Taxation: Clarifying EU rules on car taxes
European Commission - IP/12/1368 14/12/2012
Brussels, 14 December 2012
Taxation: Clarifying EU rules on car taxes
Today the Commission presented a Communication clarifying EU rules on car taxation and recommending measures to strengthen the Single Market in this area. The aim is to minimize the problems encountered by citizens and businesses moving cars between Member States and to remove obstacles for cross-border rentals.
Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit, said: "With over 3 million cars moved between Member States every year, the number of tax obstacles they still encounter is unacceptable. If Member States cannot agree on common car taxation rules, they should at least respect basic EU principles to ensure that citizens and businesses do not suffer higher taxes or discrimination. Today's Communication spells out basic rules that must be respected, and offers good advice to improve the Single Market for passenger cars."
Car registration taxes and circulation taxes are not harmonised in the EU. This can result in double taxation in certain situations and cause the fragmentation of the Single Market for passenger cars. The Commission receives numerous questions and complaints related to cross-border car taxation. This shows the problems which citizens and businesses face, and their uncertainty over their rights and obligations in this area.
The Commission has already put forward car taxation proposals to resolve problems encountered by EU citizens, but Member States have not been able to reach unanimous agreement on them. As a result, EU law related to car taxation is mainly derived from Court of Justice rulings. The Commission has also launched over 300 infringement procedures against Member States related to discrimination in national car registration rules and circulation taxes.
Despite jurisprudence of the Court and legal proceedings against Member States, the fragmentation of national tax schemes, discrimination and double taxation of cars transferred between Member States persist.
Therefore, the Commission has taken the initiative to clarify the EU legal situation for passenger car taxes and identify best practices that Member States should implement. These include providing better information on the application of car taxes in cross-border situations; refunding part of the registration tax for cars which are permanently transferred to another Member State; and making provisions for the temporary use of vehicles, particularly rental cars, which are registered in another Member State.
A Staff Working Document that accompanies the Communication gives an overview of the main legal issues that arise in the field of vehicle taxation and the level of protection available to EU citizens and businesses under EU law and case law.
Car taxation accounted for around 1.9% of all tax revenue across Member States in 2010. Each year, more than 13 million new passenger cars are registered in the EU, while over 3 million cars are moved to another Member State. Registration and circulation taxes are not harmonised in the EU, risking double taxation for citizens and businesses and the fragmentation of the Single Market.
In 2005, the Commission tried to address the problem with a proposal aimed at abolishing registration taxes and replacing them with annual, 'green' circulation taxes. To date, Member States have not managed to reach unanimous agreement on this proposal, although many Member States have unilaterally drawn on its ideas in formulating their car tax systems.
In its 2010 EU Citizenship Report (see IP/10/1390) the Commission identified double registration taxes on cars as an obstacle to free movement within the EU, and announced that it would work on solutions. In 2012, the Commission presented a proposal to simplify the re-registration of motor vehicles moved to another Member State (see IP/12/349), which could result in total savings of at least €1.5 billion per year for businesses, citizens and registration authorities.
The Communication will now be discussed by the European Parliament, the Economic and Social Committee and the EU's Council of Ministers. The Commission aims to use these discussions, and technical discussions with Member States, to give new momentum to its 2005 proposal on car taxation.
The Communication and Staff Working Paper are available here:
For more information on passenger car taxation see:
For Commissioner Šemeta's website, see: