European Court plugs online duty-free sales hole

EU citizens cannot buy duty-free products from another member state unless they physically carry the merchandise themselves and the purchase is for personal use.

In a landmark judgment by the European Court of Justice (EJC) in Luxembourg yesterday, it was made clear that excise duty has to be paid in full if purchases, particularly of alcohol and stacks of cigarettes, from another member state are made online, through telephone or via catalogue.

The news was received with a sigh of relief by many EU finance ministers particularly those of member states with current high excise duties on these products. They feared that a different court decision would have resulted in the loss of millions of euros in revenue.

Malta is one of the member states where the average excise duties on alcohol are among the highest in the EU, together with the UK, Sweden, Ireland and Finland.

The EJC ruling followed a challenge by Dutch wine enthusiasts who set up a group to buy duty-paid French wine for delivery to members in the Netherlands for their own use. The Netherlands charged excise duty, even though French taxes had already been paid because a third party was involved in the transport of the wine.

The judgement upheld a 1992 EU rule permitting consumers to pay duty in the country where goods are bought but only if the alcohol or tobacco is for personal use and transported by the customers themselves.

"Only products acquired and transported personally by private individuals are exempt from excise duty in the member state of importation," the ECJ said.

"Products which are not held for private purposes must necessarily be regarded as being held for commercial purposes for the application of the directive on excise duty."

Over the past years many EU citizens were trying to bypass these EU regulations by shopping online from member states with lower excise duties. This will now have to stop as it has been declared illegal.

On the other hand, the so-called "booze cruises", where EU citizens travel to another EU member state to stock up on alcohol and tobacco at lower rates of duty, are still allowed as the products are purchased directly by the individual for personal use.