On March 6, 2025, the ECJ released the AG Opinion in the case C-125/24 (Palmstråle).
Context: Request for a preliminary ruling under Article 267 TFEU concerning the interpretation of Article 143(1)(e) of Directive 2006/112/EC on the common system of value added tax (VAT Directive) and Articles 86(6) and 203 of Regulation (EU) No 952/2013 laying down the Union Customs Code (Union Customs Code)
Summary
- Advocate General Kokott delivered an opinion on March 6, 2025, regarding Case C-125/24, concerning the re-importation of goods and the interplay between customs law and VAT exemptions under EU law, specifically focusing on the VAT exemption for goods exempt from customs duties.
- The case involves an applicant who exported horses to Norway for competitions and then re-imported them into Sweden without properly following customs procedures, leading to the Swedish Customs Authority imposing import VAT despite no customs debt being established.
- The central legal question is whether compliance with customs procedures is necessary for obtaining an import VAT exemption under Article 143(1)(e) of the VAT Directive, particularly when substantive conditions for customs duty exemption are met but procedural requirements are not.
- Advocate General Kokott argues that the VAT exemption is not accessory to customs legislation; therefore, it should be granted if the substantive conditions for customs relief are satisfied, regardless of procedural non-compliance related to customs declarations or presentations.
- The opinion concludes that if a customs debt arises solely from procedural failures, the import VAT exemption still applies, and it is unnecessary to assess compliance with Article 86(6) of the Customs Code regarding attempts at deception, suggesting that the substantive requirements are sufficient for VAT exemption.
Articles in the EU VAT Directive
Article 143 (1)(e) of the EU VAT Directive 2006/112/EC
1. Member States shall exempt the following transactions:
(e) the reimportation, by the person who exported them, of goods in the state in which they were exported, where those goods are exempt from customs duties;
Facts
The applicant is AA and the defendant is the general representative of the Swedish Customs Authority. AA owns horses that are used for competitions. For this purpose she exported two horses to Norway, and then brought them back to Sweden after the competition. The horses were not presented as imported goods at the border crossing into Sweden, and thus back into the European Union. AA was stopped during a roadside check in Sweden and customs decided to impose a VAT assessment. AA will appeal against this decision.
Consideration:
It is mandatory to pay VAT on the import of goods from a third country into the Union. Pursuant to Article 143(1)(e) of Directive 2006/112, exemptions may be granted for the re-importation of goods. Article 203 of Regulation 952/2013 sets procedural conditions for this, such as declaring the goods intended for free circulation and submitting a request for exemption. AA had failed to declare the goods in breach of Article 139(1). This has created a customs debt under Article 79. It is not clear to the referring court whether both the substantive and formal conditions of Article 203 must be met in order to grant exemption from import duties where a customs debt has been incurred.
Questions
Must Article 143(1)(e) of the VAT Directive and Article 86(6) and Article 203 of the Customs Code be interpreted as meaning that both the substantive and formal conditions of Article 203 of the Customs Code must be met satisfied in order to be able to grant exemption from import duties – and therefore exemption from VAT – upon re-importation when a customs debt within the meaning of Article 79 of the Customs Code has been incurred due to failure to comply with the presentation obligation of Article 139(1) of the Customs Code?
AG Opinion
Article 143(1)(e) of the VAT Directive only requires that the substantive conditions laid down in Article 203 of the Customs Code are fulfilled. In so far as a customs debt under Article 79 of the Customs Code has only been incurred through non-compliance with the customs declaration obligation under Article 158(1) of the Customs Code and the presentation obligation under Article 139(1) of the Customs Code or the lack of an application for relief from customs duty under Article 203 of the Customs Code, the re-importation of returned goods within the meaning of Article 203 of the Customs Code is exempt from VAT. For that reason, it is irrelevant for the import VAT exemption under Article 143(1)(e) of the VAT Directive whether the requirements for a relief under Article 86(6) of the Customs Code (on account of the lack of an attempt at deception) are fulfilled.
Source
Reference to other ECJ Cases
- C-124/11 (Securenta): This case addressed the distinction between customs duties and VAT in the context of exemptions, emphasizing the independence of VAT regulations from customs obligations.
- C-348/14 (Hüls): The ECJ clarified the conditions under which exemptions can be applied, reinforcing that procedural infringements should not automatically negate substantive tax exemptions.
- C-309/14 (Sotiriou): This ruling highlighted the importance of the substantive requirements for VAT exemptions, indicating that compliance with procedural requirements should not always be a prerequisite if the substantive conditions are satisfied.
- C-268/83 (Baas): The court discussed the treatment of goods re-imported into the EU and the implications for VAT, contributing to the understanding of how customs and VAT regulations interact.
- C-486/07 (DHL): This case examined the relationship between customs debt and VAT liability, reinforcing that breaches of customs obligations do not necessarily lead to a VAT debt unless conditions for VAT liability are met.
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