1. Car registration fees case study
Articles 110 and 111 TFEU
Car registration fees case study
Rebecca-Emmanuela Papadopoulou
Ass. Professor, Faculty of Law University of Athens 1

2. ARTICLE 110 TFEU 2

3. THE TEXT
“No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products”
Unchanged throughout all Treaty amendments 3 3

4. THE CONTEXT PART THREE: UNION POLICIES AND INTERNAL ACTIONS
Title VII: Common rules for competition, taxation and approximation of laws
Chapter 2: Tax provisions
Article 110 applies only in case of pecuniary charges.
Non-pecuniary burdens are covered by article 34 TFEU, which prohibits quantitative restrictions and measures with an equivalent effect
Visnapuu, case C-198/14, para. 50: “Articles 34 and 110 TFEU are mutually exclusive in their scope […] Obstacles of a fiscal nature are not covered by the prohibition laid down in Article 34” 4 4

5. THE ROLE 5

6. Complementary to articles 28-30 TFEU
Articles TFEU: prohibition of
customs duties
charges having equivalent effect
to imports/exports of goods between Member States
Member States MUST NOT cancel in practice the prohibition of customs duty by imposing internal taxes on products circulating on their market 6 6

7. Complementary to articles 28-30 TFEU
Articles 30 and 110 TFEU exclude one another: a tax is either a customs duty or an internal tax
Orgacom, case C-254/13, para. 20: “...Treaty provisions relating to charges having equivalent effect [to customs duties] and those relating to discriminatory internal taxation cannot be applied together. [..] The same measure cannot belong to both categories at the same time”
Customs duties apply due to the crossing of the frontier ≠ Internal taxes apply when the goods circulate on the market

8. Complementary to articles 28-30 TFEU
Aim: to ensure free movement of goods in the internal market, by ensuring the complete neutrality of internal taxation
Manea, case C-76/14, paras : “The aim of Article 110 TFEU is to ensure free movement of goods between Member States in normal conditions of competition. [...] It seeks to guarantee the complete neutrality of internal taxation as regards competition between products already on the domestic market and imported products”

9. Instrument of negative integration
Negative integration: obligation NOT TO DO
MS must REFRAIN from measures, which violate the principle of free movement of goods
Article 110 para. 1: “Member States shall not impose…”
Positive integration: obligation TO DO
EU institutions must take measures to ensure the principle of free movement of goods → Member States must comply
Article 113: “The Council shall […] adopt provisions for the harmonization of legislation concerning turnover taxes, excise duties and other forms of indirect taxation ...” 9

10. Instrument for “framing” State sovereignty
Taxation is an instrument of economic and social policy
MS have retained powers in the field of taxation
Very limited EU competence
Article 113 TFEU: harmonization for indirect taxes, eg VAT, excise duties. Unanimity requirement
110 TFEU reconciles
MS tax sovereignty
The objective of free movement and market integration 10

11. Field of application
Indirect taxation: taxes applied on the consumption of goods/provision of services
(≠ direct taxation: taxes on income)
Internal taxation: taxes applied on goods circulating on the territory of a MS
(≠ customs duties: taxes on the crossing of a frontier) 11

12. The nature of article 110 TFEU
Art. 110 TFEU has direct effect
Commission v. Ireland, case 55/79, para. 12: “… art. 110 … imposes on MS with immediate effect the duty to apply their tax legislation without discrimination even before there is any harmonization”.
MS must not wait for the completion of the harmonization procedure
Individuals have the right to invoke art. 110 before national courts
National judges have the obligation to apply art. 110 12

13. Art. 110 para. 1: Field of application
“… any internal tax of any kind…”
Ianneli e Volpi, case 74/76, para. 19: “… the fact that a tax or levy is collected by a body governed by public law other than the State or is collected for its benefit and is a charge which is special or appropriated for a specific purpose cannot prevent its falling within the field of application of article 110”
“… imposed on products of other MS…”
Peureux, case 86/78, para. 32: Art. 110 “… does not prohibit the imposition on national products of internal taxation in excess of that on imported products”.
REVERSE DISCRIMINATION IS NOT PROHIBITED BY ART. 110 TFEU 13

14. Art. 110 para. 1: Field of application
As compared to the tax imposed on “similar domestic products”
“Domestic” products:
Products produced/manufactured in a MS
Products which are “in free circulation in a MS”, i.e. which have been imported from third States and the customs/charges due have been paid (art. 29 TFEU) 14

15. The content of art. 110 para. 1
No internal taxation “in excess of the tax imposed on similar domestic products”
MS are free to adopt any regime of internal taxation they wish, BUT
They must apply it without discrimination between domestic and imported products
REMEMBER: Reverse discrimination is not prohibited
A general tax system applying to categories of products according to objective criteria, regardless of the origin of the products, is compatible with art. 110 (Chemial Farmaceuti, case 140/79, para )
Only the “excessive” part of the taxation must be eliminated 15

16. The content of art. 110 para. 1
“…in excess of the tax imposed on similar domestic products” – The concept of “similarity”
Similar products: NOT strictly identical products
Two CUMULATIVE criteria:
Objective criterion: products have the same characteristics (raw material, production method, taste, etc)
Subjective criterion: products meet the same needs from the point of view of consumers (how and when is the product consumed/used?)
Comparison must also take into account further potential for substitution (to develop complementarity of MS economies) 16

17. Examples of “similar products”
Commission v. France, case C-302/00
Dark-tobacco cigarettes (French)
Other cigarettes, mainly light (other MS)
Same base product, comparable manufacturing processes, they satisfy the same needs
ECJ: “The tax is designed in such a way as to benefit a typical domestic product and handicaps imported products” (para. 30) 17

18. Examples of “similar products”
Commission v. France (case C-265/99)
Cars with innovative technologies (six-speed manual gearbox, five- speed automatic transmission) (mainly other MS)
Cars with traditional technologies (four-speed) (French)
ECJ: Similar characteristics as to price, size, comfort, performance, fuel consumption, reliability, etc. Similar in the eyes of consumers 18

19. Examples of “non similar products”
Commission v. Italy, case 184/85
Table fruit (apples, pears, peaches, etc) (Italy)
Bananas (French overseas departments)
Difference as to organoleptic characteristics and water content. Bananas are regarded as particularly nutritious (high energy content, well-suited for infants)
Kupferberg, case 104/81 (Association Agreement EEC- Portugal)
Wines resulting from natural fermentation
Porto wine (liqueur fortified with spirits)
Different production method, different characteristics 19

20. Forms of discrimination
Different tax percentage
Different taxable value (tax basis)
For domestic products: gross value
For imported products: gross value + transport expenses
Different payment terms
Shorter payment deadlines for imported products
Different procedures for settling tax disputes
Procedural requirements for the filing of an objection must be identical for domestic and imported products. Dounias, case C-228/98
Stricter sanctions for tax violations in the case of imported products 20

21. The content of art. 110 para. 2 TFEU
Art. 110 para. 2 covers all forms of indirect tax protection in favour of domestic products
Non similar products, BUT
“products in competition, even partial, indirect or potential competition, with each other” (Commission v. Italy, case 184/85, para. 11)
Different taxation is tolerated, BUT it must not lead to the protection of domestic products 21

22. Examples of products “in competition”
Bananas – Other table fruit (apples, pears, peaches, etc)
Alternative choice for consumers
Commission v. Italy, case 184/85
Spirits from wine and fruit – Spirits from cereals
Sufficient characteristics in common – alternative choice for consumers
Commission v. France, case 168/78
Beer – light wines
Capable of meeting identical needs – There is a degree of substitution
Commission v. United Kingdom, case 170/78 22

23. Article 111 tfeu 23

24. THE TEXT – THE CONTENT
“Where products are exported to the territory of any Member State, any repayment of internal taxation shall not exceed the internal taxation imposed on them whether directly of indirectly”
Demag, case 27/74: special turnover tax imposed on exports of products to other MS (to put a brake on exports)
ECJ: art. 111 “leaves open the question whether MS have the power to reduce the amount of the repayment, a measure which could, however, affect EU trade” 24

25. Case study: Car registration fees
Registration fees for new and/or second-hand motor vehicles put on the national market
Case law so far concerns non-producer MS (DK, GR, P, BG, RO…) 25

26. New cars: High registration fees
Commission v. Denmark, case C-47/88, para. 10: “art cannot be invoked against internal taxation imposed on imported products where there is no similar domestic product”
Could such a tax be assessed under Article 34 TFEU? 26

27. Commission v. Denmark, case C-47/88, para. 17:
Second-hand cars: registration fees calculated on a flat taxable value, regardless of the age and condition of the car
Commission v. Denmark, case C-47/88, para. 17:
Cars already circulating on the Danish market are “domestic products”
Registration fee on second-hand cars must be compared to the part of the initial registration fee, which is still incorporated in domestic used cars
Taxable value not less than 90% of the taxable value of a new car: over-taxation of imported second-hand cars 27

28. Gomez Valente, case C-393/98 (Portugal)
Taxation on second-hand cars must reflect the actual depreciation of the vehicle
Several criteria must be taken into account: age, condition, model, kilometers, etc
Criteria must be made public
Individuals must have the possibility to challenge the tax imposition 28

29. Tatu, case C-402/09 (Romania)
Romanian pollution tax on car registration
Based on actual depreciation (objective criteria)
Non-discriminatory between second-hand imported and domestic cars
BUT
Discriminatory/protective effects for second-hand domestic cars registered before the entry into force of the tax
Manea, case C-76/14 (Romania)
New Romanian pollution tax (on registration of imported second-hand vehicles AND on already registered vehicles, at the time of first transfer of ownership → compatible with article 110
Exemption from the tax, for already registered vehicles for which the former (incompatible) tax has been levied → incompatible with article 110 [the amount of the incompatible tax must be reimbursed with interest and it is not incorporated into the vheicle’s value] 29

30. CONCLUSION
Art. 110 TFEU as an important instrument for the completion of the internal market 30

31. THANK YOU FOR YOUR ATTENTION!!31