August 2014 - edition 133EU Tax Alert

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Highlights in this editionCommission investigates tax and non-tax State aid to sea ports On 9 July 2014, the Commission sent letters to Belgium and France enquiring about corporate tax advantages being

granted to sea ports.

CJ rules that Danish legislation regarding reincorporation of the losses previously deducted in respect of permanent establishments located abroad contravenes the freedom of establishment (Nordea Bank Danmark A/S)On 17 July 2014, the CJ delivered its judgement in case Nordea Bank Danmark A/S v Skatterministeriet (C-48/13).

The case deals with the Danish legislation regarding reincorporation of losses previously deducted in respect of

permanent establishments located abroad.

The CJ ruled that such legislation which reincorporates previously deducted losses incurred by foreign permanent

establishments intro the transferring company’s taxable profit in the event of transfer of those permanent

establishments to non-resident companies in the same group, contravenes the freedom of establishment in so far

as the Member State of the transferring company taxes both the profits made by those establishments before its

transfer and the gain upon the transfer.

CJ rules that bank may be obliged to include just part of rental payments in pro rata (Banco Mais)On 10 July 2014, the CJ delivered its judgment in the case Fazenda Pública v Banco Mais SA (C-183/13). Banco

Mais is a Portuguese bank which carries out leasing activities in the automotive sector and other financial activities.

It carries out both transactions in respect of which VAT is deductible and transactions in respect of which VAT is not

deductible.

The CJ ruled that a Member State in circumstances such as the one at hand, cannot be precluded from requiring

a bank which inter alia carries out leasing activities, to include in the pro rata calculation only the part of the rental

payments that corresponds to interest, where that use of the goods and services is primarily caused by the financing

and management of the leasing contracts, which is a matter for the national court to ascertain.

3

ContentsHighlights in this edition• Commission investigates tax and non-tax State aid

to sea ports

• CJ rules that Danish legislation regarding

reincorporation of the losses previously deducted in

respect of permanent establishments located abroad

contravenes the freedom of establishment (Nordea

Bank Danmark A/S)

• CJ rules that bank may be obliged to include just part

of rental payments in pro rata (Banco Mais)

State Aid / WTO• European Commission approves exemptions from

tax on advertising materials

• European Commission opens formal investigation

into tax exemption for Netherlands public companies

• Property transfer tax exemptions for reorganization of

local authorities found not to be aid

Direct taxation• AG Niessen opines on Netherlands rules regarding

Netherlands rules on mortgage interest relief

VAT• CJ rules that non-recoverability of leasing cars after

termination of leasing contracts does not qualify as a

self-supply (BCR Leasing)

• CJ rules that Member State is not allowed to require

payment of import VAT when reporting of that VAT

has already taken place under the reverse charge

mechanism (Equoland)

• Advocate General opines that transport or dispatch

to customer commences in Member State where

condition of good is brought in accordance with

contract (Fonderie)

• First evaluation of VAT cross-border ruling (CBR) pilot

case

• Commission formally requests France to levy VAT on

sporting events

• Commission publishes report on feasibility of new

VAT rules 2015

Customs Duties, Excises and other Indirect Taxes• CJ rules on the incurrence of a customs debt resulting

from an unlawful removal of goods from customs

supervision (SEK Zollagentur GmbH)

• CJ rules on the principle of respect for the rights of

the defence (Kamino International Logistics BV and

Datema Hellmann Worldwide Logistics BV)

• CJ rules on the CN classification of oil products with

aromatic constituents (Lukoyl Neftohim Burgas AD)

• CJ rules on the CN classification of plasma screens in

which video tuner can be inserted (Panasonice Italia

SpA)

• CJ rules on the CN classification of a substance

producing, by chemical reaction and exposure to

a laser light, a fluorescent effect intended for the

analysis of white blood cells (Sysmex)

• Commission refers UK to Court of Justice for failure

to comply with EU rules on marked fuel

• Commission refers Portugal to Court of Justice over

excise duty rules for cigarettes

• Operation ERMIS: 70 000 counterfeit goods seized in

EU joint customs operation

• Customs: Tackling smuggling and fraud in excise

goods

4 5

compared with those having PEss in Denmark. They

lay down a rule requiring the reincorporation of losses

lawfully deducted in respect of the foreign establishments

transferred which does not apply if establishments in

Denmark are transferred in identical circumstances. That

disadvantageous treatment is liable to deter a Danish

company from carrying on its business through a PE

situated in a Member State or in a State that is party to

the EEA Agreement other than Denmark and therefore

constitutes a restriction prohibited in principle by the

provisions of the TFEU and the EEA Agreement that

relate to freedom of establishment.

The CJ then went to analyse the justifications invoked

by the Danish Government based on the need to

ensure a balanced allocation of the power to impose

taxes between Member States in connection with the

prevention of tax avoidance. The CJ recalled that the

objective of the Danish legislation is thus to avoid the risk

of tax avoidance which would consist, in particular, in a

group organising its business in such a way that it deducts

from its taxable income in Denmark the losses incurred

by a loss-making PE situated abroad and then, once

that establishment has become profitable, transfers the

establishment’s business to a company which it controls

but which is liable to tax not in Denmark. If Denmark were

denied the power to reincorporate the losses thereby

deducted into the taxable profit of the Danish company

carrying out the transfer, when it has lost the power to

tax any future profits, arrangements of the above kind

would artificially erode its tax base and, therefore, affect

the allocation of the power to impose taxes. However, the

CJ considered that the legislation went beyond what is

necessary to attain that objective.

The CJ recalled that the balanced allocation of the power

to impose taxes has the objective of safeguarding the

symmetry between the right to tax profits and the right

to deduct losses. That means that the losses deducted

in respect of a PE must be capable of being offset by

taxation of the profits made by it under the tax jurisdiction

of the Member State in question, that is to say, both the

profits made throughout the period when the permanent

establishment belonged to the resident company and

those made at the time of the permanent establishment’s

transfer. In the present case it was not disputed that the

Highlights in this editionCommission investigates tax and non-tax State aid to sea ports On 9 July 2014 the Commission sent letters to Belgium

and France enquiring about corporate tax advantages

for ports. In respect of Germany, the Commission

asked questions about other (non-tax) competitive

advantages to ports. The functioning and tax treatment

of ports in certain other EU Member States is still under

investigation.

CJ rules that Danish legislation regarding reincorporation of the losses previously deducted in respect of permanent establishments located abroad contravenes the freedom of establishment (Nordea Bank Danmark A/S)On 17 July 2014, the CJ delivered its judgement in

case Nordea Bank Danmark A/S v Skatterministeriet

(C-48/13). The case deals with the Danish legislation

regarding reincorporation of losses previously deducted

in respect of permanent establishments (PEs) located

abroad.

Under the Danish legislation applicable in the main

proceedings, resident companies take into account on

an ongoing basis the profits and losses of their PEs

located abroad when determining the taxable income

of the company. Nordea Bank is a company resident

in Denmark which engaged in retail banking activities

in Finland, Sweden and Norway through loss-making

PEs and lawfully deducted the losses from its taxable

income in Denmark. In 2000, the activities of those PEs

were restructured. The transactions were considered

as a partial sale of the business to other companies

of the group. The losses previously deducted - which

had not been matched by subsequent profits - were

reincorporated into Nordea Bank’s taxable profit. Nordea

Bank considered that such reincorporation was contrary

to freedom of establishment.

The CJ started by considering that the Danish legislation

results in an advantage being denied to Danish

companies having permanent establishments abroad

5

took the view that fully including the rental turnover

from the leasing transactions distorted the calculation

and that, based on Article 17, paragraph 5 of the Sixth

EU VAT Directive, only the part of the rental payments

which related to interest should be included. As a result,

Banco Mais was required to pay arrears of VAT together

with compensatory interest. Finally, the matter ended up

before the Supreme Court, which decided to stay the

proceedings. The Supreme Court referred to the CJ for

a preliminary ruling regarding the question whether the

rental payments should be fully taken into account in the

numerator or that only the interest had to be taken into

account.

The CJ ruled that a Member State, in circumstances such

as the one at hand, cannot be precluded from requiring

a bank which inter alia carries out leasing activities, to

include in the pro rata calculation only the part of the

rental payments that corresponds to interest, where that

use of the goods and services is primarily caused by

the financing and management of the leasing contracts,

which is a matter for the national court to ascertain.

State Aid/WTOEuropean Commission approves exemptions from tax on advertising materials On 9 July 2014, the European Commission approved

a Danish tax on advertising material delivered to

households, which included an exemption for materials

from certain government-recognised educational

societies, weekly newspapers (with at least 25% editorial

content) and telephone directories. The tax, as such,

aims to reduce the volume of household waste paper.

The first exemption was found not to constitute aid as EU

trade would not be affected. Given the social role of weekly

newspapers in distributing local information and serving

as a means of communication for the elderly and in low-

populated areas, the Commission approved the second

exemption. The exemption for telephone directories also

constituted State aid, but the Commission’s final view on

its compatibility was not addressed in the press release

currently available.

profits of a PE belonging to a resident company that are

made before the permanent establishment’s transfer to

a non-resident company in the same group are taxable

in Denmark. In addition in the event of a subsequent

sale, the gain made upon the transfer is then added to

the taxable income of the Danish company carrying out

the transfer.

Therefore the Court concluded that the reincorporation of

the previously deducted losses went beyond necessary

to the need to safeguard the balanced allocation of the

power to impose taxes. It stressed that such conclusion

was not altered by the fact, put forward by the Danish

Government, that it would be difficult for it in the event

of an intragroup transfer to verify the market value of

the business transferred in another Member State. Such

difficulties are not specific to cross-border situations

since the Danish authorities necessarily already carry out

similar checks when a business is sold in the context of an

intragroup transfer of a resident establishment. Moreover,

the Danish authorities in any event would always have

the power to request from the transferring company the

documents that appear to them necessary in order to

verify whether the value of the business adopted for the

purpose of calculating the gain on transfer of a foreign

establishment is the same as the market value

CJ rules that bank may be obliged to include only part of rental payments in pro rata (Banco Mais) On 10 July 2014, the CJ delivered its judgment in the case

Fazenda Pública v Banco Mais SA (C-183/13). Banco

Mais is a Portuguese bank which carries out leasing

activities in the automotive sector and other financial

activities. It carries out both transactions in respect of

which VAT is deductible and transactions in respect of

which VAT is not deductible. In this regard, Banco Mais

incurred general costs on which VAT is charged.

For determining the deductible VAT on the general costs,

Banco Mais calculated its pro rata, including (besides

the financial transactions) the turnover from the leasing

transactions in respect of which VAT is deductible in the

numerator and (besides the financial transactions) the

turnover from all leasing transactions in the denominator.

The Portuguese tax authorities, however, in essence,

6 7

The taxpayer, a Netherlands national, is a foreign

taxpayer for Netherlands tax purposes. He lives in

Spain, but derives his income only from the Netherlands

(60%) and Switzerland (40%), as a shareholder of his

100% holding company in the Netherlands. He owns a

house in Spain, partly paid for by means of a mortgage,

with which mortgage interest is involved. The taxpayer

takes the position that the negative income from these

interest costs in Spain should be taken into account

in the Netherlands, based on EU law (in particular,

considering the case law of the CJ in the Schumacker

and Rennerberg judgments, without opting for treatment

as a foreign taxpayer under Netherlands law (article 2.5

Income Tax Act). The Netherlands tax inspector did not

allow this deduction, because there is no possibility to

refer to EU law. The Netherlands Court decided in favour

of the tax inspector, considering that in order to be able to

rely on the Schumacker case, a person must be regarded

as an employee.

The AG divided the problem into three sub questions. The

first question, whether the taxpayer can be treated as an

employee for EU law purposes. The taxpayer argued

that, because his father is the director of the company,

and the taxpayer himself is only the shareholder, there is

a position of subordination and he can be treated as an

employee. However, as the AG pointed out, in a case of

a 100% interest, the shareholder’s position is so strong

that there cannot be a position of subordination. The

Netherlands Court also came to this conclusion.

Second, where the taxpayer is not considered an

employee, the AG addressed the question whether this

would be relevant for applying the Schumacker case.

The tax inspector argued that, because the Schumacker

case dealt with the situation of an employee, this case

cannot be relied on in the present situation. The court

agreed with this argument. The AG pointed out however,

referring to the Wielockx case, that the Schumacker case

should apply to all persons who perform cross-border

work. The AG concluded that the Netherlands has to take

into account the personal allowances.

Finally, the AG addressed the question how to attribute

the personal allowances when there are two working

European Commission opens formal investigation into tax exemption for Netherlands public companies In May 2013, the European Commission proposed to

the Netherlands to change its corporate tax system in

regard to public undertakings by 2015, which, for the

most part, are exempt under the current system. The

Netherlands government had previously accepted the

measures proposed by the Commission (to the extent

that it would be in effect as of 2016). In a draft proposal

for a law changing the corporate tax, an exemption was

included for five seaports. From this, the Commission

concluded that the Netherlands authorities had not fully

accepted the measures proposed by it. For that reason,

the Commission has opened a full investigation as a next

step to order the Netherlands to change its system as

part of its monitoring obligations of existing aid schemes.

Property transfer tax exemptions for reorganization of local authorities found not to be aid On 26 May 2014, the European Commission found

that a German exemption from property transfer tax for

reorganizations of public authorities did not constitute

aid. As part of local merging or reorganization, land can

be transferred from one legal entity to another. Given

public policy reasons for such transfers, this did not lead

to State aid given the logic of a property transfer tax. It

should be noted that the Commission considered that

neither the merging of two economic activities nor the

development of such an activity should be the purpose

of a reorganization.

Direct TaxationAG Niessen opines on Netherlands rules regarding Netherlands rules on mortgage interest reliefOn 17 July 2014, AG Niessen issued his Opinion in

Hoge Raad (case 13/03468). The case deals with a

Netherlands foreign taxpayer who cannot claim mortgage

interest relief in his home State because no income is

derived from there. In particular, it deals with the issue of

how to allocate the mortgage interest relief to the working

States, between EU and Third (Non-EU) countries.

7

Regarding the missing cars, the tax authorities considered

that in accordance with the national Fiscal Code, the

relevant transactions had to be defined as ‘self-supplies’

and that BCR Leasing had to issue invoices to itself in

respect of these supplies. To the contrary, BCR Leasing

stated that the national legislation was not compatible

with the system of the EU VAT Directive. Finally, the

matter ended up before the Court of Appeal, which

decided to stay the proceedings and to refer to the CJ

for a preliminary ruling regarding the question if Article 16

or Article 18 of the EU VAT Directive applies in the case

at hand.

In conclusion, the CJ ruled that the impossibility for the

leasing company to recover the goods in the case at

hand cannot be regarded as a supply of goods for private

use of BCR Leasing or of its staff, within the meaning of

Article 16 EU VAT Directive. First, the goods are not in

their possession; second, the situation is the result of the

lessee’s allegedly wrongful conduct; and third, the goods

cannot be considered as being applied for purposes other

than those of the business of BCR Leasing. According to

the CJ, Article 18 EU VAT Directive also cannot be applied

to the underlying case, as the situations described in this

provision do not occur.

CJ rules that Member State is not allowed to require payment of import VAT when reporting of that VAT has already taken place under the reverse charge mechanism (Equoland) On 17 July 2014, the CJ delivered its judgment in the case

Equoland Soc. coop. (‘Equoland’) v Ufficio delle Dogane

di Livorno (C-272/13). Equoland, an Italian company,

imported in June 2006 a consignment of goods from a

third country. On the customs declaration, it was stated

that those goods were destined for the tax warehouse for

the purposes of VAT. Consequently, no payment of VAT

on importation was requested on the date of transaction.

On the day after the import, the goods were listed in a

warehouse register. As it was discovered that the goods

had never been physically stored in the warehouse,

the goods were immediately withdrawn from the tax

warehouse arrangements. Accordingly, VAT was paid by

Equoland under the reverse charge mechanism.

States, and specifically, when one of these States is

not an EU Member State, such as Switzerland. The AG

discussed seven different approaches on how to allocate

the personal allowances. According to him, the most

preferable approach is to let each working State calculate

the personal allowances according to its national tax law,

and then divide this by the number of working States

(in this case two). When one of the States is not an

EU Member State, the AG put forward that this country

cannot be taken into account by the other working States.

In the present case, this would mean that the Netherlands

would have to take into account the interest costs for the

full amount.

However, the AG argued that the CJ should decide on

the question whether the EC-Switzerland Agreement

of free movement of persons is applicable. Besides,

the interpretation of this agreement in the light of the

Schumacker case law should be dealt with by the CJ.

VAT CJ rules that non-recoverability of leasing cars after termination of leasing contracts does not qualify as a self-supply (BCR Leasing) The CJ delivered its judgment in the case SC BCR

Leasing IFN SA v Agenția Naționalǎ de Administrare

Fiscalǎ etc. (C-438/13) on 17 July 2014. BCR Leasing

is a Romanian company whose main activity is financial

leasing. For that purpose, it acquires cars from various

suppliers, which it leases to natural or legal persons.

In respect of the acquisition of the cars, BCR Leasing

deducts the input VAT paid in full.

As a result of late or non-payments by the lessees, BCR

Leasing terminated a number of the financial leasing

contracts. The lessees were required to return the goods

to BCR Leasing within three days of the termination of

the contract, but a number of the lessees refused to do

so. Despite the proceedings initiated by BCR Leasings,

some of the cars could not be recovered within the time-

limits set and as the contract had been terminated, BCR

Leasing no longer sent invoices with VAT to the lessees.

Accordingly, VAT was no longer collected by BCR Leasing

in respect of the terminated leasing contracts.

8 9

Fonderie took the view that the supply of the goods to

Atral was an Intra-Community supply of goods and that

the supply took place in Italy, where the transport of the

metal components started. Consequently, Fonderie took

the view that it did not have any transactions for which it

required a VAT registration in France and that, therefore,

it was entitled to reclaim the VAT on the invoice issued

by Saunier-Plumaz based on the refund procedure of

the Eighth EU VAT Directive. The French tax authorities,

however, opposed this view and stated that the supply

of goods was a local supply in France, as the varnished

metal components were dispatched from Saunier-Plumaz

to Atral. In that case, Fonderie could only deduct French

input VAT by registering and filing VAT returns in France.

The Advocate General opined that the transport or the

dispatch to the customer can only commence when the

good is in a condition in accordance with the contract. As

this condition was only achieved after the varnishing of

the metal components, the dispatch to Atral commenced

in France. Consequently, according to the Advocate

General, the place of supply of the components was in

France.

First evaluation of VAT cross-border ruling (CBR) pilot case Recently, the EU VAT Forum has made a first evaluation

of the VAT CBR pilot case, which started in June 2013.

The participating national tax authorities and businesses

aired their wish to extend the initiative to other EU

Member States. A first list of cross-border tax rulings has

already been published. The pilot case will be further

evaluated at the end of this year.

Commission formally requests France to levy VAT on sporting events On 10 July 2014, the Commission formally requested

France to bring the VAT treatment of tickets for admission

to matches and other sporting events in conformity with

the EU VAT Directive. Under the EU VAT Directive, the

admission fee should, in general, be subject to VAT.

According to the Commission, France so far has retained

by way of derogation an exemption for sporting events

that were subject to entertainment tax. However, in

the meantime, French municipalities have made use

of a created possibility to exempt sporting events on

With regard to the situation, the Customs Agency claimed

that the application of the law on VAT warehouses is

subject to the necessary condition that the imported goods

are ‘physically’ placed in the warehouses. Therefore,

the postponement of payment of VAT on importation

was unjustified and the Customs Agency took the view

that Equoland had not paid the VAT due on importation.

Consequently, the Customs Agency sought payment

of the VAT on importation plus a penalty of 30% of the

VAT amount. Equoland opposed this view and argued

that it had regularized its situation by paying the VAT on

importation through the reverse charge mechanism to

the tax authorities instead of to the Customs Agency. In

the end, the matter ended up before the Regional Tax

Court of Tuscany, which Court referred the question to

the CJ for a preliminary ruling.

The CJ ruled that Article 16 (1) of the EU Sixth

Directive does not preclude national legislation which

makes the grant of an exemption, such as the one at

hand, conditional on the fact of whether the goods are

physically placed in a tax warehouse. Furthermore, the

CJ concluded that the penalty procedure may prove to

be disproportionate, given the impossibility of adapting it

to the specific circumstances of each case, which is for

the referring court to decide. Finally, according to the CJ,

national legislation may not require the payment of VAT

on importation even though that VAT has already been

settled under the reverse charge mechanism through

self-invoicing.

Advocate General opines that transport or dispatch to customer commences in Member State where condition of good is brought in accordance with contract (Fonderie) On 3 July 2014, Advocate General Kokott issued her

Opinion in the case Sociéte Fonderie 2A (‘Fonderie’)

v Ministre de l’Economie et des Finances (C-446/13).

Fonderie, an Italian company, sold metal components to

its customer (Atral) in France. Before supplying them to

Atral, the goods were varnished in France by Saunier-

Plumaz, for the account of Fonderie. For this activity,

Saunier-Plumaz invoiced an amount including French

VAT to Fonderie, for which VAT Fonderie wished to obtain

a refund.

9

The following day, the haulage company designated by

SEK Zollagentur, the approved consignor, was meant

to collect a number of consignments, including the

aforementioned articles, at the temporary storage location

and deliver them to a recipient in Greven (Germany).

When the articles arrived, the recipient established that

the bicycle carriers were not included in the consignments

and accordingly, notified the customs office at the place

of destination.

The Hauptzollamt Gießen then wrote to SEK Zollagentur,

requesting information on the whereabouts of the bicycle

carriers. SEK Zollagentur replied that the bicycle carriers

had not been loaded on 17 January 2010. It stated that

the owner of the temporary storage facility had not been

able to keep the stored consignments in its warehouse

and hand them over to the haulage company, which was

why the bicycle carriers had not been handed over to the

haulage company as planned and had remained at the

temporary storage facility.

On 1 February 2010, a new consignment for the bicycle

carriers was arranged under a fresh transit procedure.

The recipient then released the bicycle carriers for free

circulation and paid import duties of EUR 2,000.

The Hauptzollamt Gießen also charged the same amount

to SEK Zollagentur on the ground that the latter had

removed the bicycle carriers from customs supervision by

failing to present them at the customs office at the place

of destination at the time of the first transit procedure.

SEK Zollagentur took the view that the customs duties

being charged were not legally owed and requested

repayment pursuant to Article 236 of the Customs Code.

It asserted that a transit procedure began only when

the goods were actually collected from the storage

depot, irrespective of the declaration made by it. Before

the transport began, the external Community transit

procedure had not commenced, with the result that the

only party responsible for the removal from customs

supervision was the owner of the temporary storage

facility.

their territory from entertainment tax. The Commission

opposes the extended existence of the VAT exemption

and takes the view that France should levy VAT on tickets

for events which are not subject to entertainment tax. If

France does not react in a satisfactory manner within two

months, the Commission may refer France to the CJ.

Commission publishes report on feasibility of new VAT rules 2015 On 26 June 2014, the Commission published a report

on the feasibility of the new VAT rules for telecom,

broadcasting and electronic services as of 1 January

2015. The report focuses on the action taken to ensure

the proper and efficient implementation of the new rules.

On the way forward, the Commission recommends the

Member States to take all relevant actions to set up the

necessary IT infrastructure in due time, to fully implement

the audit guidelines, to refrain from the option to require

an invoice on B2C supplies covered by the new place-

of-supply rules and to designate an easily accessible

contact point for double taxation problems.

Customs Duties, Excises and other Indirect TaxesCJ rules on the incurrence of a customs debt resulting from an unlawful removal of goods from customs supervision (SEK Zollagentur GmbH) On 12 June 2014, the CJ delivered its judgment in case

SEK Zollagentur GmbH (C- 75/13). The case concerns

the unlawful removal of bicycle carriers that were placed

under temporary storage.

On 15 January 2010, a shipment of 12 bicycle carriers

was brought into the customs territory of the European

Union. The shipment was placed in temporary storage

and the owner of the storage facility presented the goods

to customs and drew up a summary declaration thereof.

On 17 January 2010, SEK Zollagentur declared the

bicycle carriers for transit under the external Community

transit procedure. The bicycle carriers were released for

transit the same day.

10 11

2. The fourth indent of Article 203(3) of Regulation

No 2913/92, as amended by Regulation No

648/2005, must be interpreted as meaning that,

in circumstances such as those of the main

proceedings, where an article is removed from

customs supervision, the person who, as the

approved consignor, placed that article in the

external Community transit procedure is a customs

debtor under that provision. ‘

CJ rules on the principle of respect for the rights of the defence (Kamino International Logistics BV and Datema Hellmann Worldwide Logistics BV) On 3 July 2014, the CJ delivered its judgment in the joint

cases Kamino International Logistics BV (C-129/13) and

Datema Hellmann Worldwide Logistics BV (C-130/13).

The case concerns the possible infringement of the right

to be heard before duty assessments are imposed in the

situation that party concerned has the opportunity to be

heard during the objection stage.

In each of the actions in the main proceedings, a customs

agent, namely Kamino in Case C-129/13 and Datema in

Case C-130/13, acting on the instructions of the same

undertaking, filed in 2002 and 2003 declarations for the

release for free circulation of specified goods, described

as ‘garden pavilions/party tents and side walls’.

Kamino and Datema declared those goods under code

6 601 10 00 of the Combined Nomenclature (‘Garden or

similar umbrellas’) and paid customs duty at the rate of

4.7% cited for that code.

Following an inspection by the Netherlands customs

authorities, the tax inspector found that the classification

was incorrect and that the goods concerned should be

classified under code 6 306 99 00 of the Combined

Nomenclature (‘Tents and camping goods’), to which a

higher rate of customs duty of 12.2% applies.

As a result, the tax inspector sent, by decisions of 2 and

28 April 2005, demands for payment on the basis of

Articles 220(1) and 221(1) of the Customs Code, in order

to effect the recovery of the additional customs duties still

due from Kamino and Datema, respectively.

Following the dismissal of its action brought against

the decision refusing it repayment, SEK Zollagentur

brought an action before the Finanzgericht Hessen

(Finance Court, Hessen), which upheld the refusal of

repayment on the ground that the duties could not be

repaid because they were legally owed. SEK Zollagentur

brought an appeal on a point of law (‘revision’) before the

Bundesfinanzhof (Federal Finance Court).

In those circumstances, the Bundesfinanzhof decided to

stay proceedings and to refer the following questions to

the Court for a preliminary ruling:

‘1. Are the relevant provisions of the Customs Code,

in particular Article 50 thereof, to be interpreted

as meaning that an article left with a person by

the customs authority for temporary storage in an

approved place is deemed to have been removed

from customs supervision if it is declared for an

external transit procedure, but it does not in fact

accompany the prepared transit papers on the

transport planned and is not presented to the

customs office at the place of destination?

If the answer to the first question is affirmative:

In such circumstances is the person who, as the approved

consignor, placed the goods in the transit procedure a

customs debtor under the first indent of Article 203(3)

of the Customs Code or under the fourth indent of

Article 203(3) of the Customs Code?’

The CJ ruled as follows:

‘1. Articles 50 and 203 of Council Regulation (EEC)

No 2913/92 of 12 October 1992 establishing

the Community Customs Code, as amended by

Regulation (EC) No 648/2005 of the European

Parliament and of the Council of 13 April 2005, must

be interpreted as meaning that an article left for

temporary storage must be deemed to have been

removed from customs supervision if it is declared

for an external Community transit procedure, but

it does not in fact leave the storage facility and is

not presented to the customs office at the place of

destination, although the transit documents have

been presented there.

11

2. If the answer to Question 1 is in the affirmative:

(a) Must the European law principle of respect for

the rights of the defence by the authorities be

interpreted to mean that the principle is infringed

where the addressee of an intended decision

was not given a hearing before the authorities

adopted a measure which adversely affected it

but was given the opportunity to be heard at

a subsequent administrative (objection) stage,

which precedes access to the national courts?

(b) Are the legal consequences of the infringement

by the authorities of the European law principle

of respect for the rights of the defence governed

by national law?

3. If the answer to Question 2(b) is in the negative, what

circumstances may the national courts take into

account when determining the legal consequences,

and in particular may they take into account whether

it is likely that, without the infringement by the

authorities of the European law principle of respect

for the rights of the defence, the proceedings would

have had a different outcome?’

By order of the President of the Court of 24 April 2013,

Cases C-129/13 and C-130/13 were joined for the

purposes of the written and oral proceedings and the

judgment.

The CJ ruled as follows:

1. The principle of respect for the rights of the defence

by the authorities and the resulting right of every

person to be heard before the adoption of any

decision liable adversely to affect his interests,

as they apply in the context of Council Regulation

(EEC) No 2913/92 of 12 October 1992 establishing

the Community Customs Code, as amended by

Regulation (EC) No 2700/2000 of the European

Parliament and of the Council of 16 November

2000, may be relied on directly by individuals before

national courts.

2. The principle of respect for the rights of the defence

and, in particular, the right of every person to be

heard before the adoption of an adverse individual

Kamino and Datema did not have the opportunity to be

heard before the demands for payment were issued.

They lodged an objection against the relevant demand

with the tax inspector, who dismissed it after considering

the arguments made.

Their appeals against those dismissal decisions were

declared unfounded by the Rechtbank te Haarlem. On

further appeal, the Gerechtshof te Amsterdam (Appeals

Court) upheld the judgment of the Rechtbank te Haarlem

in so far as it required Kamino and Datema to perform

their obligations under the demands for payment at issue.

Both Kamino and Datema then appealed on a point of

law to the Hoge Raad der Nederlanden.

In its orders for reference, the Hoge Raad der

Nederlanden (Supreme Court) noted that, on appeal,

the Gerechtshof te Amsterdam found, in the light of the

judgment of the Court in Sopropé, C-349/07, that the

tax inspector had infringed the principle of respect for

the rights of the defence insofar as he had not offered

the interested parties, before issuing the demands for

payment at issue, the opportunity to express their views

on the information on which the post-clearance recovery

of the customs duties was based.

The Hoge Raad der Nederlanden noted, however, that

neither the Customs Code nor the applicable national

law contains procedural provisions requiring customs

authorities to give a customs debtor, before effecting the

communication of a customs debt under Article 221(1)

of the Customs Code, the opportunity to make known

his views as regards the information on which the post-

clearance recovery is based.

In those circumstances, the Hoge Raad der Nederlanden

decided to stay the proceedings and to refer the following

questions, which are formulated in the same terms

in Cases C-129/13 and C-130/13, to the Court for a

preliminary ruling:

‘1. Does the European law principle of respect for the

rights of the defence by the authorities lend itself to

direct application by the national courts?

12 13

CJ rules on the CN classification of oil products with aromatic constituents (Lukoyl Neftohim Burgas AD) On 12 June 2014, the CJ delivered its judgment in

case Lukoyl Neftohim Burgas AD (Lukoyl, C- 330/13).

The case concerns the classification in the Combined

Nomenclature (CN) of a product that, according to an

analysis of the customs laboratory in Ruse (Bulgaria),

exists of an oil, which, more precisely, is a directly distilled

petrol oil containing a mixture of hydrocarbons in which

the weight of the aromatic constituents exceeds that of

the non-aromatic constituents. That oil was not composed

of benzol (benzene), toluol (toluene), xylol (xylenes),

naphthalene, other aromatic hydrocarbon mixtures,

creosote oils or crude oils, sulphuretted toppings, basic

products, anthracene or phenols.

On basis of this analysis, the goods were classified in

CN heading 2707, subheading 2707 9999. An additional

amount of import duty and VAT became due. Appeals

were filed at the Administrativen sad Burgas.

Proceedings were stayed and following questions were

referred to the CJ:

‘1. Is the method for determining the aromatic

constituents of substances under Chapter 27 of the

CN, set out in Annex A to the Explanatory Notes to

Chapter 27 of the CN, inconsistent with the definition

of aromatic constituents contained in the general

considerations on Chapter 27 of the HS? If so, how

are those constituents to be determined and is the

ASTM D 2007 method a suitable and appropriate

means of doing so?

2. What is the meaning of the term ‘non-aromatic

constituents’ used in the explanatory notes to

Chapter 27 of the CN, the Explanatory Notes to

Chapter 27 of the HS and note 2 to Chapter 27

of the HS? Is the meaning of that term the same

as that of the term ‘non-aromatic hydrocarbons’

or is it broader? If it is broader than the meaning

of the latter term, does it include all constituents

which, by reference to weight, are not covered by

the term ‘aromatic constituents’, or does it refer to

constituents of a substance, such as that at issue in

measure must be interpreted as meaning that, where

the addressee of a demand for payment adopted

in a procedure for the post-clearance recovery of

customs duties on imports, under Regulation No

2913/92, as amended by Regulation No 2700/2000,

he has not been heard by the authorities before the

adoption of the decision, his rights of defence are

infringed even though he can express his views

during a subsequent administrative objection stage,

if national legislation does not allow the addressees

of such demands, in the absence of a prior hearing,

to obtain suspension of their implementation until

their possible amendment. Such is the case, in

any event, if the national administrative procedure

implementing the second subparagraph of Article

244 of Regulation No 2913/92, as amended by

Regulation No 2700/2000, restricts the grant of such

suspension where there is good reason to believe

that the disputed decision is inconsistent with

customs legislation or that irreparable damage is to

be feared for the person concerned.

3. The conditions under which observance of the

rights of the defence is to be ensured and the

consequences of the infringement of those rights

are governed by national law, provided that the

rules adopted to that effect are the same as those

to which individuals in comparable situations under

national law are subject (principle of equivalence)

and that they do not make it impossible in practice

or excessively difficult to exercise the rights of

defence conferred by the European Union legal

order (principle of effectiveness).

The national court, which is under an obligation to ensure

that European Union law is fully effective, may, when

assessing the consequences of an infringement of the

rights of the defence, in particular the right to be heard,

consider that such an infringement entails the annulment

of the decision taken at the end of the administrative

procedure at issue only if, had it not been for such an

irregularity, the outcome of the procedure might have

been different.

13

Pursuant to note 2 to Chapter 27 of the HS, the

description ‘petroleum oils and oils obtained from

bituminous minerals’ in heading 2710 is to be

understood as also including similar oils, as well

as those consisting mainly of mixed unsaturated

hydrocarbons, obtained by any process, provided

that the weight of the non-aromatic constituents

exceeds that of the aromatic constituents.

8. Is there an inconsistency between the CN

Explanatory Notes to subheadings 2707 99 91 and

2707 99 99 … and the Explanatory Notes to heading

2710 of the HS, Part I (B), to which the explanatory

notes to Chapter 27 of the CN refer?

9. Which are the authentic language versions and what

is the true meaning of the second sentence of the CN

Explanatory Notes to subheadings 2707 99 91 and

2707 99 99, which, in Bulgarian, reads ‘mezhdu tezi

produkti mogat da se upomenat’ (literal translation:

‘of these products mention may be made of’ and, in

English, ‘these products are’)?

10. How is a product with characteristics such as those

of the product at issue in the main proceedings to be

classified if the weight of the aromatic constituents

in that product exceeds that of the non-aromatic

constituents, but the product does not fulfil all four

cumulative conditions set out in the first point of the

Explanatory Notes to subheadings 2707 99 91 and

2707 99 99 of the CN?’

The CJ ruled as follows:

1. The criterion to take into consideration in order

to classify products with characteristics such

as those of the product at issue in the main

proceedings under Heading 2707 or Heading

2710 of the Combined Nomenclature in Annex I to

Council Regulation (EEC) No 2658/87 of 23 July

1987 on the tariff and statistical nomenclature and

on the Common Customs Tariff, as amended by

Commission Regulation (EC) No 1006/2011 of

27 September 2011, is the content by weight of the

aromatic constituents in relation to the non-aromatic

constituents.

the main proceedings, which, by reference to weight,

do not fall under either of those two categories, that

is to say ‘aromatic constituents’ or ‘non-aromatic

constituents’?

3. Is it permissible for one and the same method to be

used to determine both aromatic and non-aromatic

constituent content for the purposes of Chapter

27 of the CN and Chapter 27 of the HS and, if so,

which? If this is not permissible, which method must

be used to determine the aromatic constituents and

the non-aromatic constituents respectively?

4. Which of the two headings — 2707 or 2710 — of

Chapter 27 of the CN most accurately describes a

product with characteristics such as those of the

substance at issue in the main proceedings?

5. In the event that both headings describe with equal

accuracy a product having characteristics such

as those of the substance at issue in the main

proceedings, is it the fact that its weight is made up

predominantly of aromatic constituents that gives

the product its essential character?

6. Which of the two headings — 2707 or 2710 — covers

products with properties which are most similar to

the characteristics of the product at issue in the main

proceedings?

7. Is there an inconsistency between part of the CN

Explanatory Notes to subheadings 2707 99 91 and

2707 99 99 and note 2 to Chapter 27 of the HS, or

is that note not exhaustive and to be regarded as

merely illustrative?

According to the CN Explanatory Notes to

subheadings 2707 99 91 and 2707 99 99, ‘heavy

oils (other than crude) obtained from the distillation

of high-temperature coal tar or other products

similar to those oils’ are to be classified according

to their characteristics in subheadings ‘2710 19 31

to 2710 19 99’ if they do not fulfil the four cumulative

conditions set out in the CN Explanatory Notes to

the former subheadings.

14 15

DVD players, video cameras and television satellite

receivers;

• the screens in question are not supplied with a video

card at the time of importation, but such a card can

easily be purchased separately and at very low cost,

and can easily be inserted into the appropriate slot

provided for that purpose;

• at the time of importation, the screens are equipped

with two loudspeakers and a remote control, and that

those parts could be used only if the screen is used

to receive composite AV video signals if a video card

is inserted; and

• the user manual for those screens refers specifically

to the product’s audiovisual capabilities and to the

possibility of inserting a video card in order to activate

reception of television signals.

For the purpose of making customs declarations,

the applicants in the main proceedings classified the

screens imported under heading 8471 60 90 of the CN,

as screens exclusively intended for the transmission of

images generated by a computer, with the result that

those goods were exempt from customs duties and the

payment of value added tax at the rate of 20%.

However, the Agenzia took the view that those screens

should have been classified under heading 8528 of the

CN, which refers inter alia to reception apparatus for

television and video monitors, with the result that customs

duties at a rate of 14% were applicable.

The applicants in the main proceedings brought actions

before the Commissione tributaria provinciale di Milano

(Provincial Tax Court, Milan), which rejected those

actions on the ground that the possibility to programme

the screen to receive composite video signals simply by

inserting a video card meant that the apparatus could not

be classified under tariff heading 8471 of the CN, because

it no longer met the condition that the screen had to be

used principally or predominantly in an automatic data-

processing system.

The applicants in the main proceedings appealed against

the judgments in first instance before the Commissione

tributaria regionale di Milano (Regional Tax Court, Milan).

That court confirmed the classification of the imported

2. The expression ‘aromatic constituents’ in Chapter

27 of the Combined Nomenclature in Annex I to

Regulation No 2658/87, as amended by Regulation

No 1006/2011, must be interpreted as being wider

than ‘aromatic hydrocarbons’.

3. It is, in principle, for the national courts to establish

the most appropriate method to determine the

content of aromatic constituents of a specific product

in order to classify it under Heading 2707 or Heading

2710 of the Combined Nomenclature in Annex I to

Regulation No 2658/87, as amended by Regulation

No 1006/2011.

4. Point 1 of the Explanatory Notes to the Combined

Nomenclature in Annex I to Regulation No 2658/87,

as amended by Regulation No 1006/2011, on

subheadings 2707 99 91 and 2707 99 99 thereof

must be interpreted as being non-exhaustive, so

that a product falling within Heading 2707 of the

Combined Nomenclature which cannot be classified

under a specific subheading must be classified

under subheading 2707 99 99 thereof.

CJ rules on the CN classification of plasma screens in which video tuner can be inserted (Panasonice Italia SpA) On 17 July 2014, the CJ delivered its judgment in case

Panasonice Italia SpA (C-472/12). The case concerns

the classification in the Combined Nomenclature (CN) of

certain plasma screens.

The plasma screens that are subject to proceedings that

are installed against duty assessments resulting from

the classification of screens in CN heading in 8528 are

described by the national court as follows:

• the screens in question are colour monitors with a

diagonal screen measurement of 106.6 centimetres;

• in the state in which they are imported, the screens

are capable of reproducing only data generated by an

automatic data-processing system;

• however, with the insertion of a video card into the

appropriate slot with which the screen is equipped

they are also able to receive composite AV video

signals and thus also to be connected to sound

and image recording and reproducing apparatus,

15

screen of 106.6 centimetres, equipped with two

loudspeakers and a remote control, and with an

input device designed for the insertion of a video

card (very inexpensive and easy to find and insert)

which was not imported with the screen, but which,

once inserted, meant that the screen was capable

of receiving composite AV video signals and could

be connected, not only to automatic data-processing

machines, but also to recording and reproducing

apparatus, DVD players, video cameras and satellite

receivers?

(2) If the answer to the above question is in the negative,

does Regulation No 754/2004 actually require a

screen of that type to be classified under heading

8528 of the CN, and, if the answer to that question

is affirmative, do the provisions of Regulation

No 754/2004 have to be regarded as interpretative

and, as such, as having retroactive effect save where

earlier specific provisions to the contrary apply.’

The CJ ruled as follows:

1. For the purpose of tariff classification in the

Combined Nomenclature set out in Annex I to

Council Regulation (EEC) No 2658/87 of 23 July

1987 on the tariff and statistical nomenclature

and on the Common Customs Tariff, in the

versions resulting successively from Commission

Regulation (EC) No 2388/2000 of 13 October

2000, Commission Regulation (EC) No 2031/2001

of 6 August 2001, Commission Regulation (EC)

No 1832/2002 of 1 August 2002, and Commission

Regulation (EC) No 1789/2003 of 11 September

2003 of screens with the objective characteristics

at issue in the main proceedings, account should

be taken of their inherent intended purpose, which

consists in reproducing the data from an automatic

data-processing machine and from composite

video signals. Such screens must be classified

under subheading 8471 60 90 of the Combined

Nomenclature if they are used solely or mainly

in an automatic data-processing system, within

the meaning of Note 5B(a) of Chapter 84 of the

Combined Nomenclature, or under subheading

8528 21 90 thereof if that is not the case, which is

screens under tariff heading 8528 of the CN, but held that

the administrative penalties imposed were to be annulled,

given that objective uncertainties of interpretation existed.

Both the applicants in the main proceedings and the

Agenzia brought appeals in cassation against the

judgments delivered in the appeal. In their appeal, the

applicants in the main proceedings maintained their

position, according to which, the imported screens must

be classified under subheading 8471 60 90 of the CN

since, at the time of importation, they were without video

cards and, therefore, could only be used to transmit

images generated by a computer. The Agenzia restated

its argument that the classification of those screens

under heading 8528 of the CN was well-founded and

challenged the annulment by the court of appeal of the

administrative penalties imposed.

The referring court considered that the imported screens

must be classified under heading 8528 of the CN, which

refers, inter alia, to reception apparatus for television

and video monitors, for the following reasons. First, the

reception of composite video signals is one of the intrinsic

characteristics of those screens even before the insertion

of a video card, given the slot expressly provided for that

purpose. Second, no economic or technological reason

justifies the design of those screens, which are able to

receive composite video signals only after the insertion

of a video card, so that the only conceivable explanation

remains the desire to unfairly profit from the more

favourable customs treatment provided for computer

screens.

The referring court also enquired about the possibility

to apply the provisions of Regulation No 754/2004

retroactively, under which the imported screens should

be classified under heading 8528 of the CN.

In those circumstances, the Corte suprema di cassazione

decided to stay the proceedings before it and to refer the

following questions to the Court for a preliminary ruling:

‘(1) Was it necessary, before the entry into force of

Regulation No 754/2004, to classify under heading

8471, or under heading 8528 of the CN, a plasma

colour screen with a diagonal measurement of the

16 17

laser light, causing a fluorescence of the nucleic acids

present in the nucleus and cytoplasm of the leukocytes.

This fluorescence subsides rapidly after the end of the

exposure to the laser light.

At the time of importation, the product at issue in the main

proceedings was declared by Sysmex as coming under

subheading 3822 00 00 of the CN and was thus released

into free circulation exempt from customs duties. On

18 June 2007, the Hauptzollamt Hamburg-Hafen, taking

the view that that product did not come under that

subheading, issued a notice of additional assessment

providing for the a posteriori recovery of customs duties

on the importation of Stromatolyser-4DS at a rate of

6.5%.

Proceedings were initiated at the Finanzgericht in

Hamburg. The Finanzgericht Hamburg decided to stay

the proceedings and to refer the following question to the

Court for a preliminary ruling:

‘Should a product have been classified, in 2005, under

heading 3212 of the CN as a dye or colouring matter

where it is composed of solvents and of a polymethine

substance which can have a certain colouring

effect — which, on textiles at least, is not permanent —

but which, in the case of the product to be classified,

serves to obtain information on particles (white blood

cells) contained in a test solution (pre-treated blood)

by means of a process in which, through the deposition

of ions in defined components of the particles (nucleic

acids), the substance forms molecular structures which,

when exposed to laser light on a certain wavelength,

become fluorochromatic for a limited period and this

state and its extent are measured with the aid of a special

photoelectric cell?

The CJ ruled as follows:

The Combined Nomenclature set out in Annex I to

Council Regulation (EEC) No 2658/87 of 23 July 1987

on the tariff and statistical nomenclature and on the

Common Customs Tariff, as amended by Regulation

(EC) No 1810/2004 of 7 September 2004, must be

interpreted as meaning that a product, composed of

solvents and of a polymethine-based substance, which,

although it may have a weak and non-permanent dyeing

a matter for the national court to determine on the

basis of the objective characteristics of the screens

at issue in the main proceedings, and in particular

those mentioned in the Explanatory Notes relating

to heading 8471 of the Harmonised Commodity

Description and Coding System established by

the International Convention on the Harmonised

Commodity Description and Coding System

concluded in Brussels on 14 June 1983, with its

amending protocol of 24 June 1986, in particular

in points 1 to 5 of the part of Chapter I D relating

to display units for automatic data-processing

machines.

2. Commission Regulation (EC) No 754/2004 of

21 April 2004 concerning the classification of certain

goods in the Combined Nomenclature cannot be

applied retroactively.

CJ rules on the CN classification of a substance producing, by chemical reaction and exposure to a laser light, a fluorescent effect intended for the analysis of white blood cells (Sysmex)On 17 July 2014, the CJ delivered its judgment in case

Sysmex (C-480/13). The case concerns the classification

in the Combined Nomenclature (CN) of a substance

producing, by chemical reaction and exposure to a laser

light, a fluorescent effect intended for the analysis of

white blood cells.

In July 2005, Sysmex imported into Germany a liquid

under the commercial designation ‘Stromatolyser-4DS’.

Stromatolyser-4DS is a bluish transparent liquid put up

for retail sale. It is composed of solvents, namely ethylene

glycol (96.9%) and methanol (3%), and of a synthetic

organic substance (0.002%) which, chemically, belongs

to the polymethines and, more precisely, to the cyanines.

This liquid is intended for the analysis of white blood

cells (leukocytes) in order to determine the existence of a

possible pathology. Specifically, the blood to be analysed

undergoes a preparatory operation. The Stromatolyser-

4DS is then added to the prepared blood, which causes

a chemical reaction. The resulting mixture is exposed to

17

Under EU law (Directive 2008/118/EC), excise duty on

tobacco products must be charged at the rate applicable

on the date on which they are released for consumption.

There is no provision under EU legislation which allows

Member States to add supplementary duty to this

release-date tax rate, or to limit the distribution of tobacco

products for fiscal reasons.

By applying the sales-and-marketing prohibition, Portugal

implies that all cigarettes bearing the old tax markings

and unsold at the end of the transitional period were

released in excessive quantity. Such a presumption is

inadmissible under the case law of the Court of Justice.

The Portuguese sales-and-marketing prohibition is

clearly disproportionate to any fraud-tackling objective. It

also runs contrary to the provisions of Directive 2008/118/

EC, under which Member States must ensure that tax

markings do not create obstacles to the free movement

of excise goods.

The failure of Portugal to comply with these rules results

in situations whereby operators are not allowed to sell

cigarettes, which were taxed and which comply with all

requirements for a free circulation on the Single Market.

Operation ERMIS: 70 000 counterfeit goods seized in EU joint customs operation Over 70,000 counterfeit goods were seized during a

major Joint Customs Operation (JCO) code-named

‘ERMIS’. The Operation focussed on postal and courier

mail traffic, to identify fake products shipped through small

consignments. JCO ERMIS was carried out by the Greek

Customs Administration and the European Anti-Fraud

Office (OLAF), and also involved customs experts from

the Commission, Member States, FYROM, Montenegro,

Serbia and Turkey. The results of this operation were

unveiled at a debriefing meeting in Athens and have been

published across Europe.

JCO ERMIS was carried out in March 2014. Customs

authorities performed intensified controls and exchange

of intelligence on parcels coming into the EU from third

countries, via mail. Within the course of the operation,

over 70,000 counterfeit items were seized in 634 different

seizures. The goods varied in nature from mobile phones,

effect on textiles, is not in practice used for its dyeing

properties and is intended exclusively for the analysis of

white blood cells, by means of the deposition of ions in

defined components of those blood cells, which, when

exposed to laser light, become fluorescent for a limited

period, comes under heading 3822 of the Combined

Nomenclature relating to laboratory reagents.

Commission refers UK to Court of Justice for failure to comply with EU rules on marked fuel The European Commission has decided to refer the

United Kingdom to the Court of Justice of the European

Union for not properly applying the rules on fiscal marking

on fuel.

Under EU rules, fuel that can benefit from a reduced tax

rate has to be marked by coloured dye. Fishing vessels,

for example, are allowed to benefit from a lower taxed

fuel but private leisure boats must use fuel subject to a

standard rate.

Currently, UK law does not require fuel distributors to

have two separate fuel tanks to distinguish between the

lower tax marked fuel and the fuel subject to the standard

rate. As a result, private leisure boat owners are often in

a situation where they can only purchase marked fuel.

As a consequence, private leisure boats may not pay the

right amount of tax, as they purchase use fuel normally

intended for fishing vessels. Not only does this go against

EU excise rules, but it also puts private boats at risk of

heavy penalties if they are checked by local authorities

when they travel to another Member State.

Commission refers Portugal to Court of Justice over excise duty rules for cigarettesThe European Commission has decided to refer Portugal

to the Court of Justice for failing to change its excise duty

rules related to the marketing of cigarettes. In Portugal, a

time limit for the sale of cigarettes is set down, linked to

the fiscal stamp on the packaging. The design of the tax

markings in Portugal changes regularly and a new tax

rate frequently applies with the new marking. Cigarettes

cannot be sold any later than three months after the end

of the year that they are released for consumption.

18

of the total seizures of smuggled tobacco came by sea

from Asia, the Middle East and North Africa, while the

remaining 10% were of unknown origin. Based on the

findings of DISMANTLE, the report presents a number of

specific recommendations to ensure better risk targeting

of smuggled excise goods in the future.

DISMANTLE is what is known as a priority control

action (PCA), whereby customs undertake common and

intensified controls to target specific risks. The benefit

of such actions is that they help identify illicit patterns,

investigate similar cases and pinpoint where further

improvements can be made in customs activities to

clamp down on smuggling.

Among some of the main findings of DISMANTLE were:

• There is a wide diversity between national customs

control policies in the EU

• Sharing expertise, working jointly on risk analysis,

and monitoring the impact and results in real time,

can deliver very successful results (e.g., five cases

of transnational fraud were uncovered thanks to

common data analysis, that would not otherwise

have been detected).

• There are a significant number of smuggling cases

via rail traffic, with the contraband goods hidden

beneath a first layer of other goods

• The risk of ‘green borders’ i.e., smuggling through a

point in the border where there is no customs post

(such as a village / river) needs to be addressed.

Mobile customs units could be very effective in this

respect.

• The majority of smuggled cases were small or medium

quantities, brought into the EU by passengers

• A number of cases of evasion happened within EU

Intra-community movements, rather than at the

border.

On the basis of these findings, a series of

recommendations are made in the report. Notably,

it underlines the need for continued and deepening

cooperation between customs authorities and

investigators, ensuring the quality, accessibility and

timeliness of collected data, and pursuing measures to

improve the capacity for electronic risk profiling.

sunglasses, and small vehicle spare parts, to medicines

and pharmaceutical products. Most goods were found to

come from the Far East. Such counterfeit products can

pose a risk to EU consumers, given that they tend not to

be produced in line with the relevant health and safety

legislation. Moreover, counterfeit trade undermines

legitimate businesses. Although an additional number

of 210 seizures were made, the goods were released

by customs officials because of the lack of cooperation

from rights-holders, who did not come to identify the

goods and certify they were counterfeit. The participants

to the operation recalled that the cooperation of private

companies is essential to the success of such customs

operations, as only the rights-holders can certify that the

goods seized are not authentic.

JCO ERMIS follows up on previous actions coordinated

by OLAF (JCO FAKE, JCO SIROCCO and JCOs

DIABOLO I and DIABOLO II) which aim to curb the

smuggling of counterfeit goods. Such Joint Customs

Operations help generate increased intelligence, stronger

cross-border cooperation and more accurate targeting

of smuggling risk areas. Furthermore, through the high

number of seizures, the Joint Customs Operation has

once again helped avoid losses to the EU’s and Member

States’ budgets in the form of evaded customs duties and

taxes.

Customs: Tackling smuggling and fraud in excise goods Around 816 million cigarettes and 240,000 litres of alcohol

were seized by EU customs over a 10-month period

in 2013, a report published by the Commission today

reveals. The report details the planning, implementation

and results of ‘DISMANTLE’, a targeted customs operation

to tackle the risk of smuggling and fraud in excise

goods. Between March and December 2013, customs

controls were increased at the eastern border, on the

basis of common risk criteria and real-time information

exchange between EU customs authorities. During that

period, seizures in smuggled tobacco reported in the

Common customs risk management system increased

considerably – by 105% - compared to the same period in

2012. Around 1/3 of the quantity seized came from source

countries targeted through DISMANTLE, notably Russia,

Ukraine, Belarus, Bosnia-Herzegovina and Serbia. Half

19

Correspondents● Gerard Blokland (Loyens & Loeff Amsterdam)

● Kees Bouwmeester (Loyens & Loeff Amsterdam)

● Almut Breuer (Loyens & Loeff Amsterdam)

● Robert van Esch (Loyens & Loeff Rotterdam)

● Sarah Van Leynseele (Loyens & Loeff Brussel)

● Raymond Luja (Loyens & Loeff Amsterdam;

Maastricht University)

● Arjan Oosterheert (Loyens & Loeff Amsterdam)

● Lodewijk Reijs (Loyens & Loeff Rotterdam)

● Bruno da Silva (Loyens & Loeff Amsterdam;

University of Amsterdam)

● Patrick Vettenburg (Loyens & Loeff Rotterdam)

● Ruben van der Wilt (Loyens & Loeff Amsterdam)

www.loyensloeff.com

About Loyens & LoeffLoyens & Loeff N.V. is the first firm where attorneys at

law, tax advisers and civil-law notaries collaborate on a

large scale to offer integrated professional legal services

in the Netherlands, Belgium and Luxembourg.

Loyens & Loeff is an independent provider of corporate

legal services. Our close cooperation with prominent

international law and tax law firms makes Loyens & Loeff

the logical choice for large and medium-size companies

operating domestically or internationally.

Editorial boardFor contact, mail: eutaxalert@loyensloeff.com:

● René van der Paardt (Loyens & Loeff Rotterdam)

● Thies Sanders (Loyens & Loeff Amsterdam)

● Dennis Weber (Loyens & Loeff Amsterdam;

University of Amsterdam)

Editors● Patricia van Zwet

● Bruno da Silva

Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for any

consequences arising from the information in this publication being used without its consent. The information provided in the publication is intended

for general informational purposes and can not be considered as advice.

www.loyensloeff.com

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14-08-EN

-EU

TA