Poland taken to European Court over VAT on registration tax

While the argument rages in Malta over VAT charged on vehicle registration tax, the European Commission said today that it had referred Poland to the European Court of Justice over the inclusion of car registration tax within the taxable amount of VAT on new vehicles. The Commission said it considers that the car tax should not be included in the taxable amount of VAT.

"In a case over registration car tax levied in Denmark, the European Court of Justice had examined whether the taxable amount for VAT purposes, in the case of supplies of means of transport, must include registration tax which is usually paid by the supplier to the tax authorities and afterwards repaid to him by the purchaser along with the price of the vehicle.

"The Court ruled that, in the context of a contract of sale providing that the dealer will supply a vehicle registered for a price which includes the registration tax he paid before supplying the vehicle, the amount of that duty must not be included within the taxable amount of the VAT charged on the sale of the vehicle," the Commission said. "This is because, firstly, the registration tax is charged by reason of the registration of the vehicle and not by reason of the supply and, secondly, because the registration tax is paid by the supplier of the vehicle on account of the purchaser."

"The Commission understands that the car tax levied in Poland, despite some minor or ancillary differences, is basically identical to the Danish one examined by the Court: it is a one-off tax which is payable on the acquisition of the motor vehicle or as a condition for bringing it into use in the territory of the Member State concerned.

"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. In the light of this, the Commission has taken the view that the criteria of the EC Court (in Case C-98/05) must be applied to the car tax levied in Poland.

Finance Minister Tonio Fenech earlier this month said that there were conflicting decisions by the European Court on VAT charged on registration tax. He said that while the Court had decided against Denmark, there was also a case in which the Court had found against the Netherlands. The minister argued that the circumstances in Malta were closer to those of The Netherlands. Malta amended its registration tax system at the beginning of this year.