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Expiry of the customs debt vs VAT and excise duty

Judgment of the Court of Justice of the European Union of 7 April 2022 (sign. C-489/20) declares that expiry of the customs debt due to detention of the goods doesn’t mean simultaneously expiry of the obligation to pay excise duty and import VAT. The subject of a CCUE pronouncement was a case of cigarette smuggling. According to article 124(1) of the Union Customs Code (UCC), the customs debt shall be extinguished “where goods liable to import or export duties are seized and simultaneously or subsequently confiscated”. Pursuant to the position of the CJEU, Art. 2 lit. b EU directive 2008/118, excise goods are subject to a prescriptive obligation when they are already included in the territory of the EU. The tax becomes chargeable when the goods are released for consumption, like smuggling goods. Based on Article. 7 Act 1 and Act 2 lit. d of the same directive, CJUE also confirmed the obligation to pay excise duty regardless of the status of the customs debt. Consequently, the customs service imposed an additional tax liability due to excise duty and VAT.

To confirm the position, the Court of Justice of the EU referred to the previously issued judgment of 29 April 2010 (sign. C-230/08), concerning the dispute between Dansk Transport og Logistik and the Danish Ministry of Finance. It was also then that the smuggled goods were seized and destroyed, and the obligation to pay VAT and excise duty was imposed. The referring court observes in this regard, that case law of the Court, including the judgment of 9 April 2010, Danks Transport og Logistik (C-230/08, EU:C:2010:231), seems to assume the existence of “parallelism” between the extinction of the customs debt, on the one hand, and the extinction of other tax obligations, such as the obligation to pay excise duty and import VAT, on the other hand, neither Directive 2008/118 nor the VAT Directive do not contain provisions providing for the termination of these obligations in the event of illegal entry with subsequent seizure and forfeiture of the goods.

Access to the full ruling of the CJEU:

Anna Szafraniec
CEE VAT Compliance Director

Karolina Bartos
VAT Assistant

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