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Taxation & Customs
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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. Therefore, the industry found itself severely restricted in benefiting from this new market, particularly the operators of mobile shops on board of ferries and aircraft.
Since 2000, the ETRC (and its forerunner, the ITRC) has lobbied to change the rules that apply to this unique market sector. The Council has been working closely 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
1. Original proposal
In February 2006, the Commission issued a proposal for updating travellers allowances from 1 January 2007 for those persons entering the EU from third countries. The proposal included a planned increase in the value allowance for air travellers from the current €175 to €500 and €220 for other travellers. At the same time, it proposed to remove the separate allowance for perfume, to introduce a mandatory limit for beer of 16 litres and an increase in the allowance for still wine from 2 to 4 litres. On tobacco allowances, the Commission proposed that Member States should be given the option to impose a reduced allowance of e.g. 40 cigarettes rather than the standard allowance of 200 cigarettes. Member States may distinguish between air travellers and other travellers by only applying the lower quantative limit to travellers other than air travellers.
2. Final agreement
At their meeting on 28 November 2006, the Council of Finance Ministers (EcoFin) finally agreed a set of compromise proposals tabled by the Finnish Presidency that increased the monetary allowance for air and sea travellers to €430 and to €300 for those entering the EU across land borders. The Council also agreed the original proposals to remove the separate fragrance allowance, the proposal on allowances for beer and still wine and the option for lower tobacco limits for travellers entering the EU.
In October 2007, the Commission also adopted an amended implementing regulation on the Community customs regime to update the system of relief from customs duty, necessary to ensure that the directive and the regulation are entirely compatible.
3. Implementation
On 20 December 2007, the Environment Council formally adopted the directive as an A point and the new allowances will enter into force on 01 December 2008. The full text of the directive (2007/74/EC) is available here.
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