Taxation & Customs

Introduction

Following the abolition of tax and duty free sales to intra-EU travellers on 1st July 1999, there emerged a new market for retailing to consumers travelling by air and sea between the EU's then 15 Member States.

This new market sector for taxed and duty paid goods, referred to as travel retail, developed primarily as a result of the ongoing desire of travellers to continue to purchase products in this unique shopping environment, although the different rates of VAT and excise duties applicable across the EU contributed to the promotion of the trade.

From mid-1999, the Community's VAT and excise duty rules became applicable to all sales of products to travellers moving within the EU. However, the indirect tax legislation enacted to create the Community's "Single Market" on 1st January 1993 never envisaged the emergence of a market for retailing to consumers crossing the EU's fiscal frontiers by sea and air and the industry found itself restricted in benefiting from this new market, particularly the operators of mobile shops on board of ferries and aircraft. Since 2000, the ETRC has been working with the institutions in Brussels and with national government officials on the technical changes necessary to alleviate the commercial burdens on the trade.

With the enlargement of the EU to 27 members on 1st January 2007, the issues surrounding the application of the Community's tax rules takes on an even greater sense of urgency. Unfortunately, changing EU tax legislation is a lengthy process, particularly with the requirement for unanimity in Council on fiscal issues. For the latest news on taxation & customs issues, visit the Commission website.

Travellers Allowances

In November 2006, the Council of Finance Ministers (EcoFin) agreed a set of updated travellers allowances for those persons entering the EU from third countries. Formally adopted in December 2007, the directive and the new allowances enter into force on 01 December 2008. The full text of the directive (2007/74/EC) is available here.

The main details are an increase in the monetary allowance for air and sea travellers from €175 to €430 and to €300 for those entering the EU across land borders. The separate fragrance allowance was eliminated and will now form part of the value allowance. A mandatory limit for beer of 16 litres was adopted, together with an increase in the allowance for still wine from 2 to 4 litres.

On tobacco allowances, Member States are given the option to impose a reduced allowance of 40 cigarettes rather than the standard allowance of 200. However, Member States may distinguish between air travellers and other travellers by only applying the lower quantitative limit to travellers other than air travellers.

Information on how Member States have implemented the new allowances will be available shortly.