigrant,  the  'tax  privilege'  will  only  partially 
compensate for this. 

Under  the  second  option,  the  Member  State  of  departure  'loses'  the  residual  tax.  But,  as  a 
result of the refund, the car leaves the Member State 'tax neutral'. 

Under  the  third  option,  the  car  would  factually  be  exported  tax  neutral  from  the  country  of 
departure.  It  would  be  the  Member  State  of  destination  that  foregoes  tax  revenues 
corresponding  to  the  residual  tax.  The  negative  budgetary  implications  of  applying  such  an 
imputation system would be less pronounced than the implications of applying an exemption 
scheme. 

The  best  regime  for  citizens  would  be  a  depreciation-based  refund  system  applied  by  the 
Member State of departure combined with an exemption from registration tax in the Member 
State of destination. In this situation, the ultimate tax burden in the first Member State would 
always be proportional to the period of use of the car in that Member State (meaning no over-
taxation  would  occur)  and  no  tax  burden  would  occur  in  the  second  Member  State.  The 
second-best regime would be a combination of refund and imputation schemes. This regime is 
less beneficial for the citizens as they would not or not fully benefit from such imputation in 
case they moved to a Member State not charging or charging a lower registration tax. 

19 

Member States granting such a refund apply it under different conditions (see Annex II to the SWD). 
Typically the refunds are not only given to citizens changing residence with their cars but also in case 
cars are de-registered and exported by car dealers or citizens selling their cars abroad. 

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4.2. 

Other challenges 

4.2.1.  The lack of information 

By means of this Communication and SWD, the Commission aims at clarifying the EU rules 
on passenger car taxation taking into account the principles developed by the Court. It is the 
responsibility of the Member States to provide detailed information to citizens and businesses 
on  their  application  of  national  taxes  and  on  how  they  have  implemented  the  principles 
developed by the Court. It should be available in at least the language(s) of the Member State 
and the key issues (e.g. in the form of 'Frequently Asked Questions') also in the languages of 
the  citizens  that  mostly  move  to  this  Member  State,  and  in  English  for  all  others.  The 
information  should  be  easily  accessible  on  the  Internet,  adequate  and  up-to-date  and  should 
contain a contact point for more information.  

4.2.2.  Temporary  transfer  of  a  passenger  car  to  another  Member  State  (cases  3  to  7  of 

section 2.1.) 

As pointed out in section 3.2.2., it may be a challenge for Member States to bring their car tax 
legislation in line with the principles laid down in the jurisprudence of the Court. The SWD, 
which  the  Commission  intends  to  update  regularly,  should  provide  guidance  to  Member 
States.  Moreover,  discussions  with  Member  States  in  a  technical  Working  Group  could  be 
useful to identify best practices for certain situations.  

Already now, some Member States allow that vehicles registered in another Member State are 
for  a  relatively  short  period  (maximum  two  weeks,  a  month)  primarily  used  by  their  own 
citizens  without  the  obligation  to  pay  registration  and  circulation  tax  provided  certain 
conditions  like  an  administrative  notification  are  fulfilled.  But  even  this  looks  quite  rigid  at 
times  of  increasing  international  mobility  and  differentiating  mobility  patterns.  Given  the 
recent  jurisprudence  of  the  Court  on  borrowed  cars20,  Member  States  should  consider 
allowing a certain period of use of vehicles registered in another Member State by a citizen 
without the obligation to pay registration tax, provided certain conditions set to avoid evasion 
or abuse are fulfilled.  

4.2.3.  The car rental sector 

Some  Member  States  have  already  taken  measures  to  overcome  the  problems  described  in 
section 3.2.3.: 

(1) 

(2) 

20 

21 

As regards the repatriation of a one-way rental car, some Member States allow that 
vehicles registered in another Member State which arrived in their country as a result 
of a hire contract, are hired for a certain period to a resident without the obligation to 
pay registration and circulation tax if certain conditions are fulfilled21. This makes it 
easier to supply one-way rentals although the conditions vary considerably.  

One Member State allows the temporary transfer of rental cars registered in another 
Member State, for no longer than 3 months every year, without the need to pay the 
registration  and  circulation  tax  for  these  vehicles,  allowing  car-rental  firms  to  cope 
more effectively with seasonal peak demands.  

Judgment of 26 April 2012, joined cases L.A.C. van Putten, P. Mook, G. Frank, C-578/10, C-579/10, C-
580/10. 
For more details see annex III of the SWD. 

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Member States applying more flexible arrangements in these two situations can do this on the 
basis of Article 9(1) of Directive 83/182/EEC. So far, there is no evidence that this flexibility 
has  caused  problems.  Hence,  the  Commission  suggests  that  the  other  Member  States 
introduce similar arrangement, subject to the conditions set by them with a view to avoid any 
possible evasion or abuse. This would allow car rental firms to optimise the use of their fleets 
and to reduce costs and, hence, prices for final customers.  

4.2.4.  Tax-induced market fragmentation 

Although the 2005 proposal has not received unanimous support of Member States, it should 
be recognized that a lot of Member States have since introduced environmental  elements in 
their  registration  taxes  and/or  circulation  taxes.  However,  even  if  Member  States  apply  the 
same  environmental  elements,  they  often  use  different  thresholds  resulting  in  (sometimes 
huge) differences in the tax levied. Differentiations within car taxation should not be based on 
technology-specific  criteria,  such  as  engine  size  or  engine  power,  but  rely  on  objective, 
commonly available and policy-relevant performance data, such as CO2 emissions. Moreover, 
the  thresholds  should  be  regularly  updated  to  keep  pressure  to  buy  a  clean  and  efficient 
vehicle.  From  this  perspective  it  is  suggested  that  Member  States  examine  in  a  Working 
Group how the criteria they use as a basis for calculating registration and circulation taxes can 
be  better  coordinated,  so  that  the  technical  fragmentation  of  the  EU  car  market  is  reduced, 
economies  of  scale  are  exploited,  and  environmental  goals  are  reached  in  a  cost-effective 
manner. It is also to be noted that the Commission services are currently preparing guidelines 
for Member States wishing to introduce financial incentives in line with the European strategy 
on clean and energy-efficient vehicles22. 

5. 

CONCLUSION AND FOLLOW-UP  

Mobility  of  citizens  is  steadily  rising,  thanks  to  European  integration  and  as  a  result  of 
business  and  growth  models  increasingly  relying  on  an  intensified  international  division  of 
labour. Mobility can help to solve problems on local labour markets, increase the efficiency of 
markets  and  enhance  economic  growth.  Free  movement  is  also  EU  citizens'  most  cherished 
EU  right  and  a  cornerstone  in  the  development  of  the  EU.  Double  taxation  in  the  area  of 
vehicle taxation, high registration taxes upon transfer of a car in the context of migration and 
the lack of information on this may hinder cross-border mobility. 

Even  though  the  approach  proposed  by  the  Commission  in  2005,  namely  the  abolition  of 
registration taxes and integrating them in a revenue-neutral way into the existing circulation 
taxes,  has  so  far  not  been  adopted,  some  Member  States  have  already  on  a  voluntary  basis 
taken  certain  measures  envisaged  by  the  proposal,  which  the  Commission  welcomes. 
However, a number of problems which are incompatible with the idea of a real Single Market 
persist and therefore require a solution in the short term. 

Hence,  the  Commission  has  identified  and  proposes  to  the  Member  States  to  apply  the 
following best practices in the short term:  

1. 

To ensure that taxpayers know their rights and obligations when moving to another 
Member  State,  Member  States  should  provide  adequate  information  on  their 
application of registration and circulation taxes on vehicles in cross-border situations, 
including  information  on  how  they  have  implemented  the  EU  legal  framework 

22 

COM(2010)186 of 28.4.2010. 

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2. 

3. 

4. 

described in this Communication and the SWD. To this end, a central contact point 
for taxpayers should be designated, to which a link can be provided on the website of 
the Commission. 

To avoid double taxation and 'over-taxation' where citizens move a car permanently 
from one Member State to another, Member States that initially applied a registration 
tax  should  as  a  minimum  grant  a  partial  refund  of  the  tax  taking  into  account  the 
depreciation  of  the  car  independently  from  whether  or  not  the  Member  State  of 
destination provides an exemption from registration tax, if any. 

Member  States  should  make  full  use  of  the  flexibility  offered  by  Directive 
83/182/EEC  to  apply  more  liberal  arrangements  allowing  for  the  temporary  use  of 
vehicles  in  Member  States  without  application  of  registration  and  circulation  tax. 
This relates, in particular, to rental cars registered in another Member State, but also 
to other situations of temporary or occasional use by a resident of a car registered in 
another Member State.  

To  take  action  to  reduce  the  fragmentation  of  the  EU  car  market  caused  by  the 
divergent application by Member States of car registration and circulation taxes. The 
upcoming Guidelines on financial incentives for clean and energy-efficient vehicles 
also need to be taken into account. 

After  having  received  the  opinion  of  the  institutions  to  which  this  Communication  is 
addressed, the Commission intends to set up a technical Working Group to discuss the issues 
above with Member States. As a result of this process, the discussions in the Council on the 
2005 proposal could gain a new momentum. Revision of Directive 83/182/EEC could also be 
envisaged in order to take account of the extensive jurisprudence of the Court and to enhance 
transparency and legal certainty.  

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