European Parliament Supports Duty-Free Shopping

by Ulrika Lomas, Tax-News.com, Brussels

21 November 2008

The European Parliament has rejected European Commission (EC) proposals to abolish duty free shopping at regional airports and at European Union-external land borders.

This position was part of a vote on Commission plans to update the rules on excise duties. Other amendments deal with travellers' access to duty free shops, and guidelines for the amount of alcohol and tobacco citizens can take across borders.

MEPs adopted their report by a small majority - 328 in favour to 319 against with 34 abstentions - after some fairly close votes on the issue of distance selling.

The Commission’s original proposal suggested that air and sea travellers should have access to duty free purchases only when their immediate destination was outside the European Union (EU). Parliament says that those with a final destination outside the EU should also be able to take advantage of such shopping (this means that a person flying from Manchester to Shanghai via Paris would still be able to buy, for example, duty free whisky in Manchester, and not have to wait to make the purchase in Paris).

The Commission’s proposal has the effect of abolishing duty free shops on external land borders, but MEPs voted to keep them.

Individuals are allowed to buy alcohol and tobacco duty paid in one member state and transport it to another without paying further duty if it is for personal use. The current EU legislation sets out indicative guidelines for what quantities could be considered for personal use. However, some member states’ tax authorities have on occasion apparently acted to enforce the guidelines as absolute limits – for example, the Commission took action against the United Kingdom on this point. The case did not come to court as the UK amended its practice in the meantime.

To avoid such possible misinterpretation, the Commission is proposing to delete all reference to guideline amounts. The European Parliament however, argues that this may create more confusion, and says the indicative guidelines should remain.

Regarding fuel duty, MEPs added a provision that when fuel bought duty-paid in another member state is transported in “atypical” containers (e.g. not in the tank of a car or a normal spare fuel container), the receiving member state can choose to impose its own duties.

MEPs backed the Commission's proposal that where excisable goods are purchased in a country other than that of the buyer and then sent on (e.g. using internet shopping) excise duty will be paid in the country of destination - and the vendor will have to make the necessary arrangements to ensure this takes place.

Parliament also adopted a series of amendments to clarify how the rules apply to goods lost, stolen or destroyed in commercial transit and on issues surrounding the transport of goods with duty suspended: for example between tax warehouses, before the goods are put out for retail sale.

As usual with tax policy, the European Parliament’s position is only consultative and the final decision is taken by unanimity in the European Council.

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