In a surprise move the ECJ has said that alcohol and cigarettes which are delivered will still be taxed where they are consumed as well as where they are bought. The court was ruling on a test case brought by a Dutch man who imports wine for his wine club.
"This is an odd interpretation of the legislation," said Ian Hyde, a specialist in tax law at Pinsent Masons, the law firm behind OUT-LAW.COM. "I think the court had in mind two things: firstly if it had allowed it, it could have made fraud easier; and secondly, it was mindful that the Commission is processing an amendment to the legislation anyway."
Online retailers were said to have been gearing up to start buying and reselling cigarettes and alcohol all over Europe following a ruling which was expected to go the other way.
An EU Directive on excise duty allows for the importing of significant amounts of alcohol and tobacco for personal use, a change to a previous system where limits were much tighter. This case tested the terms of import and what constituted personal use.
The Dutch man, Bob Joustra, orders wine in France on behalf of himself and a group of friends in an informal wine club. That wine is then delivered to him. The other members of the club then pick the wine up from him and pay him the cost of the wine and their share of the delivery, and Joustra only covers his costs, making no profit.
Joustra objected to being charged excise duty when the wine was delivered to The Netherlands and took a case claiming that the Directive allowed excise-free importing for personal use products which that person transported across borders.
Joustra argued that even though his wine was physically moved by a third party, it was on his order, on his account and to his address, and so the wine should be considered to have been transported by him.
The court said that not only did a person have to physically transport the goods themselves to qualify, but that Joustra's ordering wine for friends did not constitute 'personal use'.
"The Court points out that, in order for products to be exempt from excise duty in the State of importation, the Directive requires that those products be intended for the personal use of the private individual who has acquired them and that it therefore excludes products acquired by a private individual for the use of other private individuals," said an ECJ statement.
"Furthermore, the products in question must be transported personally by the private individual who purchased them. Were this not so, the effect, for the competent authorities of the Member States, would be an increased risk of fraud as the transport of products covered by the exemption requires no documentation," it said.
Hyde said that this fraud concern was very real. "As you can imagine it could result in whole shipping units coming in, or articulated lorries, and the drivers just saying 'it's all for personal use' and there is no documentation needed," he said. "It is much easier to control Ford Focus estates."
The Commission is planning a revision to the Directive which would allow for delivery of goods for personal use, something to which the judgement alluded.
"If the Directive contains a lacuna in this regard, it is for the Community legislature to remedy it, if necessary," said the ECJ statement. "This is confirmed by the fact that a proposed amendment to the Directive has in fact been submitted by the Commission to the Council of the European Union for the purpose of extending the benefit of the exemption to products transported on behalf of private individuals."
