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Tax-free allowances: permanent or temporary importation of private motor vehicles
To remove the tax obstacles to the permanent or temporary importation of private motor vehicles into another Member State.
Proposal for a Council Directive of 10 February 1998 governing the tax treatment of private motor vehicles moved permanently to another Member State in connection with a transfer of residence or used temporarily in a Member State other than that in which they are registered [COM(98) 30 final - Official Journal C 108 of 07.04.1998].
This proposal is intended to replace Council Directives 83/182/EEC and 83/183/EEC, which deal respectively with the temporary importation of certain means of transport and with the permanent importation from another Member State of the personal property of individuals.
Since the inception of the single market, the taxation of personal property following a transfer of residence has been confined to motor vehicles. The rules applicable to other types of goods, such as those laid down in those two directives, have become obsolete. What is more, the rules set out in those directives in respect of motor vehicles do not cover all aspects of the tax regimes currently in force in the Member States. In order to permit genuine free movement of persons and, more particularly, of their property, it is important to remove the tax obstacles that can still impede the movement of motor vehicles (especially double taxation or unnecessary administrative requirements).
The new Directive is intended to prohibit the imposition of excise duty, registration taxes or other consumption taxes (cf. Annex I to the Directive) on private motor vehicles registered in other Member States and brought permanently into the Member State to which the private individual has transferred his normal residence. Taxes on the use of the vehicle, such as periodic road taxes (cf. Annex II to the Directive), are, however, permissible.
None of these taxes may be imposed by a Member State on private motor vehicles registered in other Member States and used temporarily on its territory (cf. point 8 below).
The provisions governing the permanent transfer of residence or the temporary use of vehicles are also applicable to the normal spare parts, accessories and equipment of any motor vehicle.
The general rules for determining "normal residence" are as follows:
- "normal residence" means the place where a person lives for at least 185 days in each calendar year because of personal and occupational ties;
- in the case of a person who lives in turn in two or more Member States, his place of "normal residence" is regarded as the place of his personal ties provided that he returns there regularly;
- where a person is living in a Member State in order to carry out a task of a set duration, his place of residence is still regarded as being the place of his personal ties, irrespective of whether he returns there during the course of this activity;
- attendance at a university or school in another Member State does not constitute a transfer of normal residence.
Individuals can give evidence of their place of residence by presenting their identity card or any other valid document. Where the competent authorities of the Member State of destination have doubts regarding such evidence, or for the purpose of certain specific controls, they may request whatever additional information or evidence they require, either from the individual or from the competent authorities of the other Member State.
N.B.: The rules for determining the normal residence were laid down in the two 1983 Directives that are due to be replaced by this new proposal. The concept of "normal residence" has been the subject of several court actions, and even the Court of Justice of the European Communities has been called upon to hand down a judgment interpreting and supplementing the provisions determining normal residence. A person's place of normal residence can therefore be defined as the permanent centre of his interests and must be determined by applying all of the criteria laid down in the Directive (and not just of one or several of them) and any other relevant factors.
Drawing on the case-law of the Court of Justice, the proposal for a Directive introduces a provision specifying that a change in a person's marital status does not, in itself, imply a change of residence.
Similarly, the proposal contains an important amendment to the current rules in order to enable a decision to be reached more easily where the place of normal residence is in dispute (cf. point 15 below).
In the case of a person's place of residence being transferred to another Member State, that person will not be liable for extra taxation provided that certain conditions are met:
- the motor vehicle has been acquired under the general conditions of taxation in force in the domestic market of one of the Member States and is not subject, as a result of its being brought to another Member State, to any exemption from or refund of any of the taxes referred to above (point 3) in the Member State from which it is brought. These two conditions are deemed to be fulfilled if the vehicle bears a standard registration plate of the Member State of registration or if the vehicle was purchased under certain special agreements governing public officials (e.g. diplomats) working abroad;
- the person transferring residence has had the use of the vehicle for a period of at least six months prior to his arrival in the new Member State;
- the motor vehicle is brought into the Member State to which the person transfers his residence not later than 12 months after such transfer.
Where a vehicle is used temporarily in another Member State, no extra tax is payable provided that:
- the vehicle is not used in the other Member State for a continuous period exceeding six months within any twelve-month period (or a continuous period of nine months in the case of a person who is working in another Member State and uses there a vehicle registered in the Member State of his normal residence);
- the person using the vehicle has his normal residence in a Member State other than the Member State of temporary use;
- the vehicle is used on an exclusively private basis.
However, during the period of temporary use in another Member State, the vehicle may not be hired out or lent to a resident of that Member State. Exceptions to this rule are listed in point 9 below.
The following are also cases of private use of the vehicle where taxation is not permitted:
- where a private vehicle belonging to a car rental firm is in the Member State of temporary use as a result of a rental contract which expired in that Member State;
- where a vehicle is driven temporarily in another Member State by a member of the family of the person benefiting from the provisions governing temporary use (provided that the person who brought the vehicle onto the territory of that Member State is present);
- where a vehicle is driven temporarily in another Member State by any person (provided that the person who brought the vehicle onto the territory of that Member State is also on board the vehicle);
- where a vehicle registered in one Member State is used in another Member State by a resident of the latter Member State on a temporary basis (for not more than two months) provided that his vehicle has been immobilised as a result of a breakdown or accident;
- where an employee is using on a temporary basis in the Member State where he is resident a vehicle belonging to or hired by his company, which itself is located in another Member State;
- where a vehicle registered in his normal country of residence is used regularly by a person for the journey between his place of residence and his place of work in another Member State;
- where a vehicle registered in the Member State of his normal residence is used by a student in the Member State in which he is pursuing his studies.
The following cases of temporary business use are also exempted from taxation:
- where the person using the vehicle has his normal residence in a Member State other than the Member State of temporary use (except in cases where that person is an employee of an undertaking which is established in another Member State and allows him the use of a vehicle registered in the Member State in question);
- where the vehicle is not used in the Member State of temporary use to carry passengers for hire or material reward of any kind, or for the industrial and/or commercial transport of goods, whether for reward or not;
- where the vehicle is not hired out or lent in the Member State of temporary use;
- where the vehicle is registered in the Member State of normal residence of the user;
- where the vehicle has been acquired under the general conditions of taxation obtaining in the Member State of normal residence of the user;
- where any periodic vehicle taxes ordinarily payable in the Member State of registration have been paid.
Where a private vehicle registered in another Member State is used temporarily in a certain Member State and becomes badly damaged there, and where the vehicle is disposed of with a view to being scrapped or destroyed, no demand for any of the taxes referred to in Annexes I and II to the Directive may be made by the Member State of temporary use.
Where a person wishes to use a vehicle in another Member State for a period in excess of that specified above (for example, on an ongoing basis in connection with a secondary residence), the Member State in question registers the vehicle and is entitled to impose the normal taxes that are liable upon registration.
Where the conditions for temporary use are not met, the individual concerned can:
- remove the vehicle from the Member State of temporary use or
- register it there and pay the normal taxes that are liable upon registration.
In applying sanctions, the Member State must ensure that they are commensurate with the gravity of the infringement and do not constitute an obstacle to the free movement of goods and persons.
In cases where a used motor vehicle is brought permanently from one Member State to another in circumstances other than those governed by the Directive, the latter Member State is entitled to impose a registration tax or similar tax (cf. Annex I to the Directive) on that vehicle provided that it ensures that the amount of tax levied is broadly in line with that levied on vehicles of a similar kind within that Member State.
In the case of disputes, especially regarding the determination of the place of residence for the purpose of taxing the vehicle, the authorities of the two Member States in question should consult each other in order to come to a decision. If they do not reach an agreement within six months of the date of the claim by the individual concerned, they must refer the matter to the Commission.
Member States may retain or introduce provisions which are more favourable to users than those laid down in the Directive. They may not, in any event, apply tax treatment which is less favourable than that applied in connection with imports or the use on their territory of vehicles brought directly from third countries.
In a similar vein, the Commission adopted on 6 September 2002 a communication entitled "Taxation of passengers cars in the European Union - options for action at national and Community levels" [COM(2002) 431 final] in which it proposes a number of policy measures and actions which should be considered in the area of passenger car taxation in order to provide solutions for the problems faced by citizens and the car industry and thus improve the functioning of the Internal Market. It explores possibilities to modernise and simplify the existing vehicle taxation systems and in particular to include new parameters in the tax bases of passenger car related taxes in order to make them partially, or totally, CO2 based. It also explores possibilities to better co-ordinate and, at a later stage, to approximate passenger car taxation systems and to remove tax obstacles and distortions to free circulation of passenger cars within the Internal Market. As registration tax seems to be at the root of most of the problems faced in this area, the Commission suggests, as a valid option for future action, its gradual reduction and stabilisation at very low levels and preferably its total abolition, over a transitional period of around five to ten years. It adds that this action should be accompanied by other actions such as gradually switching over from revenue from registration tax to that from annual circulation tax and fuel taxes.
Consultation procedure (CNS/1998/0025)
On 27 May 1998 the European Economic and Social Committee gave its opinion [Official Journal C 235 of 27.07.1998].
On 18 June 1998 the European Parliament approved the Commission proposal subject to three amendments [Official Journal C 210 of 06.07.1998].
On 15 April 1999 the Commission adopted an amended proposal [COM(1999) 165 final - Official Journal C 145 of 26.05.1999].
The proposal is currently being examined by the Council with a view to adoption.