Joined Cases C‑578/10 to C‑580/10


When cross border short term loan of a  vehicle free of charge, registration tax must be calculated according to use.

>> Mrs van Putten and Mr Mook, two Dutch nationals, and Mrs Frank, a German national, were all resident in the Netherlands when officers of the Dutch tax authority established that they were using cars registered in other Member States on the road network in the Netherlands without having paid vehicle tax. Accordingly, they were advised that, on a subsequent check they might be issued with an assessment notice for the payment of that tax.

On a subsequent check they were stopped and found to be in the same situation again. Assessment notices were therefore sent to them, amounting to EUR 5955 for Mrs van Putten, EUR 1859 for Mr Mook and EUR 6709 for Mrs Frank.

As the actions brought by each of the defendants in the main proceedings were held to be unfounded, they appealed to the Court of appeal in ‘s-Hertogenbosch. That court upheld their claims, on the ground that the notices constituted an unjustified obstacle to the right to move and reside freely within the territory of a Member State set out in Art. 18 EC.

The Staatssecretaris (Secretary of State) brought an appeal before the referring court against the decision of the Gerechtshof te ‘s-Hertogenbosch in each of the cases. The court asked whether, in the light of Art. 18 EC, European Union law covered a situation in which a Member State levied a tax on the first use on the national road network of a motor vehicle by one of its residents, which had been driven either only on national territory or on that territory and that of another Member State, where that vehicle, which was registered in another Member State, had been loaned by a resident of the latter State.

The Court held that even though, formally, the national court had limited its questions to the interpretation of Art. 18 EC, that did not prevent the Court from providing the national court with all the elements of interpretation of Community law which might be of assistance in adjudicating on the case before it, whether or not that court had specifically referred to them in the questions (see, to that effect, Case C251/06 ING. AUER [2007]).

The Court pointed out that the charging of tax was the result, not of the fact that the defendants in the main proceedings had exercised their right to freedom of movement, but of the fact that, as residents, they had used a car registered in another Member State and loaned to them on the road network in the Netherlands.

The Court reiterated that with regard to the scope of Art. 56, in the absence of a definition in the Treaty of “movement of capital” for the purposes of Art. 56(1) EC, the nomenclature annexed to Council Directive 88/361/EEC had indicative value, even though that directive was adopted on the basis of Arts 69 and 70(1) of the EEC Treaty (Arts 67 to 73 of the EEC Treaty were replaced by Arts 73B to 73G of the EC Treaty, now Arts 56 EC to 60 EC), subject to the qualification, contained in the introduction to the nomenclature, that the list set out there did not defined exhaustively the concept of movements of capital (see, inter alia, Case C318/07 Persche [2009]; Case C182/08 Glaxo Wellcome [2009]; Case C35/08 Busley and Cibrian Fernandez [2009 , and Case C25/10 Missionswerk Werner Heukelbach [2011]).

The Court held that the owner of the motor vehicle and the user of that vehicle were not confined to a single Member State even though the national provision at issue was addressed only to the residents of the Netherlands. Vehicle tax must be paid by the residents of that Member State who used a motor vehicle on the national road network, even though the use was of short duration and in the context of a loan, free of charge, between those residents and residents of other Member States of vehicles also registered in other Member States. The Court held that the cross-border lending of a vehicle free of charge constituted a capital movement within the meaning of Art. 56 EC.

The Court reiterated with regard to the question whether there was any restriction on the free movement of capital and the possible justification for such restriction, that apart from certain exceptions not relevant to the main proceedings, taxation of motor vehicles had not been harmonised at European Union level. The Member States were thus free to exercise their powers of taxation in that area provided that they did so in compliance with European Union law (see Case C-451/99 Cura Anlagen [2002]; Case C464/02 Commission v Denmark [2005]; Joined Cases C-151/04 and C-152/04 Nadin and Nadin-Lux [2005]; order in Case C-242/05 van de Coevering [2006] and order in Case C-364/08 Vandermeir [2008] ECR I-8087).

The national legislation at issue in the main proceedings, by requiring residents of the Netherlands to pay a tax on first used of a vehicle registered in another Member State on the road network in the Netherlands, including where that vehicle was loaned free of charge by a resident of another Member State, resulted in the taxation of cross-border loans free of charge of motor vehicles.

On the other hand, loans of a motor vehicle for used free of charge were not subject to that tax where the vehicle was registered in the Netherlands. Such a difference, or at least apparent difference, in treatment according to the State in which the loaned vehicle was registered was, therefore, according to the Court, liable to make such cross border capital movements less attractive, by dissuading residents of the Netherlands from accepting loans offered by residents of another Member State of a vehicle registered in that State. Such national legislation therefore constituted a restriction on the free movement of capital for the purposes of Art. 56(1) EC. provision (see Case C-478/98 Commission v Belgium [2000]).

The Court had already held that a Member State might impose a registration tax on a motor vehicle registered in another Member State where that vehicle was intended to be used essentially in the first Member State on a permanent basis or where it was, in fact, used in that manner (see Case C-451/99 Cura Anlagen [2002]; Case C464/02 Commission v Denmark [2005]; Joined Cases C-151/04 and C-152/04 Nadin and Nadin-Lux [2005]; order in Case C-242/05 van de Coevering [2006] and order in Case C-364/08 Vandermeir [2008] ECR I-8087).

 The Court held that the charging of vehicle tax on first used on the road network in the Netherlands of vehicles which were not registered in the Netherlands, was justified in the same way as the tax due on the registration of the vehicle in the Netherlands was, provided that the tax took account, as appeared to be required by the 1992 Law, of the depreciation of the vehicle at the time of that first used .

On the other hand, if the vehicles at issue in the main proceedings were not intended to be used essentially in the Netherlands on a permanent basis or were not, in fact, used in that way, there would be a difference in treatment between the two categories of persons and the charging of the tax concerned would not be justified. In such circumstances, the connection of those vehicles with the Netherlands would be insufficient to justify the charging of a tax normally due on registration of a vehicle in the Netherlands.

therefore, Art. 56 EC must be interpreted as meaning that it precluded legislation of a Member State which required residents who had borrowed a vehicle registered in another Member State from a resident of that State to pay, on first use of that vehicle on the national road network, the full amount of a tax normally due on registration of a vehicle in the first Member State, without taking account of the duration of the use of that vehicle on that road network and without that person being able to invoked a right to exemption or reimbursement where that vehicle was neither intended to be used essentially in the first Member State on a permanent basis nor, in fact, used in that way.

The Court held that since the cases fell within the scope of Art. 56 EC, it was not necessary to rule on the interpretation of Art. 18 EC.