Brussels, 2 April 2004
Excise duty: Commission proposes to simplify and liberalise rules for alcohol
The European Commission has put forward a proposal to simplify and liberalise the rules on intra-EU movements of products (mainly alcohol) on which excise duty has already been paid in a Member State. For private individuals, the proposal aims to clarify the existing rules on moving goods from one Member State to another, and to bring them more into line with the internal market principle that products acquired by private individuals for their own use should be taxed in the Member State in which they are bought. For goods moved for commercial purposes, the Commission proposes to maintain the basic principle that excise duty is payable in the Member State of destination, but to harmonise and simplify the procedures to be followed in that Member State. The Commission has found that both traders and European citizens find it difficult to comply with the law on excise duty in the Member State of destination. Since this situation is unacceptable in an Internal Market, the Commission wants to change the rules.
"The proposed directive will benefit both European citizens and traders, particularly small-scale producers wishing to sell their products in other Member States", saidFrits Bolkestein, European Commissioner for Taxation. "The European Commission wishes to ensure that private individuals and businesses are free to buy and sell goods across borders in the internal market while safeguarding the Member States' tax revenue."
The proposal covers products that have already been subject to excise duty in one Member State and are then transported to another Member State. The tax arrangements applying to such intra-EU movements depend on their purpose (see Articles 7 to 10 of Directive 92/12/EEC). If it is commercial, the goods are always taxed in the country of destination; if they are for private use, and the private individual personally transports the goods bought in another Member State, the goods are subject to excise duty in the Member State of purchase. The Commission presented its proposal following a report on the application of Articles 7 to 10 of the Directive. The report concluded that both traders and European citizens currently have difficulty complying with the law on excise duty in the Member State of destination.
The Commission proposes, firstly, to liberalise the system applying to distance purchases by a private individual, i.e. purchases made by an individual for which transport or shipment to the Member State of destination is organised entirely by that individual. At present, if a private individual resident in a Member State buys products subject to excise duty in another Member State, the goods are subject to excise in the Member State of destination if they are not transported by that individual. Private buyers therefore have to fulfil cumbersome formalities to comply with the law in the Member State of destination. Under the proposed directive, alcoholic beverages transported from one Member State to another on behalf of private individuals (but not by the seller), for their own use, would be taxed only in the Member State of acquisition, at the rate applicable there. This would also make the system more consistent with the VAT arrangements, under which distance purchases of products subject to excise duty are systematically subject to VAT in the Member State of departure. This change would not apply to tobacco products transported on behalf of a private individual. These would continue to be taxed in the Member State of destination on public health grounds.
Under the proposed directive, the general principle of taxation in the country of acquisition would also apply to sending gifts or moving house. In those cases, the restriction for tobacco products was considered unnecessary.
The proposal would abolish the "indicative" limits (800 cigarettes, 10 litres of spirits, 90 litres of wine, 110 litres of beer) currently provided for in EU law as possible evidence of whether products are intended for commercial purposes or for private use. In practice, these limits have been interpreted very narrowly by certain Member States. Moreover, the public often perceives the limits as real quantitative limits, when the quantity of goods transported is only one factor among others to be taken into account by the authorities in distinguishing products intended for commercial purposes from products intended for private use.
The Commission proposes to simplify the procedures that apply when traders transport goods which have already been subject to excise duty in one Member State to another Member State for commercial purposes, while ensuring that excise duty is paid in the Member State of destination and repaid to the trader in the Member State of departure. Such movements mainly involve small traders (such as small-scale wine producers) who find it difficult to comply with the current administrative procedures that are cumbersome and often very costly when measured against the value of the transactions in question.
The proposal for a Directive harmonises the procedure, by providing for single identification in a central office in each Member State of destination, at which foreign vendors must periodically pay excise duties on the basis of an overall declaration. Member States would no longer have the option of requiring that a tax representative be appointed.
These simplified procedures would apply, notably, to distance selling, i.e. sales to private individuals in which the goods are transported or dispatched to the Member State of destination by or on behalf of the seller. The new rules would be favourable to distance selling on the internet, for example.
The Commission proposal is also aimed at other commercial movements, such as transfers of products to another Member State for presentation or sale to clients at trade fairs. The aim of the proposed changes is to see to it that the person best placed to complete the formalities in the Member State of destination becomes the person liable for excise duty. Where that person is not established in the Member State concerned, the simplified procedures applicable to distance selling could be applied and use of the simplified administrative accompanying document, an administrative document which must normally accompany such movements, would no longer be required.
The full text of the proposal is available on the Europa website at the following address:
http://ec.europa.eu/taxation_customs/whatsnew.htmSee also MEMO/04/80.