C-10/08 Commission v Finland

Judgment · Court of Justice · Finland · 19 March 2009

Car tax deducted from VAT and the taxation of nearly-new imports

What is the case?

Finland levied a registration-based vehicle tax on cars brought into the country. Two features of the regime were challenged by the Commission. First, Finnish VAT law allowed the vehicle tax charged under Article 5 of Law 1482/1994 to be deducted from VAT, treating a tax that is not VAT as though it were input tax. Second, when valuing an imported vehicle for the purposes of that tax, Finland applied to vehicles less than three months old the same taxable value as to genuinely new vehicles, so that a car already used for some weeks abroad was taxed as if it had never been driven.

What is the Court asked?

Whether allowing a national vehicle tax to be set off against VAT is compatible with the deduction rules of Articles 17(1) and (2) of the Sixth Directive, now Articles 167 and 168 of Directive 2006/112, and whether taxing vehicles under three months old on the same basis as new vehicles discriminates against products from other Member States contrary to the first paragraph of Article 90 EC, now Article 110 TFEU.

The Court’s decision

The Court upheld both complaints. Permitting the vehicle tax to be deducted from VAT breached the first paragraph of Article 90 EC together with Articles 17(1) and (2) of the Sixth Directive. The right to deduct extends to input VAT, and a Member State cannot widen it to absorb a different national tax. Applying the value of a new vehicle to one under three months old likewise infringed Article 90 EC. The remainder of the Commission's action was dismissed and costs were split. A short but useful reminder that the deduction mechanism is closed. Relevant to any registration or circulation tax that interacts with VAT on cross-border vehicle movements.

AI-generated and factual. Not an official document: verify against the text below.

Legislation interpreted

Article 167 of Directive 2006/112/EC Origin and scope of right of deduction
Article 168 of Directive 2006/112/EC Origin and scope of right of deduction
Article 17 of Sixth Directive 77/388/EEC Deductions

Subject matter

Failure of a Member State to fulfil obligations · Infringement of Article 90 EC and Article 17(1) and (2) of Directive 77/388/EEC: Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes · Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), now Articles 167 and 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) · National legislation providing for value added tax on the tax on vehicles and a right to deduct the corresponding amount from output value added tax · Application of the same taxable value to vehicles under three months old and to new vehicles · Application of a level of depreciation of 0.8% per month to vehicles under six months old where there are no equivalent vehicles on the national market.

Record

Court: Court of Justice
Case number: C-10/08
ECLI: ECLI:EU:C:2009:171
Official texts: Judgment of 19 March 2009 (62008CJ0010)
Cite as: Judgment of 19 March 2009, Commission v Finland, C-10/08, EU:C:2009:171

Judgment of 19 March 2009

Text as published by the Court on EUR-Lex, CELEX 62008CJ0010.

Judgment of the Court (First Chamber) of 19 March 2009 – Commission v Finland

(Case C‑10/08)

Taxation in Finland of second-hand vehicles imported from other Member States – Compatibility of national legislation with the first paragraph of Article 90 EC, the Sixth VAT Directive and Directive 2006/112/EC

1. Tax provisions – Internal taxation – System of taxation of imported second-hand cars (Art. 90, first para., EC) (see paras 26-32)

2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax (Art. 90, first para., EC; Council Directives 77/388, Art. 17(1) and (2), and 2006/112, Arts 167 and 168) (see paras 34-37)

3. Tax provisions – Internal taxation – System of taxation of imported second‑hand cars (Art. 90, first para., EC) (see paras 42-45)

Re:

Operative part

The Court:

Declares that, by allowing the tax referred to in Article 5 of Law No 1482/1994 on vehicle tax (autoverolaki (1482/1994)) of 29 December 1994 to be deducted from value added tax, pursuant to Article 102(1)(4) of Law No 1501/1993 on value added tax (arvonlisäverolaki (1501/1993)) of 30 December 1993, the Republic of Finland has failed to fulfil its obligations under the first paragraph of Article 90 EC and Article 17(1) and (2) of Directive 77/388/EEC: Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, reproduced in Articles 167 and 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax.

Signatures

Declares that, by retaining, when taxing vehicles, the same taxable value for vehicles under three months old as for new vehicles, the Republic of Finland has failed to fulfil its obligations under the first paragraph of Article 90 EC.

Orders the action to be dismissed as to the remainder.

Orders the Republic of Finland to pay, apart from its own costs, three-quarters of the costs of the Commission of the European Communities.

Orders the Commission of the European Communities to bear the remainder of its own costs.