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   On 1 January 1993 borders will come down in the Community, paving the way
   for a seamless open market within Europe.

   For  businesses,  this means the abolition of customs and tax  checks  at
   borders.  For individuals, it means that they can buy what they need  for
   their personal or family use in any one of the twelve Member States.


   Before 1 January 1993 individuals had to curb their desire to go shopping
   in  another country; they also had to restrict their  holiday  purchases.
   Under the old system, individuals were entitled to "travellers'  tax-free
   allowances".  If  a private individual bought an item costing  less  than
   ECU 600,  he paid the VAT-inclusive price in the Member State  where  the
   purchase was made.  Nevertheless, he was sometimes stopped at customs and
   had to indicate that he had nothing to declare.

   If  a private individual bought an item costing ECU 600 or more, he  paid
   the VAT-inclusive price in the Member State where the purchase was  made.
   At the border, he had to declare the item and, in certain  circumstances,
   could recover the VAT paid in the country where he had made the purchase,
   but  he  had to pay VAT in the country into which he  was  importing  the
   item.  In  short,  he was subject to lengthy, painstaking  and  sometimes
   costly formalities.

   From  1  January  1993, there will no longer be  any  customs  checks  on
   baggage  and  merchandise  carried  by  persons  travelling  between  two
   Member States, whether by air, sea, rail or road.  Consumers are the  big
   winners.  They  will be able to bring home anything they have  bought  in
   another country, without stopping at the border or making any declaration
   whatsoever.   The only condition is that those purchases must be made for
   their  own  or their family's consumption and must not  be  intended  for
   resale.  The  purchases may include hi-fi, computer or  video  equipment,
   jewellery,  antiques,  electrical household appliances -  in  short,  any
   item that is for sale, whatever its value.

   Under the new VAT system, private individuals pay VAT only once,  in  the
   country where they make the purchase.

   Other important new features are that:

   -  individuals  can move house between Community countries quite  freely,
      with no tax or customs formalities;

   -  they  can  bring  with  them goods  they  have  inherited  or  wedding
      presents, with no limit as to their value;

   -  individuals  who have a second residence in another country can  bring
      in any do-it-yourself equipment or furniture they wish.

   Nevertheless, there is a special scheme for new cars (and other new means
   of  transport,  e.g.  boats and aircraft).  These  are  cars  which  have
   travelled  less than 3 000 kilometres or are less than three months  old.
   An  individual may purchase such a car in the country of his  choice  but
   VAT  is  payable  in  the country  where  the  car  is  registered.  When
   purchasing  a  new  car,  he  can  therefore  take  advantage  of   price
   competition,  but  not of differences in VAT rates.  But for  used  cars,
   i.e.  cars which are both more than three months old and  have  travelled
   more than 3 000 kilometres, VAT is no longer payable in the  individual's
   own  country,  i.e.  in the country of registration.  Used  cars  can  be
   bought anywhere, and VAT is payable in the country where they are  bought
   because it is included in the purchase price.

   What  is the situation for products such as spirits or cigarettes  which,
   if  purchased  in  another  Member State, have  always  been  subject  to
   quantity restrictions?

   Here  too,  individuals  may bring home for  their  personal  consumption
   unlimited   quantities   of  wine,  aperitifs   or  cigarettes,   without
   completing any bothersome formalities at the border.

   The  only minor restriction is that a check may be made to prevent  fraud
   with regard to the use of the products.  Member States are entitled,  but
   not  obliged,  to ask travellers to prove that their  purchases  are  for
   their  personal consumption when they exceed indicative quantities  which
   Member States themselves set over and above minimum Community quantities:
   800  cigarettes,  90  litres of wine, 110 litres of beer,  20  litres  of
   aperitifs  (alcoholic  strength of less than 22°), 10 litres  of  spirits
   (alcoholic strength of more than 22°).

   The number of Member States wishing to exercise this right will  probably
   be small.  Moreover, such questioning must not give rise to checks at the
   border  itself, but solely within national territories, e.g. in the  form
   of mobile checks.

   Purchases made in duty-free shops:

   Duty-free shops are shops where no duty is paid and which are located  in
   airports  and  ports, and on board aircraft  and  seagoing  vessels.  The
   thinking  behind  the  internal market, namely that  borders  within  the
   Community should be removed and a large single market created, will  lead
   to  the  disappearance  of duty-free purchases for  journeys  within  the

   Nevertheless,  this  facility  has  been  prolonged  temporarily,   until
   30 June 1999.  It  should,  however,  be borne  in  mind  that  duty-free
   purchases  are restricted in terms of quantity and in terms of  value  by
   specific   allowances   (see  annexed  table).  Compliance   with   these
   allowances will be checked in the duty-free shops themselves, instead  of
   at borders.


   Under  the  old VAT system, businesses which engaged  in  intra-Community
   trade  were obliged to go through customs, where checks were made on  the
   payment  of VAT on importation and the remission of tax  on  exportation.
   These formalities were lengthy, complex and costly, and were repeated for
   each consignment.

   The  new  VAT  system  does away  with  these  disadvantages  within  the
   Community.  As a result, some 60 million customs documents will disappear
   and, with them, procedures which cost firms an average of ECU 70 for each

   From 1 January 1993, lorries will be able to cross borders with no checks
   being  made.  This  puts  an  end  to  the  delays  attributable  to  the
   completion   of  customs  formalities  and  the  financing  of   VAT   on
   importation.  It  spells  the  end to the queues of  lorries  waiting  at
   border posts.

   The   concepts   of  importation  and  exportation  will   disappear   in
   intra-Community  trade and will, from now on, be reserved for trade  with
   third  countries.  But, as at present, VAT will still be payable only  in
   the country of destination.

   The  new system is based on the normal commercial documents and  requires
   firms  to make simple returns on the basis of their accounts.  The  basic
   principle  is that "supplies" (the term "exports" no longer  being  used)
   to  another  Member State  are exempt from VAT (zero-rated)  and  VAT  is
   payable  in the country of destination at the time of  "acquisition"  (no
   longer "importation").

   An  example  will illustrate this new system.  A  Portuguese  firm  sells
   sardines  to a German canning company.  Since this is an  intra-Community
   sale, the Portuguese firm continues to  apply a zero rate.  It  therefore
   sells  its  tonne  of  sardines to the  German  firm  for  ECU 1 000.  In
   purchasing the sardines, the German company is making an  intra-Community
   acquisition and pays the VAT chargeable in Germany, i.e. 15% or  ECU 150.
   It pays the Portuguese firm ECU 1 000 and, in its normal regular  return,
   declares  that it owes ECU 150 to the German tax  administration.  It  no
   longer  becomes liable for payment of the ECU 150 at the moment when  the
   border  is crossed, but at the moment when it makes its  regular  return.
   It  does  not, therefore, have to advance the VAT.  The  VAT  of  ECU 150
   will, of course, be recoverable under the normal  conditions obtaining in

   The Portuguese firm reports its sale in a recapitulative statement  which
   shows its own VAT number, the German company's VAT number  and the  total
   value  of its sales made to that company.  The statement shows  the  same
   details for all the Portuguese firm's other customers in the Community.

   For  this  system  to  be able to function smoothly,  each  firm  in  the
   Community  has  been  assigned a VAT identification  number  by  its  tax
   administration.  From  now on, each VAT number will indicate  the  firm's
   country  of  origin by means of a special code preceding the  VAT  number
   proper (BE, DK, DE, EL, ES, FR, IR, IT, LU, NL, PT, GB).

   In  order to ensure that firms are placed on an equal footing as  regards
   collection  of  the tax, and to combat tax evasion,  a  computerized  VAT
   Information Exchange System (VIES) has been established for the  exchange
   of information between the Twelve.

   Any  business  can have access to this computerized system  via  its  tax
   administration  for the purpose of confirming a VAT number or an  address
   which  corresponds  to  a VAT number, so that it can  make  a  zero-rated
   supply to a new customer.

   The business may contact its administration by telephone, telex, telefax,
   minitel or computer link.

   VIES  enables a firm to check the VAT number of its customers in  another
   Member State  in the shortest possible time: a maximum of ten seconds  is
   all  that is required for confirmation between  two  administrations.  In
   addition,  it  enables  administrations to exchange  information  on  the
   recapitulative  statements  and hence on the  volume  of  intra-Community
   sales.  Administrations  will  carry  out checks  by  cross-checking  the
   information  received  from  the  seller  with  that  received  from  the

   It  should  be noted that the VIES system works in  accordance  with  the
   rules governing business confidentiality and secrecy.

   One  further detail: in the single market, there is no change in  respect
   of  trade  with  third countries, i.e. the current  rules  governing  the
   charging of tax on importation and remission of tax on exportation remain


   In the single market, the risks of unfair competition and of diversion of
   purchases  have  revealed the need for an approximation of  indirect  tax
   rates, and in particular of VAT rates.

   Each Member State sets a single standard rate of VAT of 15% or  more.  In
   addition, all higher rates of VAT, which were generally chargeable on hi-
   fi equipment, vehicles and video recorders, disappear.  This represents a
   substantial gain for consumers in several Member States.

   Member States  have  the option of applying  one or  two  reduced  rates,
   provided that they are not lower than 5%.  These rates apply to goods and
   services of a social or cultural nature, e.g. foodstuffs,  pharmaceutical
   products, water supplies, books, newspapers, cinema and theatre.

   Member States  which  have been applying zero rates and  extra-low  rates
   (under 5%) may continue to do so on a temporary basis.

   Excise  duties,  which,  on  top of VAT,  apply  to  petroleum  products,
   alcoholic  beverages  and tobacco, are also approximated  throughout  the
   Community.  A minimum rate must be complied with for  any  product  which
   falls  into one of these categories.  In each Member State,  excise  duty
   may not be lower than the minimum Community rate.

                                     - - -



   Limits in terms of value

   Products other than those specified below up to a value of ECU 45 (ECU 23
   for those under 15).

   Specific limits

   Tobacco products

   - cigarettes                                                  200


   - cigarillos                                                  100


   - cigars                                                       50


   - smoking tobacco                                             250 grammes

   A combination of these amounts is possible.

   Spirits and alcoholic beverages

   -  distilled beverages and spirits with an alcoholic
      strength exceeding 22% vol., non-denatured ethyl
      alcohol with an alcoholic strength of 80% vol. or more      1 litre


   -  distilled spirits, aperitifs based on wine or
      alcohol, tafia, sake or similar beverages with
      an alcoholic strength of not more than 22% vol.,
      sparkling wine, liqueur wine                                2 litres


   - still wine                                                   2 litres

   A combination of these amounts is possible.

   Perfumes                                                       50 grammes


   toilet water                                                   0.25 litre

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