ECJ Rules On Polish Excise Tax

by Ulrika Lomas, for LawAndTax-News.com, Brussels

22 January 2007

Ruling last week in the case of Maciej Brzezinski v Dyrektor Izby Celnej w Warszawie, the European Court of Justice (ECJ) stated that community law precludes a Polish excise duty in so far as it affects second-hand vehicles over two years old imported from another Member State more onerously than those already registered in Poland

Under Polish legislation introduced in 2004, excise duty applies to the acquisition of second-hand vehicles originating from other Member States but not to the acquisition of second-hand vehicles already registered in Poland, these vehicles already having been subject to the duty upon their initial registration.

For cars which are new or less than two years old the percentage of excise duty is 3.1% or 13.6% depending on engine capacity. For vehicles over two years old, that percentage varies according to the age of the vehicle, attaining a maximum of 65% of the tax base.

The case centred on Mr Brzezinski, who purchased a Golf, manufactured in 1989, in Germany which he then imported into Poland. After submitting a simplified declaration relating to the acquisition of that vehicle in the Community, he paid PLN 855 by way of excise duty. Taking the view that that such a duty is contrary to the provisions of the EC Treaty, he requested reimbursement of the excise duty he had paid.

After having been unsuccessful before the customs authorities, Mr Brzezinski brought an action before the Wojewódzki Sad Administracyjny w Warszawie. That court referred questions concerning the compatibility of the Polish excise duty with Community law to the Court of Justice of the European Communities for a preliminary ruling.

The Court noted in its verdict that Article 90 EC seeks to ensure the complete neutrality of internal taxation as regards competition between products already on the domestic market and imported products.

In considering the compatibility of the excise duty in the light of Article 90 EC, the Court stated that it is necessary to compare the effects of the excise duty imposed on vehicles imported from another Member State with the effects of the residual excise duty imposed on second-hand vehicles already on the Polish market, which have already been subject to that same duty at the time of their initial registration.

The Court noted that the excise duty at issue in the main proceedings is charged only once, on new and second-hand vehicles, in respect of all vehicles intended for registration in Poland, whether they were manufactured in Poland or imported from other Member States. However, the excise duty imposed on second-hand vehicles sold more than two years after their date of manufacture increases with the age of the vehicle.

The Court argued that it is for the national court to examine whether such an increase in the rate is imposed only on second-hand vehicles originating from a Member State other than the Republic of Poland and whether, by contrast, for second-hand vehicles which were registered when they were new in Poland the percentage of residual excise duty incorporated into the price of such a vehicle remains constant.

It added that a system of taxation may be considered compatible with Article 90 EC only if it is so arranged as to exclude any possibility of imported products being taxed more heavily than similar domestic products, so that it cannot in any event have discriminatory effect.

It concluded:

"The Court accordingly holds that Community law precludes an excise duty, in so far as the amount of the duty imposed on second-hand vehicles over two years old acquired in a Member State other than Poland exceeds the residual amount of the same duty incorporated into the purchase price of similar vehicles already registered in Poland."

"The Court further holds that there is no need to limit the temporal effect of this judgment."

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