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Taxation and Customs Union

Passenger car taxation

Commission Communication clarifying EU rules

The Commission Communication adopted on 14 December 2012 (COM(2012) 756 final and press release IP/12/1368) clarifies EU rules that Member States must respect when car registration and circulation taxes are applied. The Commission also makes recommendations to improve the Single Market, in particular to avoid double taxation of cars when citizens move from one Member State to another and to remove obstacles for cross-border car rentals. The Communication is addressed to the European Parliament, the Economic and Social Committee and the Council. The Communication is accompanied by a Commission Staff Working Document giving an overview of the main legal issues that arise in the field of vehicle taxation and the level of protection available to EU citizens and businesses that can be derived from EU law and the case law of the Court of Justice of the EU (SWD (2012) 429 final of 14 December 2012 ).

Legal situation in the EU today

At present there is little EU legislation, or harmonisation of national fiscal provisions, applied by the Member States in the area of passenger car taxation. Therefore, it is for each Member State to lay down national provisions for the taxation of these cars.

As to EU Law, there is one Council Directive that restrict the rights of Member States to apply consumption taxes to vehicles:

National provisions must however be in line with the general principles of the Treaties (TEU and TFEU). This means in particular that they should not give rise to border-crossing formalities in trade between Member States, and must respect the non-discrimination principle.

For answers to the most practical questions, see the Commission Staff Working Document SWD(2012) 429 final referred to above and our FAQ.

Cars are an important means of getting around and are, therefore, instrumental to the right of freedom of movement by their users which is guaranteed by the Treaties. Many citizens take their car when they leave their Member State temporarily or settle permanently in another Member State. Others buy or hire a car in a Member State other than their own.


Commission Proposal of 2005

The European Commission on 5 July 2005 presented a proposal for a Directive (COM(2005) 261 final; press release IP/2005/839 ; and frequently asked questions MEMO/05/236 ) that would require Member States to re-structure their passenger car taxation systems. The proposal aims to improve the functioning of the internal market by removing existing tax obstacles to the transfer of passenger cars from one Member State to another. It would also promote sustainability by restructuring the tax base of both registration taxes and annual circulation taxes so as to include elements directly related to carbon dioxide emissions of passenger cars. The proposal aims only to establish an EU structure for passenger car taxes. It would not harmonise tax rates or oblige Member States to introduce new taxes.

The Commission's passenger car tax proposal contains three elements:

  • Abolition of car registration taxes over a transitional period of five to ten years.
  • A system whereby a Member State would be required to refund a portion of registration tax, pending its abolition, where a passenger car that is registered in that Member State is subsequently exported or permanently transferred to another Member State.
  • The introduction of a CO2 element into the tax base of both annual circulation taxes and registration taxes.

Annexed to the proposal is a Commission staff working document that provides a detailed analysis of the proposal's economic, environmental and social impact (SEC(2005) 809 final of 5 July 2005 ).

The ground for the proposal had been prepared by a 2002 Commission Communication proposing policies and options aimed at serving both Internal Market and environmental objectives (COM(2002) 431 final of 6 September 2002 - see also press release IP/02/1274 ).

Following the unsuccessful negotiations between the EU Member States in the Council, the proposal was withdrawn by the Commission in 2015.

Other documents

  • Passenger car taxation: public consultation on proposals for passenger car taxation (Press release IP/04/970 )
  • Communication from the Commission to the Council and the European Parliament - Taxation of passengers cars in the European Union - options for action at national and Community levels (COM(2002) 431 final of 6 September 2002). See Press release IP/02/1274 .
  • Fiscal measures to reduce CO2 emissions from new passenger cars (January 2002). A study contract undertaken by COWI A/S: Fiscal measures to reduce CO2
  • Study on vehicle taxation in the Member States of the European Union (January 2002): Study on vehicle taxation 2002
  • Proposal for a Council Directive governing the tax treatment of private motor vehicles moved permanently to another Member State in connection with a transfer of residence or used temporarily in a Member State other than that in which they are registered (COM(98) 30 final of 10 February 1998)
  • Vehicle taxation in the European Union 1997. This document sets out the taxation measures in force in each of the Member States: "Vehicle taxation in the EU 1997 "

Frequently asked questions