The European Commission (EC) is seeking to secure an important legal precedent at the European Court of Justice (ECJ) effectively banning all 27 European Union (EU) member states from charging VAT on car registration taxes.
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It has launched a case against the Austrian government, which does just that, insisting that Austrian-based car dealers include car tax amounts (called the ‘Normverbrauchsabgabe-NoVA’) within the overall price of a vehicle, charging VAT on the combined car price and registration fee.
The commission claims this breaks EU VAT laws, which while allowing member states to vary rates (within certain guidelines), has tighter rules on what can attract VAT.
One principle is that you cannot tax a tax.
Announcing its legal action, Brussels said in a communiqué: “The rules on the taxable amount of VAT have been harmonised at the EU level, and the uniform application of those rules is an essential condition for the proper operation of the VAT system.”
The commission should succeed, given a useful precedent from a 1998 ECJ case against Denmark. Here, the Danes had insisted VAT be charged on car registration tax – although with some technical differences from Austria.
But the commission has branded these “minor or ancillary differences”, claiming the Austrian tax is “basically identical to the Danish one examined by the court”.
If its judges agree, it will be highly unlikely another member state will allow its VAT to cover car registration taxes in future. Member states must follow ECJ rulings on pain of massive recurring fines (sometimes many thousands of euros per day until compliance).
Keith Nuthall
