European Commission - Press release
Car registration tax: Commission requests Ireland and Spain to modify rules on vehicles from other Member States
Brussels, 27 October 2011 - The European Commission has formally requested Ireland and Spain to change the way in which they tax leased or rented vehicles from another Member State, as well as company cars in the case of Spain, so as to ensure their rules comply with EU legislation.
According to EU rules, a Member State can only levy a registration tax on a leased or rented vehicle from another Member State in proportion to the use in its own territory. This means that a Member State may only levy a full registration tax on a leased or rented vehicle from another Member State if it is used or intended to be used on a permanent basis.
Similarly, a vehicle that is registered by a company in one Member State and used by an employee resident in another Member State cannot be taxed unless the vehicle is used on a permanent basis in the resident's country. A Member State can only require registration of the vehicle and levy a registration tax if it is proportionate to the duration of the vehicle's use on its territory.
Under Irish law, an Irish resident who rents or leases a vehicle in another Member State is obliged to pay the full amount of the registration tax. An exemption or refund is therefore not possible if a car is used in Ireland only for a short period. This discriminatory tax treatment is contrary to EU rules. Leasing or rental companies in other Member States may face additional taxation when offering their services to Irish residents.
Spain also levies the full amount of registration tax on a leased or rented vehicle by a Spanish resident in another Member State (unless the leasing period is shorter than three months in any twelve months). This is in breach of EU rules which provide that the registration tax can only be levied in proportion to the duration of the use of the leased car.
Finally, under Spanish law, the registration tax on a car can be levied in full if an employee who works for a company established in another Member State uses a car in Spain and is resident in Spain.
These provisions are contrary to EU rules on free movement of workers and on freedom of establishment, fundamental principles of the EU's Single Market.
In the absence of compliance with EU law within two months, the Commission may refer Ireland and/or Spain to the EU's Court of Justice.
A Member State may levy a registration tax on a leased or rented vehicle from another Member State when it is used or intended to be used on a permanent basis.
The Court of Justice has however concluded that such a tax is contrary to EU law if it is not proportionate to the duration of the registration of the means of transport in the State where it is used. Consequently, the Court has ruled that to oblige a natural person to pay the full amount of tax for a vehicle rented or leased in another Member State is contrary to EU rules (Articles 56 to 62 of the Treaty of the Functioning of the European Union) when the duration of the use in that territory is not taken into account.
Moreover, the Court has ruled that it is contrary to EU law to deprive the person in question of a right to an exemption or a refund, in case the vehicle is not intended to be used on a permanent basis.
The Court of Justices has also adopted a number of rulings establishing that registration tax should be proportionate the duration of use on a given territory for company cars.
For the press releases issued on infringement proceedings in the area of taxation or customs see:
For more information on EU infringement procedures, see MEMO/11/739.
For the most up-to-date general information on the infringement proceedings initiated against Member States, see: