EU Questions Cypriot Excise Tax Rules

by Ulrika Lomas, Tax-News.com, Brussels

13 April 2011

The European Commission has formally requested that Cyprus amend its legislation that recognizes depreciation when calculating excise duties on second-hand motorcycles as it has been found to discriminate against imported motorcycles.

Under current Cypriot legislation, owners of second-hand motorcycles have to pay an excise duty depending on the depreciation, i.e. the loss in the motorcycle's value over a certain period of time, but with a 10-year time limit. However, the Commission believes that the Cypriot legislation as it stands could result in higher taxation for second-hand motorcycles imported to Cyprus than for those already registered in the country and is therefore in breach of EU rules on tax discrimination against products imported from other member states, under Article 110 of the Treaty on the Functioning of the European Union.

The reasoned opinion is based on the EU Court of Justice’s ruling in the Gomes Valente case of February 22, 2011, which confirmed such discriminatory tax treatment is in breach of EU rules.

According to the terms of the Commission’s ‘reasoned opinion’ (the second step in EU infringement proceedings) Cyprus must provide a satisfactory response within two months or the Commission may decide to refer Cyprus to the EU Court of Justice.

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