C-125/24 Palmstråle

JUDGMENT OF THE COURT (Sixth Chamber)

12 June 2025 ( *1 )

(Reference for a preliminary ruling – Taxation – Common system of value added tax (VAT) – Directive 2006/112/EC – VAT exemption – Article 143(1)(e) – Reimportation of goods – Condition relating to exemption from customs duty on the importation of returned goods – Regulation (EU) No 952/2013 – Article 86(6) and Article 203 – Incurrence of a customs debt as a result of failure to comply with a formal obligation laid down in the customs legislation – Cases where such a debt is incurred)

In Case C‑125/24 [Palmstråle], ( i )

REQUEST for a preliminary ruling under Article 267 TFEU from the Högsta förvaltningsdomstolen (Supreme Administrative Court, Sweden), made by decision of 13 February 2024, received at the Court on 15 February 2024, in the proceedings

AA

v

Allmänna ombudet hos Tullverket,

THE COURT (Sixth Chamber),

composed of A. Kumin, President of the Chamber, I. Ziemele and S. Gervasoni (Rapporteur), Judges,

Advocate General: J. Kokott,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

the European Commission, by P. Carlin and A. Demeneix, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 6 March 2025,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 143(1)(e) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) (‘the VAT Directive’) and of Article 86(6) and Article 203 of Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code (OJ 2013 L 269, p. 1) (‘the Customs Code’), as regards the conditions for exemption from value added tax (VAT) applicable to a transaction involving the reimportation of goods.

2The request has been made in proceedings between AA and the Allmänna ombudet hos Tullverket (General Representative of the Customs Authority, Sweden) concerning the VAT liability of a transaction involving the reimportation of horses into the territory of the European Union.

Legal context

European Union law

The VAT Directive

3Under Article 2(1)(d) of the VAT Directive:

‘The following transactions shall be subject to VAT:

…

(d) the importation of goods.’

4The first paragraph of Article 30 of that directive reads as follows:

‘“Importation of goods” shall mean the entry into the [European] Community of goods which are not in free circulation within the meaning of Article [29 TFEU].’

5Under Article 70 of that directive:

‘The chargeable event shall occur and VAT shall become chargeable when the goods are imported.’

6Article 71(2) of the VAT Directive provides:

‘Where imported goods are not subject to any of the duties referred to in the second subparagraph of paragraph 1, Member States shall, as regards the chargeable event and the moment when VAT becomes chargeable, apply the provisions in force governing customs duties.’

7Article 143(1) of that directive provides:

‘Member States shall exempt the following transactions:

…

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’.

The Customs Code

8Recital 38 of the Customs Code states:

‘It is appropriate to take account of the good faith of the person concerned in cases where a customs debt is incurred through non-compliance with the customs legislation and to minimise the impact of negligence on the part of the debtor.’

9Article 1(1) of that code provides:

‘This Regulation establishes the [Customs Code], laying down the general rules and procedures applicable to goods brought into or taken out of the customs territory of the Union.’

10Under Article 79(1) of that code:

‘For goods liable to import duty, a customs debt on import shall be incurred through non-compliance with any of the following:

one of the obligations laid down in the customs legislation concerning the introduction of non-Union goods into the customs territory of the Union, their removal from customs supervision, or the movement, processing, storage, temporary storage, temporary admission or disposal of such goods within that territory;

…’

11Article 86(6) of that code reads as follows:

‘Where the customs legislation provides for a favourable tariff treatment of goods, or for relief or total or partial exemption from import or export duty pursuant to points (d) to (g) of Article 56(2), Articles 203, 204, 205 and 208 or Articles 259 to 262 of this Regulation or pursuant to Council Regulation (EC) No 1186/2009 of 16 November 2009 setting up a Community system of reliefs from customs duty [(OJ 2009 L 324, p. 23)] such favourable tariff treatment, relief or exemption shall also apply in cases where a customs debt is incurred pursuant to Articles 79 or 82 of this Regulation, on condition that the failure which led to the incurrence of a customs debt did not constitute an attempt at deception.’

12Article 139(1) of the Customs Code provides:

‘Goods brought into the customs territory of the Union shall be presented to customs immediately upon their arrival at the designated customs office or any other place designated or approved by the customs authorities or in the free zone by one of the following persons:

the person who brought the goods into the customs territory of the Union;

the person in whose name or on whose behalf the person who brought the goods into that territory acts;

the person who assumed responsibility for carriage of the goods after they were brought into the customs territory of the Union.’

13Article 203 of that code provides:

‘1. Non-Union goods which, having originally been exported as Union goods from the customs territory of the Union, are returned to that territory within a period of three years and declared for release for free circulation shall, upon application by the person concerned, be granted relief from import duty.

…

5. The relief from import duty shall be granted only if goods are returned in the state in which they were exported.

6. The relief from import duty shall be supported by information establishing that the conditions for the relief are fulfilled.’

Swedish law

The Law on VAT

14Chapter 1 of the mervärdesskattelagen (1994:200), in the version applicable to the dispute in the main proceedings (Law 1994:200 on value added tax; ‘the Law on VAT’), contains point 3 of the first subparagraph of Paragraph 1, which provides:

‘[VAT] is payable to the State in accordance with this Law:

…

3on the importation of goods into the country which is liable for tax.’

15Chapter 2 of that law includes Paragraph 1a, which reads as follows:

‘Importation means that goods are brought into Sweden from a place outside the European Union.’

16In Chapter 3 of that law, Paragraph 30 provides:

‘Imports which are exempt under the lagen [1994:1551] om frihet från skatt vid import, m.m. [(Law (1994:1551) on exemption from tax on, inter alia, importation; “the Law on exemption from tax on importation”)] shall be exempt from tax.’

The Law on exemption from tax on importation

17Chapter 2 of the Law on exemption from tax on importation includes Paragraph 5, the first and second subparagraphs of which provide:

‘Union goods which, after having been exported from the European Union to a third country, are brought into Sweden by the person who had exported them, without having been processed during the time they were exported from the European Union, shall be exempt from tax.

Tax exemption under the first subparagraph shall be granted only if the goods are exempt from customs duty under Articles 203 to 205 of the [Customs Code]. Goods which are exempt from customs duty under [Council] Regulation (EEC) No 2658/87 [of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 1987 L 256, p. 1)] shall be treated as if they were subject to customs duty.’

The dispute in the main proceedings and the question referred for a preliminary ruling

18AA is the owner of horses which are used in competitions in various countries. After exporting two of her horses to Norway to participate in such competitions, she brought them back into the European Union through a border crossing between Norway and Sweden, without presenting them to customs. Shortly after passing the customs post, she was stopped by a road patrol of the Tullverket (Customs Authority, Sweden).

19In the light of Article 203 of the Customs Code, AA was not subject to import duty in respect of that reimportation transaction, but the Customs Authority took the view that she was liable for VAT in the amount of 41178 kronor (SEK) (approximately EUR 3750). According to that authority, although Paragraph 5 of Chapter 2 of the Law on exemption from tax on importation, transposing Article 143(1)(e) of the VAT Directive into Swedish law, provides for an exemption from VAT in the event of the reimportation of goods, that exemption could not be granted to AA, who had not declared the horses for release for free circulation or applied for exemption from import duty.

20The Förvaltningsrätten i Karlstad (Administrative Court, Karlstad, Sweden) dismissed the action brought by AA against that authority’s decision. That court found that the horses had not been presented to customs on their return to the territory of the European Union. It took the view that a customs debt had been incurred and that that situation had led to the chargeability of VAT. It then pointed out that, in order to be entitled to the VAT exemption where goods are reimported, those goods must be declared for release for free circulation and an application for exemption from customs duty must be made by the customs declarant. Since those conditions were not met in the present case, that court held that the VAT exemption could not be granted.

21AA and the General Representative of the Customs Authority both appealed against the judgment of the Förvaltningsrätten i Karlstad (Administrative Court, Karlstad) to the Kammarrätten i Göteborg (Administrative Court of Appeal, Gothenburg, Sweden) and sought the annulment of the decision making AA liable to VAT. Those appeals were dismissed.

22AA brought an appeal before the Högsta förvaltningsdomstolen (Supreme Administrative Court, Sweden), which is the referring court.

23As regards the consequences to be drawn from the fact that AA crossed the customs post without the horses concerned having been presented to customs and without making a declaration or applying for exemption from customs duty, the referring court states that it has difficulty in applying Article 86(6) of the Customs Code. According to that provision, where an exemption from import duty is provided for pursuant to, inter alia, Article 203 of that code, that exemption is also to apply in cases where a customs debt is incurred pursuant to Article 79 of that code as a result of failure to comply with the obligation to present the goods brought into the territory of the European Union, on condition that that failure does not constitute an attempt at deception.

24In that regard, that court wonders whether it is appropriate to interpret Article 86(6) of the Customs Code restrictively, requiring that the conditions laid down in Article 203 of that code be met in all cases in order for the VAT exemption to be granted, or whether that exemption must apply even where the formal conditions laid down in Article 203 are not satisfied.

25In those circumstances, the Högsta förvaltningsdomstolen (Supreme Administrative Court) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

‘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 the procedural conditions laid down in Article 203 must be fulfilled in order for relief from import duty – and thus exemption from VAT – to be granted on [reimportation] where a customs debt under Article 79 of [that code] has been incurred through non-compliance with the presentation obligation laid down in Article 139(1) of [that code]?’

Consideration of the question referred

26By its question, the referring court asks, in essence, whether Article 143(1)(e) of the VAT Directive and Article 86(6) and Article 203 of the Customs Code must be interpreted as meaning that non-compliance with formal obligations such as the presentation of goods to customs provided for in Article 139(1)(a) of that code and the declaration for release for free circulation provided for in Article 203 of that code precludes the entitlement to the VAT exemption provided for in Article 143(1)(e) of that directive in respect of the reimportation into the territory of the European Union of goods in the state in which they were exported.

27Under Article 143(1)(e) of the VAT Directive, Member States are to exempt from VAT ‘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’.

28It is apparent from the very wording of that provision that the VAT exemption for the reimportation of goods in the state in which they were exported is subject inter alia to the condition that those goods ‘are exempt from customs duties’. The EU legislature thus expressly chose to align the conditions for the application of the VAT exemption provided for by that provision with the conditions, both substantive and formal, to which the Customs Code makes subject the entitlement to exemption from import duties applicable to returned goods.

29As regards those conditions, Article 203 of the Customs Code, relating to returned goods, provides that goods exported from the customs territory of the European Union which are, within a period of three years, returned to that territory in the same state as that in which they were exported and which are declared for release for free circulation are, upon application of the person concerned, to be granted relief from import duties.

30In the present case, according to the information provided by the referring court, it is common ground that the substantive conditions laid down in that provision are satisfied. However, that is not the case with regard to the formal conditions required by that provision. It is apparent from the request for a preliminary ruling that AA returned her horses to the territory of the European Union without, inter alia, making a declaration for their release for free circulation. Moreover, contrary to the obligation set out in Article 139(1)(a) of the Customs Code, AA did not present her horses to customs either.

31In that regard, it is true that, under Article 79(1)(a) of the Customs Code, a customs debt may be incurred in the event of non-compliance with ‘one of the obligations laid down in the customs legislation concerning the introduction of non-Union goods into the customs territory of the Union, their removal from customs supervision, or the movement, processing, storage, temporary storage, temporary admission or disposal of such goods within that territory’.

32However, Article 86(6) of the Customs Code extends the exemption provided for in Article 203 of that code to cases in which a customs debt has been incurred pursuant to, inter alia, Article 79, on condition that the failure which led to that debt did not constitute an attempt at deception.

33Article 86(6) would be largely deprived of practical effect if it were to be interpreted as not applying in a situation such as that at issue in the main proceedings, on the ground that the formal conditions required for the entitlement to relief from customs duty are not satisfied. It must be stated that, as the European Commission pointed out, in essence, in its observations, the application of Article 79(1)(a) of that code and, therefore, the application of Article 86(6) thereof, specifically presupposes non-compliance with such conditions.

34It follows that, unless it constitutes an attempt at deception, the fact that returned goods have not been presented to customs as required by Article 139(1)(a) of the Customs Code or have not been the subject of the declaration for release for free circulation provided for in Article 203 of that code does not preclude, under Article 86(6) of that code, the entitlement of those goods, by virtue of their return to the territory of the European Union, to the relief from customs duties provided for in Article 203.

35That reading is supported by recital 38 of the Customs Code, which states that ‘it is appropriate to take account of the good faith of the person concerned in cases where a customs debt is incurred through non-compliance with the customs legislation and to minimise the impact of negligence on the part of the debtor.’

36Since the failure, by negligence, by an operator acting in good faith to comply with formal obligations such as the presentation to customs of the goods and the declaration for release for free circulation does not preclude the entitlement to relief from customs duties, it also does not preclude, in the light of the clear wording of Article 143(1)(e) of the VAT Directive, the application of the VAT exemption provided for in that provision.

37It follows from the foregoing, specifically, that the fact that a taxable person such as AA has disregarded formal obligations such as the presentation to customs and the declaration for release for free circulation of horses upon their reimportation into the territory of the European Union does not preclude, unless an attempt at deception is established, the application, in respect of that transaction, of the VAT exemption provided for in Article 143(1)(e) of the VAT Directive.

38In the present case, it is apparent from the order for reference that AA did not make any attempt at deception. It will be for the referring court to satisfy itself on that point and thus to determine whether AA’s failure to comply with such formal obligations, assuming that failure to be established, is the result of mere negligence on her part which does not call into question her good faith.

39In the light of the foregoing considerations, the answer to the question referred is that Article 143(1)(e) of the VAT Directive and Article 86(6) and Article 203 of the Customs Code must be interpreted as meaning that, except where there is an attempt at deception, non-compliance with formal obligations such as the presentation of goods to customs provided for in Article 139(1)(a) of that code and the declaration for release for free circulation provided for in Article 203 of that code does not preclude the entitlement to the VAT exemption provided for in Article 143(1)(e) of the VAT Directive in respect of the reimportation into the territory of the European Union of goods in the state in which they were exported.

Costs

40Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Sixth Chamber) hereby rules:

Article 143(1)(e) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and Article 86(6) and Article 203 of Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code

must be interpreted as meaning that, except where there is an attempt at deception, non-compliance with formal obligations such as the presentation of goods to customs provided for in Article 139(1)(a) of that regulation and the declaration for release for free circulation provided for in Article 203 of that regulation does not preclude the entitlement to the VAT exemption provided for in Article 143(1)(e) of that directive in respect of the reimportation into the territory of the European Union of goods in the state in which they were exported.

Signatures

[Signatures]

( *1 ) Language of the case: Swedish.

( i ) The name of the present case is a fictitious name. It does not correspond to the real name of any party to the proceedings.

Provisional text

OPINION OF ADVOCATE GENERAL KOKOTT

delivered on 6 March 2025 (1)

Case C‑125/24 [Palmstråle] (i)

AA

v

Allmänna ombudet hos Tullverket

(Request for a preliminary ruling from the Högsta förvaltningsdomstolen (Supreme Administrative Court, Sweden))

( Reference for a preliminary ruling – Tax law – Value added tax (VAT) – Directive 2006/112/EC – Reimportation of goods – Exemption from VAT – Article 143(1)(e) – Need to comply with customs legislation – Customs union – Customs Code – Relief from customs duty on importation of returned goods – Article 203 – Article 86(6) – Relationship between customs legislation and VAT legislation )

I. Introduction

1This case provides the Court with a further (2) opportunity to clarify the interaction between customs legislation and import VAT legislation, on this occasion with regard to a VAT exemption. Specifically, it concerns the exemption from import VAT on the re-importation into the European Union of goods exempt from customs duties.

2Although the conditions for an exemption from customs duty are fulfilled in principle, the customs procedure was not carried out correctly. Therefore, the Court must clarify what effects an infringement of obligations arising from the customs procedure (in this case the presentation of the goods to customs, customs declaration and application for relief from customs duty) has on the benefit of an import VAT exemption. In that respect, is the import VAT exemption accessory to the exemption from customs duties for re-imported goods or are both exemptions to be applied independently?

II. Legal framework

A. European Union law

1. Directive 2006/112/EC (3) (‘the VAT Directive’)

3Article 143 of the VAT Directive concerns exemptions on importation:

‘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;

(f) the importation, under diplomatic and consular arrangements, of goods which are exempt from customs duties;

…’

2. Regulation (EU) No 952/2013 (4) (‘the Customs Code’)

4Article 203 of the Customs Code governs the exemption for returned goods:

‘1. Non-Union goods which, having originally been exported as Union goods from the customs territory of the Union, are returned to that territory within a period of three years and declared for release for free circulation shall, upon application by the person concerned, be granted relief from import duty.

…

5. The relief from import duty shall be granted only if goods are returned in the state in which they were exported.

6. The relief from import duty shall be supported by information establishing that the conditions for the relief are fulfilled.’

5Article 139 governs the obligation to present goods to customs:

‘1. Goods brought into the customs territory of the Union shall be presented to customs immediately upon their arrival at the designated customs office or any other place designated or approved by the customs authorities or in the free zone by one of the following persons,

(a) the person who brought the goods into the customs territory of the Union,

…’

6Article 5(33) of the Customs Code defines presentation of goods to customs as follows:

‘“presentation of goods to customs” means the notification to the customs authorities of the arrival of goods at the customs office or at any other place designated or approved by the customs authorities and the availability of those goods for customs controls.’

7Article 158 of the Customs Code requires that goods be declared to customs:

‘1. All goods intended to be placed under a customs procedure, except for the free zone procedure, shall be covered by a customs declaration appropriate for the particular procedure.

…’

8Article 5(12) of the Customs Code defines customs declaration as follows:

‘“customs declaration” means the act whereby a person indicates, in the prescribed form and manner, a wish to place goods under a given customs procedure, with an indication, where appropriate, of any specific arrangements to be applied.’

9Article 79 of the Customs Code governs customs debt incurred through non-compliance with customs legislation as follows:

‘1. For goods liable to import duty, a customs debt on import shall be incurred through non-compliance with any of the following:

(a) one of the obligations laid down in the customs legislation concerning the introduction of non-Union goods into the customs territory of the Union, their removal from customs supervision, or the movement, processing, storage, temporary storage, temporary admission or disposal of such goods within that territory;

…

3. In cases referred to under points (a) and (b) of paragraph 1, the debtor shall be any of the following,

(a) any person who was required to fulfil the obligations concerned, …’

10Article 86(6) of the Customs Code contains a derogation from Article 79 of the Customs Code, inter alia, where provision is made for exemptions:

‘6. Where the customs legislation provides for a favourable tariff treatment of goods, or for relief or total or partial exemption from import or export duty pursuant to points (d) to (g) of Article 56(2), Articles 203, 204, 205 and 208 or Articles 259 to 262 of this Regulation or pursuant to Council Regulation (EC) No 1186/2009 of 16 November 2009 setting up a Community system of reliefs from customs duty such favourable tariff treatment, relief or exemption shall also apply in cases where a customs debt is incurred pursuant to Articles 79 or 82 of this Regulation, on condition that the failure which led to the incurrence of a customs debt did not constitute an attempt at deception.’

11Recital 38 of the Customs Code reads:

‘(38) It is appropriate to take account of the good faith of the person concerned in cases where a customs debt is incurred through non-compliance with the customs legislation and to minimise the impact of negligence on the part of the debtor.’

B. Swedish law

12The Mervärdesskattelag (1994:200) (Law on VAT [1994:200]) was in force at the time relevant to the case. (5)

13According to point 3 of the first paragraph of section 1 of Chapter 1, VAT is to be paid on the importation of goods into the country, which is liable for tax. Pursuant to section 1a of Chapter 2, ‘importation’ means that goods are brought into Sweden from a place outside the European Union.

14The first paragraph of section 30 of Chapter 3 provides that imports which are exempt from tax in accordance with the lag (1994:1551) om frihet från skatt vid import, m.m (Law on tax exemption on importation, inter alia (1994:1551)) are exempt from tax.

15The first paragraph of section 5 of Chapter 2 of the Law on tax exemption on importation, inter alia states that exemption from tax is to be granted for Union goods which, after having been exported from the European Union to a third country, are brought into Sweden by the person who exported them, without their having been processed during the time they were exported from the European Union. According to the second paragraph thereof, exemption from tax is to be granted only if the goods are subject to relief from customs duty under, inter alia, Article 203 of the Customs Code. Goods which are exempt from customs duty under Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff are treated as if they were subject to customs duty.

III. Facts and request for a preliminary ruling

16The applicant owns horses which are used in competitions in various countries. She exported two horses to Norway, that is to say, outside the customs territory of the Union. After the horses had participated in competitions, they were brought back into the Union through a border crossing from Norway to Sweden. The applicant did not stop at the customs post to present the goods brought in and submit a customs declaration. Instead, she was only stopped at the Tullverket (Customs Authority, Sweden; ‘the Customs Authority’) road check shortly after she had passed the customs post.

17The Customs Authority decided to charge the applicant import VAT in the amount of 41 178 Swedish kronor (SEK) (approximately EUR 3 500). However, no customs debt was established. According to the Customs Authority, exemption from VAT on re-importation could not be granted because the applicant had not declared the horses for release for free circulation or applied for relief from customs duty.

18The applicant appealed against the decision before the Förvaltningsrätten i Karlstad (Administrative Court, Karlstad, Sweden), which dismissed the appeal. The Förvaltningsrätten i Karlstad (Administrative Court, Karlstad) found that the horses had not been declared and presented to customs upon their arrival into Union customs territory, that a customs debt had therefore been incurred and that this meant that import VAT was payable. The court also found that the declaration of the goods for release for free circulation and an application for relief from customs duty were requirements for the grant of exemption from import VAT on re-importation. As neither had happened, exemption from import VAT could not be granted.

19Both the applicant and the Allmänna ombudet hos Tullverket (General Representative of the Customs Authority, Sweden) appealed against the judgment of the Förvaltningsrätten i Karlstad (Administrative Court, Karlstad) before the Kammarrätten i Göteborg (Administrative Court of Appeal, Gothenburg, Sweden) and claimed that the decision should be annulled. The Kammarrätten i Göteborg (Administrative Court of Appeal, Gothenburg) dismissed the appeals on essentially the same grounds as those relied on by the lower court. The applicant appealed against that judgment before the Högsta förvaltningsdomstolen (Supreme Administrative Court, Sweden).

20It is disputed whether the applicant declared the horses orally when she was stopped by customs staff after passing the customs post. However, the present reference for a preliminary ruling concerns only the course of events on which the referring court bases its decision, namely that the customs post was passed without the goods being presented and without a customs declaration or application for relief from customs duty being submitted.

21The referring court is uncertain as to how Article 143(1)(e) of the VAT Directive and Article 86(6) of the Customs Code are to be interpreted. It considers two possibilities to be conceivable. Either the conditions laid down in Article 203 of the Customs Code must be fulfilled in all cases for exemption to be granted, or exemption can be granted even if the procedural conditions laid down in Article 203 are not fulfilled (in this case, there was neither a declaration for release for free circulation nor an application for relief).

22In those circumstances, the Högsta förvaltningsdomstolen (Supreme Administrative Court) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

‘Must Article 143(1)(e) of the VAT Directive and Articles 86(6) and 203 of the Union Customs Code be interpreted as meaning that both the substantive and the procedural conditions laid down in Article 203 must be fulfilled in order for relief from import duty – and thus exemption from VAT – to be granted on re-importation where a customs debt under Article 79 of the Union Customs Code has been incurred through non-compliance with the presentation obligation laid down in Article 139(1) of the Union Customs Code?’

23The European Commission alone submitted written observations in the proceedings before the Court. In accordance with Article 76(2) of the Rules of Procedure, the Court decided not to hold an oral hearing.

IV. Legal assessment

24The question referred concerns the interaction between the Customs Code and the VAT Directive in the case of what are known as ‘returned goods’. They are Union goods which are exported from the Union but returned unchanged into the Union within a certain period (first subparagraph of Article 203(1) of the Customs Code). The subject of the proceedings is an assessment for the purposes of import VAT. The applicant relies on Article 143(1)(e) of the VAT Directive. That provision exempts the re-importation of ‘goods exempt from customs duties’ from import VAT.

25Since the applicant did not correctly carry out the customs procedure on re-importation, but the substantive requirements for customs exemption are fulfilled, the question arises as to whether the import VAT exemption is accessory to customs legislation. In that case, all requirements for customs exemption under the first subparagraph of Article 203(1) of the Customs Code must be fulfilled and the customs procedure must have been carried out correctly. Or is it sufficient if only the substantive requirements for the customs exemption are fulfilled?

26By leaving the customs territory of the European Union, the horses lost their status as Union goods (Article 154(a) of the Customs Code) and became non-Union goods (Article 5(24) of the Customs Code). If non-Union goods are to be returned to the customs territory of the European Union, they must – subject to the application of special customs procedures – be re-declared for release for free circulation (Article 201(1) of the Customs Code) and a customs debt would in principle be incurred (Article 77(1) of the Customs Code). In order to avoid again taxation on former Union goods (re-imported goods), the first subparagraph of Article 203(1) of the Customs Code provides for duty exemption under certain conditions. However, those conditions are not fulfilled on account of the lack of a customs declaration (Articles 158(1) and 201(1) of the Customs Code) and the lack of an application (first subparagraph of Article 203(1) of the Customs Code). Furthermore, on account of the lack of customs declaration and presentation of goods to customs (Article 139(1) of the Customs Code), a customs debt would be incurred under Article 79(1)(a) of the Customs Code.

27Article 86(6) of the Customs Code lays down a derogation to the latter. Under that provision, relief from customs duties on returned goods under the first subparagraph of Article 203(1) of the Customs Code is also granted if the customs debt was incurred under Article 79(1)(a) of the Customs Code, that is to say on account of a failure to meet an obligation. However, that only applies if those failures were not based on an attempt at deception.

28In the interpretation of Article 143(1)(e) of the VAT Directive, it will first be determined whether the granting of exemption from import VAT is accessory to customs legislation and requires that all conditions for the customs relief be fulfilled (Part A.). If that is so, the exemption from import VAT under Article 143(1)(e) of the VAT Directive would only be granted here if the abovementioned requirements of the exception in Article 86(6) of the Customs Code are fulfilled (Part B.).

A. Interpretation of Article 143(1)(e) of the VAT Directive

1. Wording and scheme

29The wording of Article 143(1)(e) of the VAT Directive is not clear. While Article 143(1)(f) of the VAT Directive refers to goods ‘to which an exemption from customs duty applies’ [‘für die eine Zollbefreiung gilt’], Article 143(1)(e) concerns ‘goods covered by an exemption from customs duty’ [‘unter eine Zollbefreiung [fallende Gegenstände]].

30That suggests that, as regards point (f), all the conditions for exemption must obtain in any event, otherwise it does not ‘apply’. In contrast (Article 143(1)(e) of the VAT Directive), ‘goods’ are also ‘covered by an exemption from customs duty’, even if the customs procedure has not been complied with. However, that linguistic difference can only be found in the German language version. (6)

31Historically, the exemption from import VAT for returned goods has existed since the Sixth Directive. (7) At that time, however, there was no standardised customs procedure throughout the European Union. Each Member State had its own law on customs procedure. It would have made little sense if harmonised tax exemption had been dependent on Member States’ different laws on customs procedure. Therefore, the reference to ‘goods covered by an exemption from customs duty’, which was adopted unamended in Article 143(1)(e) of the VAT Directive, can hardly mean compliance with the (now harmonised) customs procedure.

2. Meaning and purpose

(a) Objective of the respective exemptions for returned goods

32Customs legislation is intended to protect domestic goods from competition from third-country imports and thus ensure fair trade relations. However, that objective does not apply to returned goods because the goods originally come from the European Union. Against that background, the first subparagraph of Article 203(1) of the Customs Code provides for relief from customs duty for returned goods.

33In contrast, import VAT applies to goods that enter the economic network of the European Union and may be the object of consumption. (8) Import VAT is intended to pre-burden goods imported from third countries in the same way with VAT as goods in the Member State of importation. However, if goods that originally come from the European Union are re-imported into the European Union unchanged as returned goods, there are no ‘consumable’ increases in value which have to be taxed. Article 143(1)(e) of the VAT Directive takes that into account by exempting goods from import VAT.

(b) Different consequences of an infringement

34Both Article 143(1)(e) of the VAT Directive and Article 203(1) of the Customs Code therefore take account of the special situation of returned goods. However, only infringements of customs legislation give rise to a customs debt. In addition, a VAT debt can only be incurred if that infringement also fulfils the factual preconditions for importation laid down in VAT legislation. (9) It requires the goods may also have undergone ‘taxable consumption’ in the Member State. The mere infringement of the customs procedure may indicate that. However, a corresponding presumption may be rebutted. (10)

35However, if import VAT exemption is refused, for example, with reference to the lack of a customs application, precisely that difference is disregarded. The refusal of an import VAT exemption would be the result of an infringement of customs legislation, even though no ‘taxable consumption’ has occurred. In the case of returned goods within the meaning of Article 203 of the Customs Code, there is no increase in value that could be ‘consumed’ and would have to be taxed (see point 33 above).

36The different legal consequences are in keeping with the fundamental independence of customs legislation and VAT legislation. (11) The Court has highlighted the parallel nature of customs legislation and import VAT legislation, particularly in its earlier case-law. (12) However, that usually only concerned specific rules, such as, for example, the second subparagraph of Article 71(1) of the VAT Directive. Furthermore, the statement which is often cited as justification, namely that ‘import VAT and customs duties display comparable essential features since they arise from the fact of importation of goods into the European Union and the subsequent distribution of those goods through the economic channels of the Member States’, (13) does not allow any accessory relationship to be inferred. (14) Rather, it merely demonstrates the frequent coincidences in practice between the incurrence of customs duties and import VAT.

37On the other hand, the places where the customs debt and import VAT debt was incurred may well be different. (15) The second subparagraph of Article 71(1) of the VAT Directive only links the time at which the import VAT debt was incurred with the customs debt, but makes no statement as to the place of taxation. (16) The place where the VAT is incurred may not be determined in accordance with customs legislation, as otherwise a contravention of the principle of the territorial application of VAT could arise. (17) Similarly, in the view of the Court, the continued existence of the VAT debt can be independent of the extinguishment of the customs debt. (18) That all clearly shows that there is no accessory relationship between the two regulatory regimes. Therefore, the Court no longer speaks of a parallel nature of the respective regulatory regimes, but only of a ‘link’ [Zusammenhang] (19) or a ‘link’ [Verknüpfung]. (20)

(c) No accessory relationship for practical reasons

38In practice, import VAT and customs duties are levied and cleared together. That makes it possible, for example, to carry out transactions at a single point of contact and facilitate checks. (21) In the specific case, the exemption from import VAT can be claimed at the same time as submitting the customs declaration.

39However, such reasons relating to practicability are not sufficient to establish an accessory relationship whereby the customs procedure would also have to be complied with for a VAT exemption. (22) The two regimes are designed differently. According to the second subparagraph of Article 1(1) thereof, ‘the Code shall apply uniformly throughout the customs territory of the Union’. In addition, customs duties belong exclusively to the European Union. (23) Import VAT, on the other hand, does not belong to the European Union, but to the respective Member State where the import takes place because that is where the (presumed) final consumption takes place. (24) Therefore, the VAT rate applicable there is decisive.

40In addition, customs legislation is more formalised than VAT legislation. For example, under Article 79(1)(a) of the Customs Code an infringement of customs obligations gives rise to a customs debt. VAT, on the other hand, is a general consumption tax that aims to tax the consumer’s expenditure on a supply or service. (25) That objective is fundamentally independent of procedural offences. Consequently, infringements of VAT formalities do not generally result in the incurrence of a VAT debt. For example, tax exemption is to be granted for intra-Community supplies if the substantive requirements are satisfied. The mere failure to satisfy formal requirements does not in principle justify a refusal to grant it. (26)

41In the present case, the assumption of an accessary relationship for practical reasons would produce a very strange result. Despite an infringement of customs procedure law, no customs debt was established (apparently because the rate of duty on those horses is 0%). On the other hand, import VAT was established on account of an infringement of customs procedure law, even though there is no taxable increase in the value of the returned goods. The much more formalistic customs legislation waives a customs debt (for substantive reasons), while the much less formalistic VAT legislation – there is no counterpart to Article 79 of the Customs Code in the VAT Directive – is to result in an import VAT debt despite a tax exemption.

42Ultimately, it is not the task of VAT legislation to ensure compliance with the customs procedure. Rather, a sanction (for example, a fine) must be provided for in national law for offences under Article 42 of the Customs Code. In addition, there is still an incentive to submit a customs declaration and present goods to customs at least to benefit from customs relief. That is because an infringement of that obligation generally gives rise to customs debt in accordance with Article 79(1)(a) of the Customs Code, unless the exception laid down in Article 86(6) of the Customs Code applies (see point 44 et seq. below).

3. Interim conclusion

43Compliance with the customs procedure is therefore not required for exemption from import VAT under Article 143(1)(e) of the VAT Directive. Instead, it is sufficient that the substantive requirements for customs relief (in this case the existence of corresponding returned goods) are satisfied. This is the case here. Therefore, an infringement of the obligation to present goods to customs, the obligation to submit a customs declaration or a lack of an application for customs relief does not mean that the substantive import VAT exemption for returned goods (in this case horses) no longer applies.

B. In the alternative: Interpretation of Article 86(6) of the Customs Code

44Only if the Court takes a different view is it necessary to examine whether Article 86(6) of the Customs Code allows the tax relief under the first subparagraph of Article 203(1) of the Customs Code for returned goods to continue to apply despite the infringement of customs obligations (failure to declare and present goods). This presupposes in particular that there is no attempt at deception on the part of the applicant.

45However, this approach – pursued here in the alternative – would have the fundamental disadvantage that all the problems arising from the application of Article 79(1)(a) and the counter-exception under Article 86(6) of the Customs Code would be carried over into VAT legislation. However, subjective provisions such as Article 86(6) and recital 38 of the Customs Code (good faith) are fundamentally alien to VAT legislation. The same applies to the incurrence of VAT through a procedural infringement. The associated difficulties are clearly illustrated by the present case.

46A first question is whether Article 86(6) of the Customs Code is relevant here at all. The exemption under the first subparagraph of Article 203(1) of the Customs Code requires that a customs declaration be submitted. That is precisely what is lacking here, which is why there would be no exemption from a purely formal point of view. However, an exemption must only be ‘provided for’. In addition, Article 86(6) of the Customs Code was created precisely to minimise the consequences of non-compliance with customs legislation (such as, for example, the lack of a customs declaration) (see recital 38 of the Customs Code). The more convincing reasons therefore militate in favour of applying Article 86(6) of the Customs Code.

47Whether the lack of customs declaration and presentation of the horses to customs is to be regarded as an attempt at deception in the specific case is, however, a question of fact. In principle, it is for the national court to make the necessary factual judgement. Nevertheless, it would seem sensible to provide it with guidance as to when an attempt at deception within the meaning of that provision exists. To the best of my knowledge, the Court of Justice has yet to deal with this issue.

48In the literal sense, a person who is aware of, and seeks to avoid, the incurrence of a customs debt wishes to deceive. In addition, recital 38 of the Customs Code makes it clear that its Article 86(6) serves to take account of good faith in the event of non-compliance with customs legislation. However, a person is only deemed to have acted in good faith if he or she intends to act correctly and is able to rely on his or her judgment. (27) In that respect, according to recital 38 of the Customs Code, the impact of negligence is to be minimised. Consequently, gross negligence can, nonetheless, constitute an attempt at deception. That is the case if the importer must have been aware of his or her customs obligations because he or she was grossly negligent in ignoring them. That is also confirmed by a comparison with the previous provision in Article 212a of the Community Customs Code. (28) It referred to ‘deception’ and ‘obvious negligence’, which the legislature has now summarised under the term ‘attempt at deception’.

49The inclusion of gross negligence in attempts at deception is also justified by the fact that customs legislation is highly formalised on account of the limited checking options available in mass customs procedures. Only customs declaration and presentation to customs enable the customs authorities to check the goods to be imported. For that reason, Article 79(1)(a) of the Customs Code allows a customs debt to be incurred in principle in the event of an infringement of the customs procedure. Only Article 86(6) of the Customs Code constitutes an exception, which, however, does not apply if there is an attempt at deception. Too narrow an understanding of an attempt at deception would contradict this rule-exception relationship. The derogation contained in Article 86(6) of the Customs Code must therefore be interpreted restrictively. Consequently, an attempt at deception within the meaning of Article 86(6) of the Customs Code exists if the importer was aware, or unaware due to gross negligence, of the customs obligations which he or she has infringed.

50There must be objective connecting factors for the subjective evidence of the (lack of) knowledge or imposition. (29) The surrounding circumstances are of great importance in that regard. This applies in particular to a basically neutral act without objective meaning (such as, for example, passing a customs post without stopping).

51In the case of professional economic operators, there is much to suggest that knowledge of customs obligations can be assumed. Someone who exports his or her horses correctly obviously knows the customs legislation. It stands to reason that that person also knows that he or she has to re-import his or her horses correctly.

52However, if the importer was aware of his or her obligation under customs legislation (for example, to declare and present goods) or was grossly negligent in not being aware of it, an infringement of that obligation is generally also an attempt at deception. Something else may apply in cases of force majeure or acute emergency situations where there is no reasonable, legally recognisable alternative course of action for the person concerned other than an infringement of customs obligations.

53In the light of the foregoing, an attempt at deception within the meaning of Article 86(6) of the Customs Code therefore exists if objective (surrounding) circumstances show that the importer was aware of his or her customs obligations or was grossly negligent in not being aware of them and infringed them. In that case, a customs debt is incurred under Article 79(1)(a) of the Customs Code due to the (deliberate or grossly negligent) infringement of the obligation. Therefore, if Article 143(1)(e) of the VAT Directive actually also requires compliance with the customs procedure, an import VAT exemption would probably have to be refused in this case (subject to the corresponding assessment of the facts by the referring court).

V. Conclusion

54I propose the Court answer the question referred by the Högsta förvaltningsdomstolen (Supreme Administrative Court, Sweden) as follows:

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.

Notes

(1) Original language: German.

i The name of the present case is a fictitious name. It does not correspond to the real name of any party to the proceedings.

(2) Judgments of 18 January 2024, Hauptzollamt Braunschweig (Place where VAT is incurred – III) (C‑791/22, EU:C:2024:59); of 8 September 2022, Hauptzollamt Hamburg (Place where VAT is incurred II) (C‑368/21, EU:C:2022:647); of 7 April 2022, Kauno teritorinė muitinė (C‑489/20, EU:C:2022:277); of 3 March 2021, Hauptzollamt Münster (Place where VAT is incurred) (C‑7/20, EU:C:2021:161); of 10 July 2019, Federal Express Corporation Deutsche Niederlassung (C‑26/18, EU:C:2019:579); and of 27 September 2007, Teleos and Others (C‑409/04, EU:C:2007:548).

(3) Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, in the version of 1 July 2022 (OJ 2006 L 347, p. 1); as last amended in OJ 2022 L 155, p. 1).

(4) Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code (recast), in the version of 14 December 2016 (OJ 2016 L 354, p. 32).

(5) According to the information provided by the referring court, the new Mervärdesskattelag (Law on VAT) [2023:200] essentially contains corresponding provisions.

(6) See, for example, the Danish, French, Spanish, Italian, Portuguese and Dutch language versions. There is also a slight difference in the English version (‘where those goods are exempt from customs duties’, point (e), and ‘goods which are exempt from customs duties’, point (f)), which can be seen in a similar form in the Swedish version. However, that difference is not as marked as it is in the German language version.

(7) Article 14(1)(e) of Sixth Council Directive 77/388/EEC 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).

(8) Judgments of 10 July 2019, Federal Express Corporation Deutsche Niederlassung (C‑26/18, EU:C:2019:579, paragraph 34), and of 18 May 2017, Latvijas Dzelzceļš (C‑154/16, EU:C:2017:392, paragraph 69 and the case-law cited).

(9) See judgments of 18 January 2024, Hauptzollamt Braunschweig (Place where VAT is incurred – III) (C‑791/22, EU:C:2024:59, paragraph 31); of 8 September 2022, Hauptzollamt Hamburg (Place where VAT is incurred II) (C‑368/21, EU:C:2022:647, paragraphs 27 and 31); of 7 April 2022, Kauno teritorinė muitinė (C‑489/20, EU:C:2022:277, paragraph 48); of 3 March 2021, Hauptzollamt Münster (Place where VAT is incurred) (C‑7/20, EU:C:2021:161, paragraph 30 et seq.); of 10 July 2019, Federal Express Corporation Deutsche Niederlassung (C‑26/18, EU:C:2019:579, paragraphs 44 and 48); and of 2 June 2016, Eurogate Distribution (C‑226/14 and C‑228/14, EU:C:2016:405, paragraph 64 et seq.).

(10) See, expressly, judgment of 10 July 2019, Federal Express Corporation Deutsche Niederlassung (C‑26/18, EU:C:2019:579, paragraph 48).

(11) See my Opinion in Teleos and Others (C‑409/04, EU:C:2007:7, point 80).

(12) Judgments of 7 April 2022, Kauno teritorinė muitinė (C‑489/20, EU:C:2022:277, paragraph 47); of 3 March 2021, Hauptzollamt Münster (Place where VAT is incurred) (C‑7/20, EU:C:2021:161, paragraph 29); and of 10 July 2019, Federal Express Corporation Deutsche Niederlassung (C‑26/18, EU:C:2019:579, paragraph 41).

(13) Judgments of 18 January 2024, Hauptzollamt Braunschweig (Place where VAT is incurred – III) (C‑791/22, EU:C:2024:59, paragraph 23); of 8 September 2022, Hauptzollamt Hamburg (Place where VAT is incurred II) (C‑368/21, EU:C:2022:647, paragraph 25); of 7 April 2022, Kauno teritorinė muitinė (C‑489/20, EU:C:2022:277, paragraph 47); of 3 March 2021, Hauptzollamt Münster (Place where VAT is incurred) (C‑7/20, EU:C:2021:161, paragraph 29); and of 10 July 2019, Federal Express Corporation Deutsche Niederlassung (C‑26/18, EU:C:2019:579, paragraph 41).

(14) See judgment of 25 October 2018, Božičevič Ježovnik (C‑528/17, EU:C:2018:868, paragraph 41).

(15) See judgments of 18 January 2024, Hauptzollamt Braunschweig (Place where VAT is incurred – III) (C‑791/22, EU:C:2024:59, paragraph 30 et seq.); of 8 September 2022, Hauptzollamt Hamburg (Place where VAT is incurred II) (C‑368/21, EU:C:2022:647, paragraphs 27 and 31); of 3 March 2021, Hauptzollamt Münster (Place where VAT is incurred) (C‑7/20, EU:C:2021:161, paragraph 34 et seq.); and of 10 July 2019, Federal Express Corporation Deutsche Niederlassung (C‑26/18, EU:C:2019:579, paragraphs 48 and 53).

(16) Judgment of 18 January 2024, Hauptzollamt Braunschweig (Place where VAT is incurred – III) (C‑791/22, EU:C:2024:59, paragraph 28).

(17) Judgment of 18 January 2024, Hauptzollamt Braunschweig (Place where VAT is incurred – III) (C‑791/22, EU:C:2024:59, paragraph 34).

(18) Judgment of 7 April 2022, Kauno teritorinė muitinė (C‑489/20, EU:C:2022:277, paragraph 51).

(19) Judgment of 3 March 2021, Hauptzollamt Münster (Place where VAT is incurred) (C‑7/20, EU:C:2021:161, paragraph 27).

(20) Judgment of 18 January 2024, Hauptzollamt Braunschweig (Place where VAT is incurred – III) (C‑791/22, EU:C:2024:59, paragraph 23).

(21) See, for example, recitals 13 and 42, p. 2 of the Customs Code.

(22) See recital 9, p. 4 of the Customs Code; under that provision, ‘customs legislation should be better aligned on the provisions relating to the collection of import charges without change to the scope of the tax provisions in force’.

(23) See Article 2(1)(a) of Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own resources of the European Union and repealing Decision 2014/335/EU, Euratom, in the version of 15 December 2020 (OJ 2020 L 424, p. 1); see also judgment of 18 January 2024, Hauptzollamt Braunschweig (Place where VAT is incurred – III) (C‑791/22, EU:C:2024:59, paragraph 32).

(24) Judgment of 18 January 2024, Hauptzollamt Braunschweig (Place where VAT is incurred – III) (C‑791/22, EU:C:2024:59, paragraph 32).

(25) See, for example, judgments of 3 May 2012, Lebara (C‑520/10, EU:C:2012:264, paragraph 23); of 11 October 2007, KÖGÁZ and Others (C‑283/06 and C‑312/06, EU:C:2007:598, paragraph 37 – ‘it is proportional to the price charged by the taxable person in return for the goods and services which he has supplied’), and of 18 December 1997, Landboden-Agrardienste (C‑384/95, EU:C:1997:627, paragraph 20 – ‘only the nature of the undertaking given is to be taken into consideration: for such an undertaking to be covered by the common system of VAT it must imply consumption’, and paragraph 3).

(26) Settled case-law, for example judgments of 9 February 2017, Euro Tyre (C‑21/16, EU:C:2017:106, paragraph 34); of 20 October 2016, Plöckl (C‑24/15, EU:C:2016:791, paragraph 37); and of 27 September 2007, Collée (C‑146/05, EU:C:2007:549, paragraph 29 et seq.).

(27) See, with regard to the legitimate expectation and good faith on the part of the person liable for payment in the context of a post-clearance recovery under Article 119(1)(a) and subparagraphs 3 and 4 of Article 119(3) of the Customs Code, judgment of 16 March 2017, Veloserviss (C‑47/16, EU:C:2017:220, paragraph 24 et seq., on the predecessor provision).

(28) Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 2006 L 302, p. 1).

(29) See, to that effect, judgment of 25 October 2018, Božičevič Ježovnik (C‑528/17, EU:C:2018:868, paragraph 47) with regard to Article 143(1)(d) of the VAT Directive and ensuring that there is no participation in tax evasion.