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Brussels, 29 January 2009

Car taxation: The European Commission calls on Greece to apply a Court ruling on depreciation criteria used to determine the taxable value of used cars

Through a letter of formal notice under Article 228 of the EC Treaty, the European Commission has decided to open a new infringement procedure against Greece regarding its car taxation law. Despite some modifications in the law and a recent European Court of Justice judgement, the Greek car tax legislation still continues to discriminate, in certain cases against the acquisition of second-hand cars from other Member States. The European Commission has therefore requested that Greece modify the relevant provisions of its legislation which provide for the depreciation of value to be applied to second-hand passenger vehicles from other Member States in the determination of their taxable value. If Greece fails to comply with the letter of formal notice, the Commission may send a reasoned opinion to Greece before bringing the matter to the Court of Justice for a second time, seeking the imposition of a penalty payment.

The European Court of Justice (ECJ) has consistently held that a Member State is not prohibited from levying a vehicle tax on the first registration of a vehicle in that Member State, provided that the tax is in conformity with Article 90 of the EC Treaty. This means that a Member State must not impose any internal taxation on the products of other Member States in excess of that imposed on similar domestic products.

The Court also decided that registration tax paid on a new vehicle forms a part of its market value and that Member States must take actual car's depreciation value into account when calculating registration tax. (see ECJ cases Nunes Tadeu, C-345/93; Commission v Denmark, C-47/88; and Commission v Hellenic Republic, C-375/95).

The following example illustrates this rule: registration tax on a x years old car transferred in one Member State cannot exceed the amount of duty included in the residual value of a similar used vehicle registered x years ago in that Member State.

In its judgment in Case C-74/06 of 20 September 2007, the ECJ held that by applying a single criterion of depreciation (based on age) for the purpose of determining the taxable value of second-hand vehicles transferred from another Member State into Greece in order to establish the registration tax, and by adopting a reduction in value which may lead, even if only in certain cases, to a discrimination of second-hand cars from other Member States, Greece has failed to fulfil its obligations under Article 90 EC.

With effect from January 2008, Greece repealed its legislation, contested by the ECJ in its Judgment, and adopted in Law 3634/08 new depreciation scales which seek to address the issues raised by the Judgment. The new depreciation scales take account of the fact that vehicle depreciation is not linear and provide for an additional depreciation criterion based on the mileage of the vehicle.

The Commission considers that the introduction of new accelerated depreciation scales and another depreciation criterion based on mileage will not in themselves render the system compatible with the Judgment. The system will only be compatible with the Judgment if it ensures that the amount of the registration tax due does not exceed, even if only in certain cases, the amount of the residual tax incorporated in the value of similar second-hand vehicles already registered in the national territory. To achieve this, depreciation rates should be established at a level which reflects not the average loss of value of vehicles but which is, with reasonable approximations, very close to the highest loss of value of such vehicles. Greece has not provided evidence to the effect that depreciation rates are in fact adjusted to the highest loss of value of vehicles.

For information on EU activities in the field of car taxation see:

For the press releases issued on infringement procedures in the taxation or customs area see:

For the latest general information on infringement measures against Member States see:

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